Monday, April 12, 2021

No. 416: An Interesting Beneficiary Dispute

On January 22, 2021, a three-judge panel of a state appellate court in Georgia unanimously upheld a trial court ruling in an interesting beneficiary dispute between the widow and a granddaughter of the insured. For ease of reference, here are the key parties:
Donald: Donald Usher, insured, grandfather of Emery
Emery: Sarah Emery, granddaughter of Donald
Gayle: Gayle Usher, widow of Donald
GTL: Guarantee Trust Life Insurance Company, insurer
I have the trial court ruling, the appellate court panel ruling, and some documents from the trial court proceedings. Here I describe the case based on those rulings and documents. The two rulings are in the complimentary package offered at the end of this post. (See Emery v. GTL, State Court of Gwinnett County, Georgia, Case No. 18-C-04523-S6, and Georgia Court of Appeals, Third Division, Case No. A20A2082.)

Background of the Case
On October 15, 2010, GTL issued a $25,000 policy on the life of Donald. Gayle was the beneficiary. On September 11, 2015, Donald made Emery the owner and beneficiary. I found no explanation of the reason why Donald made the change.

In August 2016, about a month before Donald died, Gayle called GTL and inquired about the policy. GTL initially informed Gayle that it could not discuss the policy with her without the permission of the owner.

On August 15, 2016, despite not having sought Emery's permission to discuss the policy with Gayle, GTL faxed a policy change form to Gayle. On August 18, 2016, Gayle returned the policy change form to GTL. When GTL received the form from Gayle, it was missing a page requiring the signatures of Gayle and Emery. GTL notified Gayle and Emery that it could not process the form because it did not contain the signatures.

Emery did not respond to GTL at that time. Gayle responded that she had retained a copy of the signature page, and faxed it to GTL. The fax showed the purported signatures of Gayle and Emery.
On August 31, 2016, GTL updated its records to reflect that Gayle was the owner and beneficiary. On September 9, 2016, Donald died. On October 15, 2016, GTL paid the death benefit to Gayle. A year later, on October 3, 2017, Emery's attorney wrote to GTL and enclosed an affidavit from Emery confirming her status as owner and beneficiary of the policy.

Emery's Lawsuit
On June 18, 2018, Emery filed a lawsuit against GTL alleging bad faith failure to perform under an insurance contract, breach of contract, and negligence. After a hearing, the trial court granted GTL's motion for summary judgment. The trial court reasoned that, because GTL had paid the beneficiary named in its file, the company had complied with applicable law and was therefore insulated from liability.

Emery's Appeal
On appeal, Emery argued that the trial court erred in finding that GTL paid the death benefit to Gayle in accordance with the terms of the policy as contemplated by §33-24-41 of the Georgia Code. The appellate court panel disagreed with Emery. The panel said the statute in question does not impose on an insurance company the duty to investigate and determine whether a person fraudulently completed and submitted a policy change form.

General Observations
As indicated at the beginning of this post, I think this is an interesting case. Because I am not an attorney, it would be inappropriate for me to express a legal opinion on the case. Having said that, it is my personal belief that Gayle stole the death benefit from Emery.

Available Material
I am offering a complimentary 10-page PDF consisting of the trial court ruling (3 pages) and the appellate court panel ruling (7 pages). Email jmbelth@gmail.com and ask for the April 2021 package about the case of Emery v. GTL.

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Monday, April 5, 2021

No. 415: Georgia's New Election Law Faces Strong Legal Challenges

The Republican-controlled legislature in Georgia recently passed, and the Republican governor immediately signed, a new election law (Georgia Senate Bill 202). It is called an "election security law" by its proponents, and a "voter suppression law" by its opponents. The 98-page law faces several strong court challenges.

Here I discuss one such court challenge, a 35-page complaint in a Georgia federal court. The law and the complaint are in the complimentary package offered at the end of this post. (See The New Georgia Project et al. v. Raffensperger et al., U.S. District Court, Northern District of Georgia, Atlanta Division.)

