No. 13: A STOLI Case in Federal Court in Minnesota

On November 27, 2013, U.S. District Judge Ann D. Montgomery issued a Memorandum Opinion and Order (Order) in a stranger-originated life insurance (STOLI) lawsuit. The plaintiff is PHL Variable Insurance Company, a unit of Phoenix Companies, Inc. The defendant is Bank of Utah. The case is not yet fully resolved. (PHL v. Bank of Utah, U.S. District Court, District of Minnesota, Case No. 12-cv-1256.)

The Sale

The lawsuit arose out of a $5 million life insurance policy issued by PHL on the life of William Close, then a retiree aged 74. The policy was issued on September 11, 2007. Close died of lung cancer on November 18, 2011.

In May 2006, Harold Pomper, a broker for Lextor Insurance LLC, approached Close. Pomper said premiums would be paid by a loan, said Close's beneficiary would collect a death benefit if he died during the two-year contestability period, and submitted a preliminary application to PHL.

On August 11, 2007, Pomper and Brad Friedman, a Lextor representative, met with Close and his wife Kathleen. Pomper and Friedman later testified they completed an application at the meeting, but Kathleen did not recall paperwork there. The application listed Close as the proposed insured and the William Close 2007 Irrevocable Trust as the proposed owner of the policy. Friedman testified he and Close went through the questions on the application and Friedman hand wrote the answers provided by Close. Friedman did not request documentation to verify Close's answers. Friedman and Pomper testified they had no reason to doubt the accuracy of Close's answers.

The Misrepresentations

The application said Close had a net worth of $6,675,000, had an annual income of $350,000, had never applied for life insurance and been declined, and had never been convicted of a felony. Actual net worth was less than one-tenth the amount represented. Tax returns for 2006 and 2007 showed adjusted gross income below $20,000 each year. Close had applied for life insurance with another company and had been declined; Friedman's signature as a witness had been on the rejected application. Close had been convicted of a felony in 2002 for receiving illicit kickbacks while serving as a trustee for labor union pension funds.

The application included a client intent form. It asked whether the insured or owner would be borrowing to pay the premiums and, if so, the name of the financing program; the answer was checked "yes" and "CFC of Deleware [sic]" was indicated. The form asked whether the policy was being purchased in connection with any program under which the insured or owner may have been advised of the opportunity to transfer the policy to a third party within five years of issuance; the answer was checked "no." The form asked if the insured or owner had an understanding or agreement providing for a party other than the owner to obtain a legal interest in the policy or entity owning the policy; the answer was checked "no." The form was signed by Close, Friedman, and the trustee.

Kathleen testified they were told "right up front that [the policy] was going to be sold." She recalled Pomper and Friedman saying they would look for an investor to buy the policy within two years, and the Closes would receive $500,000 after the policy was sold. When asked whether there was any discussion about who would pay the premiums, she said: "Well, it definitely wasn't us... we didn't have that kind of income to support the policy."

Friedman and Pomper testified they told Close he could sell the policy after two years and it would be worth a percentage of the death benefit, but testified they did not promise Close $500,000. Friedman testified he informed Close of the option to repay the loan and keep the policy, and it was not his understanding Close obtained the policy to sell it.

The Infolink Report

On receiving the application, PHL obtained an "Infolink Advanced Amplified Life Report" to verify Close's financial and medical representations. The report, dated August 16, 2007, is under seal in the court file pursuant to a protective order. Infolink reports have turned up in other PHL STOLI cases, suggesting the company used them routinely.

The Infolink report was completed using answers given by Close in a telephone interview. The section about financial information was incomplete and inconsistent. Nearly all spaces for breakdowns of income and net worth were blank. The report showed annual income of $375,000 entirely from dividends, and net worth of $6.7 million. The report said the information provided by Close was confirmed by an unnamed personal reference who had known Close for five years. The PHL underwriter who underwrote the policy, when asked about the report, testified he would have wanted to obtain further verification of the information.

The application showed a planned annual premium of $272,025, amounting to 77 percent of Close's claimed income of $350,000. The underwriter and PHL's chief underwriter testified the ratio was unusually high and was something an underwriter would question. The underwriting file lacks evidence showing PHL sought or obtained further information about Close's finances before issuing the policy.

