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Life Health > Life Insurance > Life Settlements

Wells Fargo Faces John Hancock Suit Over Life Insurance Issue

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A new federal court case could affect what happens when the owner of a life insurance policy uses the policy as loan collateral and then sells the policy through a life settlement.

John Hancock Life Insurance Co. (U.S.A.) filed the suit in the U.S. District Court of Massachusetts against two parties — Wells Fargo and Monterey County Bank — that may have the right to receive some or all of the death benefits from two life insurance policies that John Hancock sold to Basil Mills in 2007.

John Hancock is not alleging that Wells Fargo or Monterey County Bank did anything wrong. It’s asking the court for permission to pay $3 million in policy death benefits and interest to the court clerk and let Wells Fargo and Monterey County Bank decide where the money should go.

Wells Fargo declined to comment. John Hancock and Monterey County Bank were not immediately available for comment.

The complaint is available on Law.com Radar.

What It Means

Financial professionals who have clients who want to sell in-force life insurance policies should consider asking the clients whether the clients have used the same policies as loan collateral.

Clients trying to sell policies used as loan collateral might need legal advice about that.

The Suit

John Hancock is a Boston-based subsidiary of Manulife Financial.

Basil Mills, a California resident, bought a $2 million life insurance policy from John Hancock in June 2007 and also bought a $1 million policy from the company around the same time, according to the complaint.

Originally, he named his brother as the beneficiary. In 2008, he gave the policies to Stephanie Hardy.

Later that year 2008, Hardy used the policies as collateral for loans from Monterey County Bank.

In 2009, John Hancock received forms indicating that Hardy had sold the policies through a life settlement transaction and a request to change the owner of the policies to “Wells Fargo, A Beneficiary Designation — LIFE.”

Basil Mills died in early 2022.

Wells Fargo has filed a claim form.

Monterey County Bank says it has a 25% profit share in the policies, for $750,000.

“John Hancock cannot determine to whom and in what amounts the death benefit should be paid until the conflicting claims are settled,” the company says in the complaint.

Credit: Bloomberg


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