The New Law
Two sentences on page 4 of the new law make clear it was prompted by "The Big Lie" perpetrated by former President Donald J. Trump about the results of the 2020 general election. Here are those sentences:
  • Following the 2018 and 2020 elections, there was a significant lack of confidence in Georgia election systems, with many electors concerned about allegations of rampant voter fraud.
  • Many Georgia election processes were challenged in court, including the subjective signature-matching requirements, by Georgians on all sides of the political spectrum before and after the 2020 general election.
The Complaint
The plaintiffs are The New Georgia Project and two other entities. The defendants are Georgia Secretary of State Brad Raffensperger and four other Georgia election officials. The plaintiffs allege that the new law violates the First and Fourteenth Amendments to the U.S. Constitution and Section 2 of the U.S. Voting Rights Act. The plaintiffs seek a declaration of such violations and an injunction prohibiting the defendants from enforcing the challenged provisions.

The "Nature of the Case" section of the complaint consists of seven paragraphs. Here is the second paragraph of that section:
2. After the high-turnout general election [in 2020] officials conducted multiple recounts and audits. Supporters of former President Donald J. Trump filed several lawsuits seeking to overturn the general election's results, falsely alleging widespread fraud and misconduct on the part of election officials. No court in any of these lawsuits found support for these litigants' fanciful claims. After the senatorial runoff elections, Secretary [of State] Raffensperger declared in a nationally-televised interview that Georgia "had safe, secure, honest elections."
The complaint challenges many of the provisions of the new law. Here are some of those provisions:
  • Despite nationwide scrutiny of Georgia's elections, which confirmed the absence of any fraud, insecurity, or wrongdoing, Republican members of the General Assembly passed legislation clearly intended to make it harder for lawful Georgia voters to participate in the state's elections.
  • It will impose unjustifiable burdens disproportionately on the state's minority, young, poor, and disabled citizens.
  • It will impose unnecessary and burdensome new identification requirements for absentee voting.
  • It will unduly restrict the use of absentee drop boxes and bank mobile polling places.
  • It will prohibit the state from distributing unsolicited absentee ballot applications.
  • It will prohibit third parties—including voter engagement organizations—from collecting absentee ballot applications.
  • It will burden voters with the risk of disenfranchisement due to meritless challenges that require an immediate defense of their qualifications.
  • It will invalidate ballots cast by local voters before 5:00 p.m. in a precinct other than the one to which the voters were assigned, regardless of the reason or their inability to travel to another location.
  • It will compress the time period for voting in a runoff election.
  • It will ban any non-poll worker from giving food or drink, including water, to voters waiting in line.
General Observations
The new law is a brazen attack on the voting rights of Georgians. The law was signed by the governor in a secret signing session attended by a few Republicans immediately after he received the bill. The secrecy of the signing session became a media sensation when State Representative Park Cannon of Atlanta, a Black woman and member of the Democratic minority in the legislature, knocked quietly on the governor's office door in an effort to witness the signing of the bill. She was arrested by state troopers and dragged kicking and screaming to jail.

The new law is an outright takeover of Georgia's election system by the legislature. It is clear that, if the election result in any county or precinct is disliked by the Republicans, they can take steps to alter the result to their liking.

It is my hope that the federal judge will grant the declaratory relief and the injunctive relief that the plaintiffs seek. I plan to report further developments.

Available Material
I am offering a complimentary 133-page PDF consisting of the new Georgia election law (98 pages) and the complaint filed in federal court against the law (35 pages). Send an email to jmbelth@gmail.com and ask for the April 2021 package about the new election law in Georgia.

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Tuesday, March 23, 2021

No. 414: A Strange Twist in Tranamerica's Appeal in the Lebbin Case

Background
In No. 372 (May 18, 2020), I posted an update on the Spector-Lebbin Family Trust (Trust) lawsuit against Transamerica Life Insurance Company (Transamerica). I mentioned several aspects of the case. I said it began in federal court in Maryland, and was transferred at Transamerica's request to federal court in Florida, where the policies were originally sold and where several potential witnesses were located. I also said the judge in Florida ruled Transamerica should pay the Trust about $2.5 million, including interest, for breach of contract. I also said Transamerica appealed to the federal Eleventh Circuit.