The Trust

The trust was established to own the policy and perform the obligations under a financing agreement with CFC of Delaware LLC. Kathleen was beneficiary of the trust, and BNC National Bank was trustee. Ryan K. Crayne was trust protector. He testified he served as trust protector for "at least a hundred trusts" associated with CFC.

The Premium Finance Loan

To pay the premium and meet other costs, Close applied for a loan from CFC, which made loans to irrevocable life insurance trusts under a program financed by New Stream Insurance LLC. The loan application provided Close would not pledge any assets, but would personally guarantee 25 percent of the loan if the trust defaulted. The record includes no evidence of attempts by CFC to verify Close's financial information.

CFC approved the loan and entered into an agreement with the trust on September 18, 2007. CFC agreed to lend the trust $330,225, consisting of $272,025 of premium, closing fees of $16,000, an origination fee of $11,200, and $1,000 to terminate the trust. The term of the loan was two years. The trust granted CFC a security interest in the policy. BNC, the trustee, executed a collateral assignment of the policy to CFC and submitted it to PHL, which recorded the assignment on or about October 1, 2007. There is no evidence that CFC performed any underwriting about the trust's ability to repay the loan. The funds were provided by New Stream, a hedge fund that invested in life insurance products; it later entered bankruptcy proceedings.

The Policy Surrender

In July 2009, CFC wrote to the Closes and Crayne, the trust protector, saying the loan to the trust would mature in December 2009. CFC said the four options to repay the loan were (1) refinance with CFC, (2) refinance elsewhere, (3) repay the loan with personal funds, or (4) sell the policy and use the proceeds to repay the loan.

Close spoke with Friedman about selling the policy. Close sent his medical records to Friedman on October 8, 2009. The records showed a mass in his left lung and possible metastatic lesions in both lungs, said Close was under the care of an oncologist, and noted Close's "possible cancer."

Friedman testified he tried to sell the policy but did not recall to or through whom he made the attempt. He further testified the "policy wasn't worth a lot of money at the time" because Close "was relatively healthy, I think." The policy was not sold.

On January 7, 2010, Crayne, the trust protector, without speaking with Close about Close's intent concerning the policy, and without knowledge of Close's medical diagnosis, sent a letter instructing BNC, the trustee, to deliver forms to PHL to change the owner and beneficiary of the policy to New Stream. Crayne directed BNC to wait to receive signed documents from Close and Kathleen. When asked if surrender of the policy was the best option available to Close, Crayne testified he would have expected Close to "scramble to find refinancing" and keep the policy if he was ill.

A week later, Close and BNC executed documents surrendering the policy to CFC in full satisfaction of the trust's obligations to CFC. CFC designated New Stream as assignee of the policy in full satisfaction of CFC's obligations to New Stream relating to the policy. Kathleen executed a document acknowledging the trust's surrender of the policy to New Stream. New Stream submitted change of ownership and change of beneficiary forms to PHL, which recorded the changes.

New Stream transferred the policy to Bank of Utah as securities intermediary. PHL was informed and recorded the transfer. On June 2, 2011, New Stream sold its interest in the policy to Limited Life Assets Services Limited (LLAS) in connection with the liquidation of New Stream's assets in bankruptcy. Bank of Utah became securities administrator for LLAS. In January 2012, after Close's death, Bank of Utah submitted a claim to PHL for the $5 million death benefit.

The PHL Lawsuit

On May 24, 2012, PHL filed a lawsuit against Bank of Utah seeking a declaratory judgment that the policy was null and void ab initio (from the beginning) due to a lack of insurable interest when the policy was issued, and that PHL may retain the premiums. On July 3, 2012, Bank of Utah answered the complaint and filed a counterclaim for breach of contract and unjust enrichment based on PHL's refusal to pay the death claim and retaining the premiums. On August 1, 2013, PHL and Bank of Utah each filed motions for summary judgment, and each filed motions to exclude expert testimony.

