New York Couple Sues Over Life Premium Finance Collateral Calls
The Aronsons thought $1.5 million in collateral would be enough. Then conditions changed.
A lawsuit in New York state could affect how advisors there explain life insurance premium financing arrangements.
Ester and Ben Aronson and their trusts have sued Braver Strategies, a financial consulting firm, in a Rockland County, New York, state court over the performance of financing arrangements used to pay for $150 million in life insurance coverage.
The list of defendants also includes Penn Mutual Life Insurance Co., Massachusetts Mutual Life Insurance Co. and New York Life Insurance Co.
The Aronsons first filed the suit in June 2023 and recently filed an amended complaint. Braver responded with an answer denying the allegations and maintaining that the plaintiffs have failed to state a cause of action for which relief may be granted.
Brave and MassMutual were not immediately available to comment on the case. Representatives for the Aronsons, Penn Mutual and New York Life did not respond to requests for comment.
The insurance arrangements: The Aronsons worked with Moses Braver, the Brave Strategies CEO, to set up life insurance, trust and premium finance arrangements in 2020.
Moses Braver “represented that the Aronsons would not need to post more than $1.5 million of total collateral over the entire terms of the life insurance policies and the premium financing loans,” according to the complaint.
The policies’ cash-value growth was poor, the interest rates on the premium financing loans increased, and projections showed the Aronsons would have to add more than $3 million in collateral over the next two years, the plaintiffs said.
Braver agreed to help the Aronsons surrender the policies in 2022, but he required them to sign a document stating that they would not take legal action against him, the plaintiffs said.
The suit: The plaintiffs contend that the defendants violated New York state suitability laws.
“Had each of the life insurance companies conducted the suitability determination required by New York law, they each should have determined that the life insurance policies were not suitable for each of the plaintiffs,” the plaintiffs say.
The plaintiffs are seeking actual damages, punitive damages and attorneys’ fees.
Larry Rybka’s views: Larry Rybka, the chairman of Valmark, a financial services distributor, has been following life premium finance cases closely. He said the Aronson case is an interesting test of New York state’s Regulation 187 best interest life and annuity sales standards.
Credit: Diego M. Radzinschi/ALM