Friday, August 25, 2017

No. 231: Life Insurance Fraud—A Case Involving Incredible Criminal Allegations

On June 22, 2017, the U.S. Attorney's office in the Southern District of Ohio filed a 33-count grand jury indictment against three individuals, along with a motion to seal the indictment. On August 9 the office filed a motion to unseal the indictment, and the judge unsealed it the same day. Often there are only a few days (the time needed to arrest the defendants) between the filing under seal and the unsealing. In this case extra time was needed to complete the investigation. On August 10 the office issued a press release about the case. (See U.S.A. v. Stevenson, U.S. District Court, Southern District of Ohio, Case No. 2:17-cr-134.)

The Defendants
The defendants are Mitch G. Stevenson, his wife Patricia Stevenson, and their daughter Candace G. Stevenson. The indictment charges each defendant with one count of money laundering conspiracy. The indictment also charges Mitch with twenty-two counts of money laundering, Patricia with two counts of money laundering, and Candace with eight counts of money laundering. Money laundering conspiracy is a crime punishable by up to twenty years in prison. Money laundering is a crime punishable by up to ten years in prison.

On August 10 Patricia and Candace made their initial appearances before a magistrate judge. A private attorney represented Patricia. The magistrate judge appointed a federal public defender to represent Candace. On August 11 Mitch made his initial appearance before the magistrate judge. A private attorney represented Mitch. The defendants were released after their initial appearances. The docket reflects the filing of orders describing the conditions of release and the filing of financial affidavits. However, those documents are not publicly available, at least not yet.

The Policies
In early 2009 West Coast Life Insurance Company issued two life insurance policies on the life of Person A, a Cincinnati resident and relative of the defendants. The policies had a combined death benefit of $2.9 million. Mitch was the initial owner and beneficiary of one policy, for $1.5 million. Person B, another relative of the defendants, was the initial owner and beneficiary of the other policy, for $1.4 million. In early 2011 Patricia became owner and beneficiary of the first policy, and Candace became owner and beneficiary of the second policy. The indictment does not identify the agent who submitted the application, and does not comment on West Coast Life's underwriting.

The Impostor
The application for the policies required Person A's medical history and a medical examination. An examination of an impostor took place on February 6 or 7, 2009, in Sugar Land, Texas, a Houston suburb. The identity of the impostor (she represented herself as a relative of the defendants) is not known. The impostor weighed 176 pounds, and said her address was in Sugar Land. The impostor said she had not been treated for dizziness, diabetes, or high blood pressure, and had not been a hospital patient for five years. The indictment does not identify the physician or paramedic who examined the impostor.

Three weeks before the medical examination of the impostor in Texas, the real Person A was in the emergency room of a Cincinnati hospital. At that time Person A weighed 387 pounds. During the previous two years, Person A had made at least 17 visits to hospital emergency rooms. Also, Person A had been taking medications for diabetes, high blood pressure, and other conditions. On February 6, 2009 (the day of, or the day before, the examination of the impostor in Texas), Person A was in the emergency room of a Cincinnati hospital.

The Death Claims
On January 9, 2012, Person A died at a Cincinnati hospital. On January 25 Patricia and Candace filed death claims with West Coast Life. On January 30 the company issued checks for the death benefits. Each check was about $4,000 larger than the death benefit, perhaps reflecting interest from the date of death to the date of the checks.

Use of the Money
On February 8, 2012, Patricia and Candace deposited the checks into four newly opened bank accounts. On February 21 Candace used a $248,000 cashier's check to buy a 2012 Bentley GT Convertible and registered it in her name. On February 24 Patricia used $700,000 in cashier's checks to transfer funds to Mitch. He and Patricia used some of the money for a land contract for a home in Mason, Ohio, near Cincinnati.

The defendants moved money from bank to bank. The indictment alleges that the transactions were "designed in whole or in part to conceal and disguise the nature, location, source, ownership, and control of the proceeds of criminal activity." The indictment seeks forfeiture of the proceeds derived from the illegal activity.