The Order

In her Order, Judge Montgomery granted in part and denied in part PHL's motion for summary judgment. She ruled the Close policy was void ab initio, but denied PHL's request to retain the premiums pending resolution of Bank of Utah's counterclaim for unjust enrichment. She denied Bank of Utah's motion for summary judgment on its counterclaim for unjust enrichment, thereby leaving the matter to be resolved at trial. She dismissed Bank of Utah's motion for summary judgment on its counterclaim for breach of contract. She denied motions by both PHL and Bank of Utah to exclude expert testimony.

General Observations

This is one of many STOLI lawsuits involving gross misrepresentations in the application and grossly deficient underwriting by the insurance company. Here are a few excerpts from Judge Montgomery's Order illustrating these characteristics:

There is no dispute the completed Application included gross misrepresentations.

When viewed in totality, the transactions demonstrate that the loan and Trust arrangements among Close, CFC, and New Stream were, in practice, hollow formalities designed to circumvent the insurable interest requirement. The transactions' form will not be allowed to prevail over their substance.

...the record shows PHL had some knowledge of facts that would have put it on notice that the Policy was being procured as a cover for a wager, and that PHL did not investigate those facts.

It remains to be seen whether there will be appeals, and whether Bank of Utah's counterclaim for unjust enrichment will go to trial. Meanwhile, I am offering the 34-page Order as a complimentary PDF. Send me an e-mail request at jmbelth@gmail.com for Judge Montgomery's Order.

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Email: jmbelth@gmail.com

Blog: www.josephmbelth.com

No. 12: The Expanded and Improved Medicare For All Act of 2013

On February 13, 2013, U.S. Representative John Conyers (D-MI) introduced H.R. 676, the "Expanded and Improved Medicare For All Act." The bill has 53 cosponsors (all Democrats) in the House of Representatives. On February 22, the bill was referred to the Subcommittee on Indian and Alaska Native Affairs of the Committee on Natural Resources. There has not been any other action on the bill. Here is the bill summary prepared by the Congressional Research Service:

Establishes the Medicare for All Program to provide all individuals residing in the United States and U.S. territories with free health care that includes all medically necessary care, such as primary care and prevention, dietary and nutritional therapies, prescription drugs, emergency care, long-term care, mental health services, dental services, and vision care.

Prohibits an institution from participating unless it is a public or nonprofit institution. Allows nonprofit health maintenance organizations (HMOs) that deliver care in their own facilities to participate.

Gives patients the freedom to choose from participating physicians and institutions.

Prohibits a private health insurer from selling health insurance coverage that duplicates the benefits provided under this Act. Allows such insurers to sell benefits that are not medically necessary, such as cosmetic surgery benefits.

Sets forth methods to pay institutional providers of care and health professionals for services. Prohibits financial incentives between HMOs and physicians based on utilization.

Establishes the Medicare for All Trust Fund to finance the Program with amounts deposited: (1) from existing sources of government revenues for health care, (2) by increasing personal income taxes on the top 5% income earners, (3) by instituting a modest and progressive excise tax on payroll and self-employment income, (4) by instituting a modest tax on unearned income, and (5) by instituting a small tax on stock and bond transactions. Transfers and appropriates to carry out this Act amounts that would have been appropriated for federal public health care programs, including Medicare, Medicaid, and the Children's Health Insurance Program (CHIP).

Requires the Medicare for All Program to give first priority in retraining and job placement and employment transition benefits to individuals whose jobs are eliminated due to reduced administration.

Requires creation of a confidential electronic patient record system.

Establishes a National Board of Universal Quality and Access to provide advice on quality, access, and affordability.

Requires the eventual integration of the Indian Health Service into the Program, and an evaluation of the continued independence of Department of Veterans Affairs (VA) health programs.

A Few Thoughts

During the 40 years of The Insurance Forum, I rarely wrote about the tragic situation of those in our great nation who have no insurance covering the cost of health care and those who have inadequate coverage. A few exceptions were articles contributed by Alan Press in our March 2008, June 2008, October 2009, and December 2009 issues, and my article in the June 2010 issue about the then recently enacted Patient Protection and Affordable Care Act (PPACA).