In No. 397 (November 9, 2020), I posted another update. I said Transamerica and the Trust filed their initial appellate briefs on August 31, 2020 and October 30, 2020, respectively. I also said there was not yet a timetable for the appellate case.

A Strange Twist
The Eleventh Circuit covers Alabama, Florida, and Georgia. Thus it was natural for Transamerica to file its appeal in the Eleventh Circuit. On February 23, 2021, in a strange twist, the clerk of the Eleventh Circuit wrote a letter to the parties raising a jurisdictional issue. Here is the opening paragraph of the clerk's letter (the full letter is in the complimentary package offered at the end of this post):
After review of the district court docket entries, order and/or judgment appealed from, and the notice of appeal, it appears that this court may lack jurisdiction over this appeal. If it is determined that this court is without jurisdiction, this appeal will be dismissed.
The clerk asked the parties to advise the court simultaneously within 14 days of their positions regarding the jurisdictional issue. He said they could file their responses electronically, and did not need to file paper copies. Both parties filed their responses on March 9. On March 17, the Trust filed a "motion for leave to file sur-reply." The next day, Transamerica filed an opposition to the motion. The two responses, the motion, and the opposition to the motion are in the complimentary package offered at the end of this post. At this writing, there is nothing further on the Eleventh Circuit docket.

General Observations
In their responses to the jurisdictional issue, the parties explained why they think the Eleventh Circuit has jurisdiction. I do not understand why the Eleventh Circuit thinks it may not have jurisdiction. I will report further developments.

Available Material
I am offering a complimentary 55-page PDF consisting of the Eleventh Circuit clerk's letter (2 pages), the Trust's response to the clerk's letter (21 pages), Transamerica's response to the clerk's letter (12 pages), the Trust's motion (10 pages), and Transamerica's opposition to the motion (10 pages). Email jmbelth@gmail.com and ask for the March 2021 package about the Lebbin case.

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Wednesday, March 17, 2021

No. 413: USAA's Executive Compensation for 2020 Hits the News

On March 1, 2021 (the due date), United Services Automobile Association (USAA) filed with the Nebraska Department of Insurance the 2020 Supplemental Compensation Exhibits for USAA and four other USAA companies: USAA Casualty Insurance Company, USAA Life Insurance Company, USAA General Indemnity Company, and Garrison Property and Casualty Insurance Company. The exhibits are required by Nebraska law for insurance companies doing business in the state. The five exhibits are here.

The Danner Article
Patrick Danner is a staff writer for the San Antonio Express News. In an article updated March 5 and entitled "Former USAA CEO Stuart Parker receives more than $6 million golden parachute," Danner wrote about recent executive compensation developments at USAA. He wrote not only about Parker, but also about others, including Parker's successor, Wayne Peacock. Here are the first three sentences of the Danner article:
Former USAA CEO Stuart Parker had a cushy landing following his departure last year from the San Antonio insurance and financial services company. Parker, who retired January 31, 2020, after leading USAA for almost five years, received at least $6.5 million in severance payments. The golden parachute accounted for more than half of the $11.3 million in total compensation five USAA insurance companies paid him last year.
The Cunningham Article
Waylon Cunningham writes about business and technology. On March 5, he wrote an article in the San Antonio Report entitled "Former USAA CEO Stuart Parker netted a $6.5 million severance package." Here are the first three sentences of the Cunningham article:
Former USAA CEO Stuart Parker received a severance package worth at least $6.5 million after he left the company last year. The payments, made after he retired January 31, 2020, formed the bulk of the more than $11.3 million he received in total compensation from five USAA-affiliated companies last year, according to records from the Nebraska Department of Insurance. Besides the severance package, Parker in 2020 also received $336,473 in salaries and $4.8 million in additional compensation, including bonuses.
The USAA Campaign
In the early days of this blog site, I posted three blog items about USAA's campaign to repeal Nebraska's century-old insurance executive compensation disclosure law. William H. McCartney, who at the time was senior vice president and associate general counsel of USAA, led the repeal effort. He had served as Nebraska's director of insurance from 1987 to 1994, and as president of the National Association of Insurance Commissioners in 1992. The repeal effort failed, and Nebraska's disclosure law remains in effect today. For further details about the USAA campaign, see No. 38 (March 31, 2014), No. 39 (April 7, 2014), and No. 40 (April 11, 2014).