General Observations
The indictment presents overwhelming evidence supporting incredible criminal allegations. I do not understand how the defendants could have thought they would be able to get away with such a brazen scheme to defraud a life insurance company.

It seems likely the case will not go to trial. I think it will end with plea agreements and sentencing of the defendants to significant prison time. I plan to report further developments.

Available Material
I am offering an 18-page complimentary PDF consisting of the U.S. Attorney's press release (2 pages) and the indictment (16 pages). Email and ask for the August 2017 package about the U.S.A. v. Stevenson case.


Monday, August 21, 2017

No. 230: Long-Term Care Insurance—Another Lawsuit Involving Claims Practices at Senior Health Insurance Company of Pennsylvania

In No. 229 (posted August 8, 2017), I reported on a 2013 long-term care (LTC) insurance claims practices lawsuit against Senior Health Insurance Company of Pennsylvania (SHIP). While working on that post, I learned of a 2011 claims practices lawsuit against SHIP. Here I report on the earlier case. (See Gottlieb v. Conseco, U.S. District Court, Central District of California, Case No. 2:11-cv-2203.)

U.S. District Court Judge George H. King handled the Gottlieb case. President Clinton nominated him in April 1995, and the Senate confirmed him in June 1995. He served as chief judge from September 2012 to June 2016, and retired in January 2017. U.S. Magistrate Judge Victor B. Kenton was also involved in the case.

In January 1988, Beatrice Orkin Gottlieb, a California resident aged 57 at the time, acquired LTC insurance coverage from AIG Life Insurance Company (AIG). The insurance was evidenced by a certificate issued by the AIG Long Term Care Trust. The master contract became effective in June 1987. In group insurance, a "master contract" covers the entire group, and a "certificate" is issued to each member of the group. The certificate in this case had an Extended Home Care Benefit Rider in which "home" was defined. Some definitions of "home" are mentioned later.

In December 1991 American Travellers Life Insurance Company (ATL) informed Gottlieb by letter that ATL had "reinsured and assumed" the coverage from AIG. ATL said that "you can be assured that the benefits of your policy will remain exactly the same." (The underlining was in the original.)

In December 1999 ATL informed Gottlieb by letter that the company's name had changed to Conseco Senior Health Insurance Company (CSHI) because Conseco, Inc. had acquired ATL. The letter said: "The name change will in no way affect the terms and conditions of your policy." In November 2008, when Conseco transferred CSHI to an oversight trust, SHIP became the company's name.

In April 2010 Gottlieb entered a skilled nursing facility. In July 2010 she moved to another skilled nursing facility. Her daughter, Debbie Ferman, filed a claim against SHIP, which denied the claim. The denial appeared to be based on an endorsement added to the policy changing the definition of "home." Gottlieb had never agreed to the endorsement and had never even received it.

The Lawsuit
In March 2011 Gottlieb filed a class action lawsuit against CSHI doing business as SHIP. Gottlieb filed a first amended complaint in May 2011, a second amended complaint in September 2011, and a third amended complaint in September 2012. The four complaints and the exhibits attached to them differ significantly.