I have said on occasion that I support the concept of a single-payer system of universal health care. I have not embraced the PPACA, because I think it is a complex compromise that will not solve the problems we face. Also, I am pessimistic about the likelihood of enactment of a single-payer system, such as H.R. 676. Whenever anyone asks me why we do not have universal health care of the type found in every other advanced society in the world, my one-word answer is "Politics."

In my opinion, the enactment of Social Security in 1935 and Medicare in 1965 were the two greatest political achievements of the past century. Each occurred as the result of an extraordinary combination of events. I think it will require a similar combination of events for the U.S. to enact a system of universal health care, which thus far has eluded Presidents Theodore Roosevelt, Harry Truman, and Barack Obama.

No. 11: More on the Dilemma for Consumers When an Insurance Company Is Sold

In the December 2013 issue of The Insurance Forum, published November 7, I wrote about the dilemma faced by policyholders when an insurance company is sold by its parent company in such a way as to cause a downgrade in the insurance company's financial ratings. In the article I cited the recent divestitures of Aviva Life & Annuity Company by Aviva plc and Lincoln Benefit Life Company by Allstate Life Insurance Company. I suggested that the problem would be alleviated if rating firms assign stand-alone ratings to the subsidiary unless the parent company provides an unlimited, permanent, and unconditional parental guarantee to the subsidiary.

Moody's Special Comment

On November 20, Moody's Investors Service, a major rating firm, issued a six-page "Special Comment" entitled "US Life Insurance: Recent Divestitures Raise Questions about Parental Commitment." Moody's cited five recent divestitures in addition to the two I cited: Sun Life Assurance Company of Canada US by Sun Life Financial, MONY Life Insurance Company and MONY Life Insurance Company of America by AXA Financial, and Commonwealth Annuity & Life Insurance Company and First Allmerica Life Insurance Company by Goldman Sachs Group. Here is the opening paragraph of the special comment:

Insurance subsidiaries' creditworthiness often benefits from implied support stemming from a unit's strategic importance to a stronger parent and/or group of other operating subsidiaries that are managed as a tightly integrated group. This implied support has been validated in practice over time and is typically reflected in higher ratings for those subsidiaries than they would merit on their own. However, recent subsidiary dispositions, most prominently in the US life insurance sector, raise new questions about the reliability of this implied support over time as parent strategies change.

An Interesting Table

The special comment includes an interesting table listing eleven U.S. life insurance companies that receive "rating uplift" from their parent companies. Here are the companies, with the number of "notches of rating uplift" in parentheses: Allianz Life Insurance Company of North America (1), Allstate Life Insurance Company (2), AXA Equitable Life Insurance Company (2), Combined Insurance Company of America (1), Great-West Life & Annuity Insurance Company (1), Hartford Life Insurance Company (1), HCC Life Insurance Company (1), Jackson National Life Insurance Company (1), John Hancock Life Insurance Company USA (1), USAA Life Insurance Company (1), and Zurich American Life Insurance Company (2).

Conclusion

In the concluding section of the special comment, Moody's says "implicit support may lack permanence" and "shifts in strategic importance of subsidiaries can result in rating transitions." However, Moody's does not mention the possibility of a subsidiary obtaining an unlimited, permanent, and unconditional guarantee from its parent. I will provide the special comment in the form of a complimentary PDF. Just send me an e-mail request for Moody's special comment on recent divestitures.

No. 10: The Danger of Announcing Dividend Interest Rates

I have expressed the opinion that announcing dividend interest rates associated with traditional participating life insurance policies is a deceptive sales practice. Also, I have expressed the opinion that announcing gross interest rates associated with universal life policies is a deceptive sales practice. For example, see "How Not To Advertise Universal Life" in the May 1984 issue of The Insurance Forum.

MassMutual's Press Release

On November 4, 2013, MassMutual issued a two-page, seven-paragraph press release entitled "MassMutual Approves Record $1.49 Billion Dividend Payout for Policyowners." The release contains three footnotes and some descriptive material entitled "About MassMutual." The lead paragraph of the release reads:

Massachusetts Mutual Life Insurance Company (MassMutual) announced today that its Board of Directors has approved the company's largest dividend payout ever in the company's history for 2014: a record payout estimated at $1.49 billion to eligible participating policyowners. The dividends to be paid in 2014 reflect a dividend interest rate¹ of 7.10 percent for eligible participating permanent life and annuity blocks of business, an increase over last year's rate of 7.00 percent.