Executive Compensation Data for 2019
Long-time readers are aware that I have been writing about executive compensation in the insurance industry for many years. It began with an article in the October 1975 issue of my monthly newsletter, The Insurance Forum, where I showed the 1974 compensation of senior executives of five large mutual life insurance companies. The information was of such great interest to readers that I steadily expanded the coverage.

When I ended the Forum at the end of 2013, I began showing some executive compensation data on this blog site. For example, the 2019 data from my three sources (the Securities and Exchange Commission, the New York State Department of Financial Services, and the Nebraska Department of Insurance) are in No. 381 (July 13, 2020), No. 385 (August 7, 2020), and No. 404 (December 23, 2020).

Chapter 24 of My Memoir
In Chapter 24 of my 2015 book, The Insurance Forum: A Memoir, I summarized my experience over the years in assembling executive compensation data. The experience included many efforts by insurance companies and insurance regulators to prevent access to executive compensation data. Chapter 24 and the book's Table of Contents are here, along with an order form for any reader interested in buying the book.

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Thursday, March 11, 2021

No. 412: A Recent John Grisham Page Turner

John Grisham is one of my favorite authors. He has written about three dozen novels, one work of nonfiction, a collection of short stories, and several books for young readers. I have read many of his books.

A Time for Mercy
A few months ago I read A Time for Mercy, which at the time was a recently published page turner. It was set a few years after the events described in his fascinating first book, A Time to Kill, and includes many of the same characters. The book centers around the subject of domestic violence. A teenage boy murders the man in whose house the boy, the boy's mother, and the boy's sister live. The boy is charged with murder and is defended by the same attorney who was one of the central characters in Grisham's first book. The recent book, like all of Grisham's books, is almost impossible to put down, and has some surprising developments at the end. I strongly recommend the book.

My Earlier Reviews of Grisham Books
Grisham's sixth book, a 1995 novel entitled The Rainmaker, centers around a large fictional health insurance company whose refusal to honor a claim leads to the death of the claimant. The insurance angle prompted me to write a short review of the book in the August 1995 issue of my monthly newsletter, The Insurance Forum.

My second review of a Grisham book described one of the short stories, entitled "Michael's Room," in a 2008 book entitled Ford County. The story is about an infant who suffers severe brain damage as the result of a botched delivery, and about the family's negligence lawsuit against the physician. My review of "Michael's Room" was in the May 2010 issue of the Forum.

My third review of a Grisham book was about a 2010 book entitled Theodore Boone: Kid Lawyer. The book was the first of several books for young readers. The central character is a 13-year-old whose parents are lawyers and who seems headed for a legal career himself. Here though, our hero gets involved in a murder trial in his home town. My review of the book was in the December 2010 issue of the Forum.

My first three reviews of Grisham books, described briefly above, are here. My fourth review of a Grisham book, a 2013 book entitled Sycamore Row, appeared in No. 7 (November 13, 2013), one of my first blog posts.

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Thursday, March 4, 2021

No. 411: More on COVID-19 and the Underwriting of Life Insurance

In No. 409 (February 11, 2021), I reported that the Consumer Federation of America (CFA) had written a letter to the National Association of Insurance Commissioners (NAIC) about COVID-19 and the underwriting of life insurance. The letter grew out of developments reportedly occurring in Europe. The CFA sent copies of the letter to the chief executive officers of several large life insurance companies based in the United States, as well as to the American Council of Life Insurers (ACLI). In No. 409, I provided this link to the CFA letter.