The Settlement
In October 2012 the parties reached a settlement. In December 2012 Judge King issued an order preliminarily approving the settlement, conditionally certifying a class for the purposes of the proposed settlement, approving the class notice, and scheduling a final approval hearing. The class notice offers the entire settlement agreement (63 pages including exhibits) to class members interested in seeing it. Here is a paragraph of the class notice summarizing the case:
This lawsuit [name of case] is about whether the term "home" in certain insurance policies includes Assisted Living Facilities or Residential Care Facilities. Plaintiff has alleged that in certain instances, it does. Under the Proposed Settlement, SHIP agrees that if a Long Term Care Policy defines "home" as a "private home, a home for the aged, a residence home, or a similar residential institution, or your home" and does not specifically exclude benefits for Home Health Care provided in an Assisted Living Facility or Residential Care Facility for the Elderly, claims for benefits will not be denied on the basis that said facility is not an insured's "home."
The class notice also contains a paragraph summarizing the terms of the proposed settlement. Here is a portion of that paragraph:
Under the Proposed Settlement, SHIP agrees to consider an Assisted Living Facility as an insured's "home" under a Long Term Care Policy owned by a member of the Settlement Class. SHIP will notify all State Departments of Insurance or their regulatory equivalents, in writing, of the terms of the Settlement.... There are no provisions for money damages to be paid to Class Members. The Class Representative, or Mrs. Gottlieb, did, however, include individual claims for relief against SHIP for its alleged failure to pay certain benefits to her under her own Long Term Care Policy. Therefore, SHIP has agreed to pay her the full contract value of her policy in the amount of $182,500, along with an additional $5,000 for representing the Class, which required her to incur travel and other expenses related to maintaining the lawsuit.
In March 2013 Judge King issued a final order and judgment approving the settlement. In April 2013 Gottlieb filed a motion for attorneys' fees in the amount of $250,000. In July 2013 Magistrate Judge Kenton granted the motion. SHIP appealed Magistrate Judge Kenton's order to the U.S. Circuit Court of Appeals for the Ninth Circuit. In August 2015 the appellate court affirmed Magistrate Judge Kenton's order.

The remainder of the class notice paragraph describing the terms of the proposed settlement explains an "audit process" SHIP agreed to implement. SHIP was required to submit quarterly audit reports to attorneys for the class for two years following the settlement's effective date. The reports show nothing of significance. For example, here is one of the reports from a law firm representing SHIP:
This letter provides you with information from defendant SHIP under the terms of the March 12, 2013 Final Order and Judgment, and, in particular, information pertaining to Paragraph 4(c) and (d). This pertains to the quarter ending September 30, 2014. Through this office, SHIP advises that under the audit process described in the order there have been no claim denials for health care benefits wherein the stated reason for the denial included a determination that the insured resided in an ineligible setting. SHIP has further advised that it has audited at least 25% of review notes to ensure that the ALF Op Memo was applied in a manner consistent with the terms of the Settlement and Order. [Blogger's note: "ALF Op Memo" is a memorandum describing the standard operating procedure when a policy includes a provision relating to Assisted Living Facilities.]
General Observations
There were three insurance company name changes in the Gottlieb case. The first resulted from the transfer of coverage from AIG to ATL by way of so-called assumption reinsurance. Neither company gave Gottlieb an opportunity to consent to the transfer. Rather, ATL merely informed her of the transfer by letter. See No. 220 (posted June 1, 2017), which explains why the transfer of coverage without Gottlieb's consent arguably violated her constitutional rights. The subject is treated in detail in chapter 23 of my 2015 book entitled The Insurance Forum: A Memoir.

The second name change—ATL to CSHI—resulted from Conseco's acquisition of ATL. The third name change—CSHI to SHIP—resulted from Conseco's transfer of CSHI to an oversight trust. Policyholder consent is not required when an entire company is sold, or when a company merely changes its name. In other words, policyholder consent is required only when a block of policies is transferred from one company to another.

One of the exhibits attached to the third amended complaint is interesting. It is a transcript of a tape recording of part of a telephone conversation between Ferman (Gottlieb's daughter) and Robert Bryant, who represented a firm that was handling claims administration for SHIP. The transcript illustrates what a claimant is up against when he or she contacts the company about a claim denial. It also makes clear that Ferman was not easily brushed off.

Available Material
I am offering a 52-page complimentary PDF consisting of the text of Gottlieb's third amended complaint (17 pages), the appendix to the third amended complaint showing the transcript of the Ferman/Bryant telephone conversation (10 pages), Judge King's final order (8 pages), Magistrate Judge Kenton's order (13 pages), and the Ninth Circuit's affirmation of Magistrate Judge Kenton's order (4 pages). Email and ask for the August 2017 package about the Gottlieb v. Conseco case.


