A three-judge panel at the U.S. Court of Appeals for the 11th Circuit has ruled for an annuity owner who wishes a servicer had not started sending her annuity income on the default annuitization date.
The panel found that the language in the contract did not let the servicer, Transamerica Premier Life Insurance Co., begin making payments until Quin Briscoe, the owner, chose an annuity payment option.
"Had Transamerica wished to set a default annuity payment option by amending the contract, it certainly had the authority to do so," Circuit Judge Andrew Brasher wrote in an opinion discussing the ruling.
"Because Transamerica could have remedied any purported ambiguity before it materialized by amending the contract, we decline to now modify the contract in its favor by looking to extrinsic evidence to set a default payment method," Brasher wrote.
Transamerica declined to comment on the ruling, and representatives for Briscoe were not immediately available to comment.
What it means: An advisor with a client who does not want to begin getting income from an annuity on the default annuitization date may want to have a lawyer look at the contract's default payment method provision and make sure the client documents any communications with the issuer about payment options.
The contract: Briscoe bought the annuity involved in the 11th Circuit ruling from Vanguard in 1996. Her husband bought a similar annuity.
Briscoe contributed a total of $200,000 to her annuity, which was issued by Peoples Benefit Life, and her husband contributed $200,000 to his annuity.
The Briscoes never meant to let their contracts annuitize, Brasher wrote.
"Instead," he wrote, "they purchased the annuities to take advantage of tax benefits associated with annuity accounts, and they planned to fully liquidate them upon retirement, prior to annuitization."
Vanguard later transferred responsibility for servicing the annuity to Aegon's Transamerica Premier Life Insurance subsidiary.
The default annuitization date was Dec. 1, 2022 — the first day after the month following Briscoe's 65th birthday.
Briscoe had planned to liquidate the annuity before income came out. She did not send the servicer an annuity payment option choice by the annuitization date.
Transamerica began sending payments according to one of the payment options.
Briscoe objected, but Transamerica declined to reverse the annuitization.
The case: Briscoe sued in the U.S. District Court for the Southern District of Florida in 2023.
The district court ruled in her favor, holding that the annuitization was incorrect because Briscoe had not picked a payment option.
Two judges on the 11th Circuit panel ruled entirely in Briscoe's favor.
One judge, Circuit Judge Robert Luck, argued in a separate opinion that Transamerica did not breach the contract when it began making annuity payments but did breach the contract when it chose a payment option.
The contract let Briscoe write to the servicer to change the annuitization date, "but she didn't do so," Luck wrote in his opinion.
"The payment-method breach is a different story," Luck said. "The annuity contract only allows one party to select the method of payment — Briscoe.... The provision has no express wording conditioning annuitization on selecting the payment method."
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