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A federal judge in Montana has let a family move forward with most of its allegations against a team that helped it use premium financing to buy $67.5 million in cash-value life insurance in 2014 and 2017.
The family argues that the arrangement was supposed to generate modest, steady growth but instead lost value when interest rates increased.
U.S. District Judge Dana Christensen wrote in a 48-page order that, under Montana law, "the defendants owed plaintiffs a duty of care."
Christensen dismissed a few allegations based on arguments about some plaintiffs' possible lack of a relationship with one defendant, but he let allegations of negligence, fraud and unjust enrichment move forward. He also let the family overcome arguments by some of the defendants that they had no direct or vicarious fiduciary duty to the family, in part because insurance agents in Montana have no fiduciary duty to their clients.
The Montana Supreme Court "'has not yet recognized a fiduciary relationship between an insurance agent and a client,'" Christensen wrote, quoting a passage from one of the court's opinions. "This language falls short of foreclosing the possibility of such a relationship."
Whether Montana does or does not recognize a fiduciary relationship between an agent and a client "must be considered by the trier of fact," Christensen wrote.
The new court ruling indicates that the Stevenson family has stated claims that can move forward but has not addressed whether the claims are correct.
The case is Todd Stevenson et al. vs. Massachusetts Mutual Life Insurance Co. et al.
The plaintiffs: Todd Stevenson and his relatives own Stevenson and Sons Funeral Homes, a funeral services company founded in 1962 that is based in Miles City, Montana.
The Stevensons' family lawyer introduced them to an estate and retirement advisor, Joshoa Gardner, who was affiliated with GP Capital Partners and Summit Financial.
The life insurance arrangement: Gardner worked with Succession Capital Alliance, a premium financing brokerage firm that helped connect the Stevensons with Wintrust Life Financial, a source of premium financing.
The Stevensons set up trusts and used Gardner's advice and Wintrust financing to buy two cash-value life insurance policies in 2013 and five policies in 2017.
The policies came from Massachusetts Life Insurance Company, the Penn Mutual Life Insurance Company and the Penn Insurance and Annuity Company.
The arrangement was supposed to provide a safe estate planning and retirement planning arrangement, according to Christensen's description.
In 2023, after interest rates surged, the arrangement began to perform poorly.
Earlier this year, the premium debt service was worth $8 million more than the policies, according to Christensen.
The case: The Stevensons sued over the performance of the arrangement in 2024 in the U.S. District Court for the District of Montana.
The list of plaintiffs includes Todd Stevenson, other members of his family, two irrevocable family trusts, two irrevocable life insurance trusts, and Stevenson and Sons Funeral Homes.
In addition to MassMutual, the list of defendants includes Penn Mutual, The Penn Insurance and Annuity Company, Summit Financial Group, GP Capital Partners, Burgess Group, Joshoa Gardner, Succession Capital, Wintrust, Barrington Bank and CMS National Services.
The Stevenson family acknowledges in its pleadings that a family lawyer advised the family, but it says that the lawyer was not a financial advisor or a sophisticated financial professional.
The family asserts that the defendants should have conducted a more rigorous suitability review and understood that the arrangement was not suitable for the family.
The defendants have denied the allegations in court pleadings.
The Gardner defendants said in a memorandum filed in April that the Stevensons are savvy businesspeople.
The Stevensons did not attach their insurance policies to their complaint, according to the Gardner defendants' memorandum.
"These documents establish that plaintiffs were repeatedly advised — and acknowledged — the significant risks associated with premium-financed life insurance, contradicting any allegations of fraud and misrepresentation," according to the memorandum.
Reactions: The Stevenson family welcomed Christensen's ruling.
"The court reaffirmed that Montana law does not excuse banks, insurance companies, professional middlemen, or insurance agents from the ordinary duty of reasonable care we all owe to each other," attorneys for the family said in a statement. "There are no special rules here for the wealthy and the powerful. We are pleased that our clients can now finally move forward in the discovery process, and we are excited to eventually ask for justice from a Montana jury."
Attorneys for the estate planner, Joshoa Gardner, and two other "Gardner defendants," GP Capital Partners and Summit Financial Group, said they disagree with the ruling.
"But, as this case is being actively litigated, we do not believe it is productive to provide detailed commentary on the court's order or the case," attorneys for the Gardner defendants said. "We look forward to the discovery phase in this litigation, which we are confident will reveal that the actual facts and documentary evidence will show that the claims asserted in plaintiffs' complaint are wholly without merit."
Attorneys for the other defendants could not immediately be reached for comment.
Credit: makibestphoto/Adobe Stock
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