Tuesday, August 8, 2017

No. 229: Long-Term Care Insurance—Senior Health Insurance Company of Pennsylvania Shows How Not To Handle a Claim

In January 1996, Mary ("Molly") White, an Ohio resident aged 67 at the time, purchased a long-term care (LTC) insurance policy from American Travellers Life Insurance Company (ATL). The company later became Conseco Senior Health Insurance Company, and still later became Senior Health Insurance Company of Pennsylvania (SHIP).

In May 2013, Ruth White, who is Molly's daughter and holds power of attorney for her, filed a claim with SHIP for benefits under the policy. SHIP denied the claim. In August 2013, Ruth filed an appeal with SHIP, which denied the appeal. Since 2013, Molly's mental and physical conditions have deteriorated. Ruth filed additional claims, most recently in October 2016. SHIP denied the claims. In June 2017, Ruth filed a lawsuit against SHIP in state court in Ohio. In July 2017, SHIP removed the case to federal court.

U.S. District Judge John R. Adams is handling the case. President George W. Bush nominated him in January 2003, and the Senate confirmed him in February 2003. (See White v. SHIP, U.S. District Court, Northern District of Ohio, Case No. 5:17-cv-1531.)

The APC Rider
The ATL policy provides for benefits when the insured is in a "Long Term Care Facility" or "Assisted Living Facility." The policy also has a complimentary rider that provides benefits under an "Alternative Plan of Care" (APC) recommended by a physician.

The crux of the dispute is whether the APC rider provides benefits when Molly is at home rather than in one of the above facilities. ATL promoted the APC rider in marketing material. The company said such things as "Unlimited Coverage for Custodial, Intermediate and Skilled Care PLUS Alternate Care Benefits!" It also made it sound as though the APC rider provided a way to receive benefits at home without being admitted to one of the above facilities. The APC rider reads:
If you would otherwise qualify for benefits, we will consider paying for the cost of services you require under a written alternative plan of care. Such alternative care must be a medically acceptable alternative to Long Term Care or Home Health Care.
The alternative plan of care must be initiated by you. It must be developed and written by your physician and consistent with generally accepted medical practices. Those parts which are mutually agreeable to you, your physician and us will be adopted.
Alternative care may include but not be limited to: (1) special treatments; (2) different sites of care; or (3) modifications to your residence to accommodate your needs. Suggested services and benefit levels may be different from, or not otherwise covered by, the policy. If so, they will be paid at the levels specified in the alternative plan of care.
Agreement to participate in an alternative plan of care will not waive any of your rights or our rights under the Policy. However, the total of all benefits paid under this Rider will be an offset to those otherwise payable under the Policy to the extent that is agreed to by you and us in the written alternative plan of care. [Blogger's note: The final sentence above is in boldface type.]
Denial Letters
As mentioned earlier, SHIP denied the claims and appeals that Ruth submitted. For example, in a June 2013 letter to Molly's physician, a SHIP "care manager" said:
In order to evaluate Mary White's eligibility for benefits, we reviewed care plan assessment, care notes, and the results of a recent onsite nursing assessment, have spoken to Ruth White and have determined that Mary White needs assistance with bathing, dressing, toileting, transferring, mobility, and continence.
It is our understanding that Mary White does not desire to receive services in a nursing home setting and wishes to receive care at home. However, Mary White's policy covers Long Term Care Facility or Assisted Living Facility care, only.
In an August 2013 letter to Ruth, the same care manager said it differently. Here are the two key paragraphs:
You requested benefits under your Alternative Plan of Care rider. In order to determine your eligibility, both you and your physician submitted information on whether admission to a nursing home would otherwise be required for your condition, that your care needs can adequately be met at home and a plan of care describing the type of services sufficient to support your care needs at home. We will not pay benefits for any type of Alternative Care unless we are first reasonably satisfied that you would otherwise require nursing home confinement.
We have carefully reviewed the circumstances of your claim, as well as the information your physician submitted on your behalf. Your physician did not recommend nursing home confinement or indicate that you require a level of care that requires nursing home confinement. In addition, we have carefully considered the circumstances of your claim, including the type, level and frequency of care you have received, as well as the reasons you submitted for making this request. We have determined that we are unable to approve your request for coverage of care outside of an eligible Long Term Care Facility or Assisted Living Facility. This denial is based on the lack of proper medical documentation to support the request that covered benefits, under the policy, are not suitable for you.
The Lawsuit
On June 15, 2017, Ruth filed a breach of contract lawsuit against SHIP in the Summit County (Ohio) Court of Common Pleas (Case No. CV-2017-06-2489). On July 20, SHIP removed the case to federal court and filed its answer to the complaint. The next day, the case was assigned to Judge Adams, who immediately issued a case management conference scheduling order. Here are some but not all the elements of the order:
  • Judge Adams set the case management conference for July 31.
  • He ordered lead counsel and parties with full settlement authority to be present and have calendars available for scheduling.
  • He ordered any undue hardship motions or motions to continue to be filed by July 26.
  • He ordered, in the event of a motion for continuance, that counsel confer and agree on three alternative dates not later than August 7.
  • He ordered the plaintiff to make a settlement offer by July 27, and he ordered the defendant to respond with a settlement offer by July 28.
On July 26, the parties filed a joint report on their planning meeting. On July 27, Ruth filed initial disclosures, a demand for $87,000, plus estimates of $20,000 in attorney fees and $11,300 in costs. The next day, SHIP filed an offer of $17,500. On July 31, at the case management conference, the case was placed on the expedited track. On the same day, Ruth filed additional documents.

