Pacific Life denied all claims and asked a Washington state federal judge to dismiss a lawsuit brought by a Richland couple dissatisfied with a PDX indexed universal life policy.
Simona G. Marie and Thomas Lewis, from Richland, Wash., filed a lawsuit June 27 against Pacific Life, Harding Financial Partners and Andrew Brown, the producer who sold them a PacLife PDX life insurance policy.
Starting December 2017, plaintiffs made five premium payments totaling $505,000, the lawsuit states. Their investment gain added $248,650. The couple surrendered the policy in April 2022 and received a $202,655 check from PacLife. They claim the insurer made nearly $551,000 from the IUL contract.
Plaintiffs allege negligent misrepresentation, breach of fiduciary duty, professional negligence, breach of contract and violation of the Washington Consumer Protection Act.
In a 22-page response filed Monday, PacLife said the blame for the outcome of the PDX policy lies with decisions made by Marie and Lewis.
“[W]hen Marie grew unhappy with the consequences of her own financial decisions, Plaintiffs brought the present suit in an attempt to place blame on anyone else,” PacLife attorneys wrote. “The Complaint demonstrates that any alleged harm Plaintiffs claim to have suffered was a result of Marie’s decision to purchase the Policy and pay a $1,000,000 premium over five years. Marie later decided to pay only half of the total premiums, and nevertheless expected the Policy to perform precisely as originally illustrated.”
Brown filed a separate 14-page response to the complaint in which he denied or claimed he “lacks sufficient information” to nearly every point of the complaint. In its response, PacLife pointed out that at no time was Brown a PacLife agent, so the insurer cannot be held liable for any statements he made.
Illustrations not to blame
The lawsuit makes several references the ongoing IUL illustration controversy and efforts by state insurance regulators to tighten the rules and clamp down on unrealistic illustrations.
“PDX policies are extremely difficult for consumers and perhaps even brokers to understand,” the lawsuit reads. “The sales illustrations overstate future performance and do not disclose key assumptions, including but not limited to PacLife’s so-called ‘Performance Factor,’ that produce extremely high fee costs and risks.”
But PacLife countered by defending the illustrations shown to Marie and Lewis.
“[T]he Illustration contains no misrepresentations of existing fact and could not be justifiably relied upon to promise performance, as it contained numerous disclosures that certain elements were ‘non-guaranteed,'” the insurer claimed.
Marie and Lewis were successful married business owners in 2017 when they bought a PDX policy with a “Performance Factor,” paid with annual $200,000 premiums for five years, the lawsuit said.
“Simona Marie and Tom Lewis purchased the policy with the intent to provide them with income in retirement,” the lawsuit said.
After making $200,000 premium payments in 2017 and 2018, Marie and Lewis decided to reduce their final three premium payments to $35,000. Brown indicated that the couple could reduce their premium in exchange for reduced financial benefits, including reduced annual income to $ 117,000 per year from ages 65 to 100, the lawsuit claims.
On Nov. 14, 2021, the couple made the final $35,000 premium payment. A month later, they joined Brown on a Zoom call to discuss their investment, the lawsuit said. Instead, Brown informed Marie and Lewis they would need to pay further premiums to maintain their contract.
Pacific Life: no wrongdoing shown
The couple say they were never told that the reduced premium payments could endanger their policy, or prompt additional premium payments. Marie and Lewis surrendered the policy in April 2022, paying PacLife a $45,000 surrender charge.
In a competitive IUL sales world with constantly changing regulations, the plaintiffs sought to paint the PacLife PDX as an especially egregious product.
“No IUL product in the industry contemporaneous with the PDX policy was riskier than the PDX policy,” the lawsuit reads.
But PacLife said their policy performed within the parameters outlined in the policy the plaintiffs signed.
“While Plaintiffs generally complain that Pacific Life’s PDX policy is confusing misleading by nature, the Complaint alleges no wrongdoing by Pacific Life with regard to the issuance or management of the Policy,” the response reads. “Plaintiffs claim Pacific Life breached the Policy, but do not point to any policy language that Pacific Life failed to comply with.
“Plaintiffs allege a claim against Pacific Life for negligent misrepresentation but allege no representations at all by Pacific Life other than the Illustration, in which they cannot point to any false representations of fact.”
InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at email@example.com. Follow him on Twitter @INNJohnH.
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