The ACLI Letter to the CFA
I said I would write soon to the NAIC, the ACLI, the CEOs of a few of the companies to which the CFA had written, and a few other CEOs. I also said I would ask for their comments, and would post a follow-up report on the responses. However, I changed my mind when I received from the CFA a copy of a two-page letter it had received from Susan K. Neely, president and CEO of ACLI. The ACLI letter is here.

The CFA Reply to the ACLI Letter
Shortly thereafter, I received from the CFA a copy of its reply to the ACLI letter. The CFA reply to the ACLI letter is here.

General Observations
I think the original CFA letter, the ACLI letter to the CFA, and the CFA reply to the ACLI letter together contain a great deal of food for thought. It will be interesting to see what, if anything, the NAIC does about the problem. I plan to report about significant further developments on the subject.

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Wednesday, February 24, 2021

No. 410: The Age 100 Problem Remains Alive and Well

My first article about the age 100 problem in cash-value life insurance was in the January 2001 issue of The Insurance Forum, my monthly newsletter that preceded this blog site. My first blog post on the subject was No. 141 (February 1, 2016).

The Age 100 Problem
The age 100 problem stems from the fact that cash-value life insurance policies are often sold as "permanent life insurance," "whole life insurance," or some other expression falsely suggesting that the life insurance protection will last for the insured's entire life. In fact, however, the protection lasts only until the policy's "terminal age." Today, many millions of cash-value life insurance policies are in force in the United States with a terminal age of 100. Thus the "whole life" policy is actually an endowment at age 100. Furthermore, cash-value life insurance policies are often sold with heavy emphasis on the facts that the "inside interest" is income-tax deferred and the death benefit is income-tax exempt.

Extended Maturity Riders
In No. 226 (July 20, 2017), I reported that some (but not all) companies had begun offering extended maturity riders (EMRs) to universal life policies. Here is language describing the EMR offered by Principal Life Insurance Company:
If the insured reaches the stated maturity age, maturity is extended to the date of his or her death. The rider is automatically added to policies in states where approved, and there is no charge for the rider. There will be no charges during the maturity extension period. However, loan interest will continue to be charged. No additional premium payments, other than loan payments, will be allowed.
At the time I was not aware of any companies offering EMRs on traditional whole life policies. Nor am I aware of any such offers today.

A New Mortality Table
As mentioned earlier, millions of policies now in effect are based on a mortality table that has a terminal age of 100. However, recent policies are based on a new mortality table that has a terminal age of 121. I have often asked, but no actuary has ever explained to me why it is impossible to issue a policy based on a mortality table that has no terminal age.

A 2018 Survey
In No. 277 (July 17, 2018), I reported on the results of a survey I conducted about the age 100 problem. I wrote to the chief executives of 22 life insurance companies asking some important questions about the age 100 problem. Nine of the companies acknowledged receipt of the survey in at least some fashion. However, some of the responses provided little or no information. I showed in detail the disappointing responses to the survey.

A Recent Email
Recently I received, out of the blue, an email from an individual with a family member who survived to age 100. The family member received a check for the face amount. Later the family member was hit with huge bills for federal and state income taxes, as well as penalties. Normally I would identify the company and provide other details. In this instance, however, I am choosing to protect the privacy of the individual and the family.

General Observations
Over the 20 years that I have been writing about the age 100 problem, it has become clear that life insurance officials are reluctant to discuss the problem. I think the reason is they fear that publicity about the problem might endanger the highly favorable income tax treatment of cash-value life insurance. Although there have been important developments, such as EMRs, progress has been slow. For example, no one has ever responded to the idea of using a 1035 exchange to replace a policy based on a mortality table containing a terminal age of 100 with a policy based on a mortality table containing a terminal age of 121. I would welcome comments from readers about the age 100 problem. Please send an email to jmbelth@gmail.com.

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