A footnote is indicated after the words "dividend interest rate" in the above lead paragraph. The footnote reads:

The dividend interest rate is not the rate of return on the policy. Dividends consist of an investment component, a mortality component and an expense component. Therefore, dividend interest rates should not be the sole basis for comparing insurers or policy performance. Additionally, dividends for a given policy are influenced by such factors as policy series, issue age, gender, underwriting class, policy year and policy loan rate, as well as changes in experience.

The footnote says what the dividend interest rate is not, but does not say what it is. Further, saying dividend interest rates should not be the sole basis for comparisons implies they are a basis for comparisons.

A Brokerage E-mail

On November 5, a MassMutual brokerage office in Georgia sent an e-mail to producers. The subject is "MassMutual Announces 2014 Dividend." The title, in large boldface type, is "7.10% Dividend Announced." Here is the full text, except for contact information:

MassMutual has officially announced our 2014 dividend. We will payout [sic] a record $1.49 Billion. The dividend interest rate is 7.10%. Please see attachment for official news release.

The full press release, including its three footnotes, was attached to the e-mail. A recipient of the e-mail shared it with me.

Another Brokerage E-mail

On November 12, a MassMutual brokerage office in Indiana sent an e-mail to producers. The subject is "2014 Dividend Announcement," and there is no title. The third paragraph of the five-paragraph text includes this sentence: "Additionally, a 7.10% dividend interest rate¹ represents a 10 basis point increase for all participating permanent life and annuity blocks of business (from 7.00% to 7.10%)." [The boldface type is in the original.] Footnote 1 is shown at the bottom of the e-mail in exactly the form shown in the company's press release. A recipient of the e-mail shared it with me.

A Newspaper Article

On November 4, an article appeared in The Republican, a newspaper in MassMutual's home city of Springfield, based on the press release. The title is "MassMutual announces record dividend estimated at $1.49 billion." Here are the first two sentences of the text:

MassMutual Financial Group has approved the insurer's largest dividend payout in history for 2014. The record payout to eligible policy holders is estimated at $1.49 billion. The dividends to be paid in 2014 reflect a dividend interest rate of 7.1 percent for eligible policy holders, an increase over last year's rate of 7 percent flat.

The article does not mention anything that appears in footnote 1 of the press release. Thus it does not warn the reader against drawing the inference that 7.1 percent is a policy rate of return or that the figure may be used for comparison purposes.

My Inquiry and MassMutual's Statement
I contacted a MassMutual spokesman, explained my concerns, said I was planning to post an article, and requested a statement from the company to include in the article. In response, the company said:

Based on the information you shared, the initial e-mail message that you forwarded is accurate and links through appropriately to our news release with full disclosures. Regarding your latter question on a news story, although our release cited full disclosures, we cannot dictate what a news organization includes in its coverage.

Conclusion
I am more concerned about what producers say to policyholders and prospects than what MassMutual says to producers. I think producers, in their sales work, and especially in the current environment of low market interest rates, will emphasize the 7.10 percent dividend interest rate in such a way as to imply that it is the rate of return on the policy, and that it may be used for comparison purposes. Thus I think the figure will be used in such a way as to constitute a deceptive sales practice. For these reasons, it is my opinion that companies should not announce dividend interest rates, even with cautionary footnotes.

I have long argued for a rigorous system of disclosure to life insurance consumers. Among other things, the system includes information about yearly rates of return on the savings component of cash-value life insurance, and reflects the combined effect of interest, mortality, and expenses. My most complete description of the system is in the December 1975 issue of the Drake Law Review. I am making the 26-page article available as a complimentary PDF. Just e-mail me a request for the Drake Law Review article.