I asked the insurance department in Pennsylvania, SHIP's state of domicile, how many consumer complaints it received in recent years against the company. A spokesman said the department received 25 complaints in 2013, 20 in 2014, 19 in 2015, 26 in 2016, and 11 thus far in 2017.

According to SHIP's statutory statement for 2016, Pennsylvania is the fourth largest state by LTC premiums (after Texas, California, and Florida). By extrapolation from Pennsylvania's 26 complaints in 2016, I estimate there were 300 consumer complaints filed against SHIP in 2016 with all the state insurance departments combined. I think 300 is a large number for a company with capital and surplus of only $28 million at the end of 2016.

In SHIP's statutory financial statements, page 4, line 13 shows "Disability benefits and benefits under accident and health contracts." The figures (in millions) in SHIP's four most recent annual statements are $415 in 2013, $412 in 2014, $414 in 2015, and $309 in 2016. I think the 2016 figure is a sharp drop from the figures in the three prior years.

Long Term Care Group
Long Term Care Group (LTCG) is an LTC insurance administration company. I believe that LTCG administers claims against SHIP. All the SHIP letters I have seen in this case show SHIP at P.O. Box 64913, St. Paul, MN 55164. One of LTCG's locations is in Eden Prairie, a suburb of the Twin Cities. The SHIP/LTCG contract probably says SHIP bears sole responsibility for the claims practices described in this post.

My Inquiry to SHIP
In view of the SHIP data and the LTCG situation mentioned above, I decided to ask SHIP a few questions. I sent them to the New York firm that handles media relations for SHIP. I asked:
  1. Is Long Term Care Group handling claims for SHIP? If so, which office of LTCG? If not, who is handling claims for SHIP?
  2. Is SHIP in the process of denying all claims? Irrespective of your answer, please indicate the number of new claims approved and the number of new claims denied in 2013, 2014, 2015, 2016, and thus far in 2017.
  3. Is SHIP in the process of discontinuing as many previously approved claims as possible? Irrespective of your answer, please indicate the number of previously approved claims discontinued (other than by death of the insured) in 2013, 2014, 2015, 2016, and thus far in 2017.
An official of the media relations firm responded promptly. He said SHIP has no comment on the questions.

General Observations
I am writing about this case because I think SHIP's claim denial letters are outrageous. They are not only gibberish but also seem to conflict with the language of the APC rider. However, I decided not to go into further detail here. Instead, interested readers are invited to obtain the complimentary package I offer at the end of this post. The package contains the ATL policy, including the APC rider, and seven denial letters.

I think the case grabbed the attention of Judge Adams, because he has been moving it along with lightning speed. I hope that the parties settle the case quickly to avoid lengthy delays that would be caused by discovery efforts and a jury trial.

In addition to the White case, I am aware of only two other lawsuits ever filed against SHIP relating to claims practices. I wrote about one of those cases in the May 2012 and November 2013 issues of The Insurance Forum. (See Hall v. SHIP, Superior Court, State of California, County of San Bernardino, Case No. CIVRS 1200996.) I have not written about the other case, which initially was against a SHIP predecessor but eventually involved SHIP. (See Gottlieb v. Conseco Senior Health, U.S. District Court, Central District of California, Case No. 2:11-cv-2203.)

If there were about 300 consumer complaints filed nationally in 2016 against SHIP, it seems reasonable to ask why there have not been many lawsuits. I think the answer is that we are talking about caregivers who are busy tending to the needs of some of our most vulnerable citizens. After the caregiver loses the claim struggle with SHIP, after a state insurance department's consumer complaint division tells the caregiver the insurance department cannot act as the insured's attorney, and after a private attorney approached by the caregiver says a lawsuit against SHIP would be a long legal battle with a doubtful outcome, the caregiver simply gives up.

As I have reported, SHIP is an LTC insurance company in runoff (not selling new policies) and is in fragile financial condition. Indeed, SHIP would have been insolvent at the end of 2016 without a $50 million surplus note on which it has not paid any interest.

Yet the four officers whose names appear on the first page of SHIP's 2016 statutory financial statement appear to be getting by. According to data filed with the insurance department in Nebraska, Paul Lorentz received total compensation of $411,886 in 2016, Ginger Danough $396,423, Barry Staldine $325,403, and Kristine Rickard $239,154.

Available Material
I am offering a 53-page complimentary PDF consisting of the state court complaint (3 pages), SHIP's answer including exhibits (24 pages), seven denial letters (10 pages), the case management conference scheduling order without exhibits (5 pages), Ruth's demand for $87,000 (2 pages), Ruth's preliminary budget estimate (1 page), SHIP's offer of $17,500 (3 pages), and the two articles in The Insurance Forum about the Hall v. SHIP case (5 pages). Email and ask for the August 2017 package about the White v. SHIP case.


Tuesday, August 1, 2017

No. 228: Stranger Originated Life Insurance—Sun Life of Canada Wins a Partial Court Victory

Sun Life Assurance Company of Canada recently won a partial victory in a lawsuit relating to stranger originated life insurance (STOLI). There have been many STOLI lawsuits, and I have written about a few of them. I am writing about this one because it illustrates vividly the fraudulent nature of STOLI transactions.

U.S. District Judge Pamela Lynn Reeves handled the case. President Obama nominated her in May 2013, and the Senate confirmed her in March 2014. (See Sun Life v. Conestoga, U.S. District Court, Eastern District of Tennessee, Case No. 3:14-cv-539.)

Developments in the Lawsuit
In November 2014 Sun Life filed a lawsuit against Conestoga Trust Services, LLC. The defendant was the sixth assignee of a $2 million life insurance policy Sun Life issued in April 2008 on the life of Erwin Collins. At the time, Collins was a 74-year-old resident of Knoxville, Tennessee. Conestoga acquired the policy in April 2013. Collins died in June 2014, more than four years beyond the expiration of the two-year contestability period. Sun Life sought a court declaration that the policy was void from inception as an illegal wagering contract. In December 2014 Conestoga answered the complaint.