No. 9: The Unsealing of Some Phoenix Court Documents

I have written extensively about cost-of-insurance (COI) increases that subsidiaries of Phoenix Companies, Inc. imposed on owners of universal life policies of the type used in stranger-originated life insurance transactions. I discussed five federal court lawsuits. I also discussed investigations of the "2010 increase" by what is now the New York State Department of Financial Services (DFS), the California Department of Insurance (CDI), and the Wisconsin Office of the Commissioner of Insurance (OCI).

Phoenix rescinded the 2010 increase imposed on New York policyholders after DFS ordered the company to do so. Phoenix later imposed the "2011 increase" on New York policyholders, apparently without objection by DFS. Numerous important court documents relating to the COI increases have been sealed or heavily redacted, but I am continuing my efforts to obtain them. My June 2012 public records request to DFS remains pending. Although my public records request to CDI was denied, I obtained some documents through a public records request to OCI. See the October 2012, December 2012, and November 2013 issues of The Insurance Forum. 

The September 2011 DFS Letter to Phoenix

On September 6, 2011, Michael Maffei, chief of the life bureau of DFS, sent a three-page letter to Kathleen McGah, vice president and counsel of Phoenix. He described the results of the DFS investigation into the 2010 increase and alleged that Phoenix committed five violations of New York insurance laws. He ordered Phoenix to reduce the COI rates to the rates used prior to the 2010 increase; credit the difference, with interest, to policy values; and refrain in the future from using the "funding ratio" (the ratio of a policy's accumulated value to the policy's face amount) as a basis for COI increases. The Maffei letter remains sealed in court files, but I obtained it through my August 2013 public records request to OCI. I am making the letter available as a complimentary PDF. Just e-mail me a request for the Maffei letter. 

The Mills Reports

Robert Mills is an economist and director at Micronomics, Inc., an economic research and consulting firm. The plaintiffs' attorneys retained him to calculate damages in the event Phoenix is found liable for breach of contract as alleged in court complaints.

On September 16, 2013, Mills submitted a report based on data provided by Phoenix. On September 30, he submitted a supplemental report based on additional data provided by Phoenix. The reports were sealed pursuant to a protective order. On November 6, they were unsealed. The figures below are from the supplemental report.

Mills focused on the 2011 increase Phoenix imposed on New York policyholders. He said owners of 87 policies were affected by the 2011 increase, and 55 of them remained in force as of June 30, 2013. The total estimated COI overcharges for the 55 policies was $1,517,849 through August 30, 2013, and that figure will increase over time. Mills also estimated prejudgment interest (through March 31, 2014 on estimated overcharges through August 30, 2013) of $172,277 at a 9 percent interest rate (the statutory rate in New York) or $76,568 at a 4 percent interest rate (the rate Phoenix argues should be used).

Mills discussed 22 policies that lapsed between notification of the 2011 increase and June 30, 2013. He estimated that $7.95 million in premiums were paid into those policies. He also gave some lower damages figures based on the assumption that a small percentage of the policies lapsed for reasons other than the 2011 increase.

Two Important Unanswered Questions

After their investigations, CDI and OCI ordered Phoenix to rescind the 2010 increase imposed on policyholders in those states, but Phoenix refused to do so. Question: Why did Phoenix refuse to comply with the CDI and OCI orders to rescind the 2010 increase imposed on California and Wisconsin policyholders after having complied with the DFS order to rescind the 2010 increase imposed on New York policyholders? OCI began an administrative proceeding, the results of which will not be known for some months. To my knowledge, CDI has done nothing further.

Although DFS ordered Phoenix to rescind the 2010 increase, DFS apparently did not object to the 2011 increase. Question: How did Phoenix implement the 2011 increase on New York policyholders in such a way as to avoid the problems that caused DFS to order rescission of the 2010 increase? Hopefully the question will be answered when further court documents are unsealed or DFS complies with my public records request.

Other Documents

Numerous court documents relating to Phoenix's COI increases remain sealed, and I still await numerous documents in response to my public records request to DFS. When more documents become available, I will report on them.

No. 8: More on the Reversal of the Neasham Conviction

In No. 6, I discussed the reversal of the conviction of Glenn Neasham, a California agent who sold an Allianz annuity to Fran Schuber in 2008, just before her 84th birthday. An important issue was whether Schuber was suffering from dementia at the time of the sale. A reader expressed some thoughts about my posting, and we engaged in further correspondence. The exchange prompts me to elaborate on three points.

The $14,000 Commission

The first point relates to Neasham's $14,000 commission, which I view as an appropriation of Schuber's funds to Neasham's use. The reader asked whether I am opposed to commissions. I said I am not. I have often said commissions are essential in situations where financial services are sold rather than bought. The consumer's tendency is to procrastinate, and someone must perform what I call the "anti-procrastination function." A person has to be paid to perform that function, and commissions are a reasonable form of compensation. I have often said many people die without wills because no one is paid to perform the anti-procrastination function.

I failed to make sufficiently clear in my previous posting that the annuity in question was not a single-premium annuity, but rather a flexible-premium annuity in which the first premium was large and no further premiums were contemplated. The first-year commission rate on a flexible-premium annuity is significantly higher than the commission rate on a single-premium annuity. In other words, I think the annuity sold in this case generated an excessive commission.

Jochim's Financial Interest

The second point relates to the financial interest of Louis Jochim, Schuber's 82-year-old live-in boyfriend, who precipitated the sale by bringing Schuber to Neasham's office. The reader said the question of Jochim's financial interest in the sale had nothing to do with Neasham. In response, I said it had everything to do with Neasham. In my opinion, the purpose of the sale was to allow Jochim--rather than Schuber's son Ted--to take eventual control of Schuber's property.

As described in my June 2012 article, Jochim's plan was thwarted. After Neasham's conviction, and after Allianz refunded the entire annuity premium to Schuber with interest, Ted obtained a court order. It designated Ted the conservator of Schuber's person and property. Jochim moved out of Schuber's house, and Ted moved her to the memory loss unit of an assisted living facility.

The Suitability Issue

The third point relates to suitability of the annuity. As I said in No. 6, the fact that the California Department of Insurance had approved the annuity contract form for sale to persons up to age 85 does not mean it is necessarily suitable. The reader said he sees no problem with an annuity that provides a period certain. In my view, when a person selects an annuity consisting of a period certain and a deferred life annuity, the arrangement would not be suitable for a person in poor health because the portion of the funds going to the purchase of the deferred life annuity would be forfeited entirely if the person dies during the period certain.

No. 7: John Grisham Strikes Again

John Grisham, one of our most popular novelists, has done it again. His latest book is Sycamore Row (Doubleday, 2013). It is set in 1988 in the fictional Mississippi town of Clanton. It involves many of the characters in his first book, A Time to Kill, which was set in 1985.

Seth Hubbard, a white man in his 60s, is dying of lung cancer and commits suicide by hanging himself from an old sycamore tree. He leaves a suicide note containing instructions about his funeral, a letter to Jake Brigance, the attorney hero of Grisham's first book, and a handwritten will executed the day before he committed suicide.

The handwritten will revokes Hubbard's previous will, which was of the usual type prepared by a law firm. The handwritten will disinherits Hubbard's two adult children, their children, and his two ex-wives. It leaves the bulk of his estate, which turned out to be large, to his black housekeeper, with relatively small bequests to a church and a long lost brother. The housekeeper had been with Hubbard for three years and had cared for him during his difficult final days. The handwritten will names the executor and instructs him to appoint Jake the attorney for the estate. The letter to Jake instructs him to carry out the terms of the handwritten will "at all costs," and warns there will be a big fight. The letter to Jake includes these sentences: "The doctors have given me only weeks to live and I'm tired of the pain.... If you smoke cigarettes, take the advice of a dead man and stop immediately."

Hubbard was correct about the fight. All through the book I wondered whether the second word of the title was "row," rhyming with "grow," or whether it was "row," rhyming with "brow." At the end of the book we learn there was a row (rhyming with grow) of sycamore trees of which the hanging tree was a remnant. However, the legal war that ensued certainly qualified as a row (rhyming with brow).

I have read all of Grisham's books, and I think this one may be his best yet. It is 447 pages but is a page-turner.