In January 2015 Conestoga filed an amended answer and a counterclaim against Sun Life. In February 2015 Sun Life responded to the answer and counterclaim, and Conestoga filed a motion for judgment on the pleadings. In April 2015 Sun Life opposed the motion. In September 2015 Judge Reeves denied the motion as premature, saying the record was not sufficiently developed for her to determine whether the policy was void from inception as a STOLI scheme, or whether Conestoga was an "innocent bona fide assignee."

In March 2016 Conestoga filed a motion for summary judgment. In September 2016 Judge Reeves denied the motion as moot. In October 2016 Conestoga filed an amended motion for summary judgment, and Sun Life filed a motion for summary judgment.

In January 2017 the parties requested a delay in the proceedings. Judge Reeves postponed the trial, which had been scheduled for March 2017, until November 2017.

The Ruling
On July 12, 2017, Judge Reeves handed down a memorandum opinion and a judgment. Here is the third paragraph of the opinion:
For the reasons that follow, the court finds there was a pre-existing agreement for Erwin Collins to obtain the policy and transfer it to a stranger investor. Therefore, the policy constitutes a STOLI scheme, and under Tennessee law, it violates public policy and is void ab initio. As a result, Sun Life does not have to pay the death benefit to Conestoga. However, Sun Life must refund the premiums to Conestoga so that Sun Life does not obtain a windfall.
The Scheme
Eugene E. Houchins, III (Norcross, Georgia) was the key figure in the case. He was a life insurance broker and president of Bonded Life Company, which he used to procure life insurance policies. He invited Robert Coppock to earn fees by referring elderly persons to him for a program under which those persons would receive money through life insurance policies taken out on their lives. Houchins retained Coppock as a Bonded Life agent. Bonded Life paid Coppock a referral fee of 20 percent of the first-year premium on any completed transaction. Coppock referred Collins to Houchins.

Collins created "The Erwin A. Collins Irrevocable Life Insurance Trust." The trust applied for the policy, and was to be owner, beneficiary, and premium payer of the policy. Houchins worked with David Wolff of Iron Core Capital. Wolff worked with Life Asset, a firm in the secondary market for life insurance policies.

In September 2007 Houchins submitted an informal inquiry to Sun Life about whether Collins would qualify for a Sun Life policy. A week later, Sun Life made a tentative offer subject to a formal application and full underwriting. On November 5, 2007, Ann Collins, the wife of Erwin Collins, signed an application in Knoxville in her capacity as trustee of the Collins trust. A couple of months later, the application and supporting documents were submitted to Sun Life.

In late February 2008 Life Asset told Wolff it would not acquire a beneficial interest in a policy on Erwin Collins because Tennessee was a state where Life Asset would not conduct business. To solve the "Tennessee problem," Houchins had a different trust, with a Georgia address, reapply for a policy. The new application supposedly was signed in Georgia by the insured, by a Houchins friend as trustee, and by Houchins' father as broker/registered representative. Houchins removed references to Tennessee from the policy and trust documents, used a phony Georgia address as the insured's residence, and arranged to have signatures falsely notarized in Georgia. Houchins arranged financing for the initial premium payment, and Sun Life issued the policy.

The Houchins Deposition
On August 4, 2016, a Sun Life attorney deposed Houchins in Atlanta. The transcript shows it was a memorable five-hour deposition. After answering questions about his name and address, Houchins invoked his Fifth Amendment right against self-incrimination in response to virtually all other questions. His attorney, apparently to be on the safe side, instructed Houchins to take the Fifth despite the fact that the statute of limitations had run out on any conceivable crime for which Houchins might have been charged. The facts in the case were developed from documents in the record and the testimony of others. The Sun Life attorney used the deposition questions to enter many documents into the record. To provide readers with a glimpse of what happened at the deposition, I am offering an excerpt from the transcript.

The Houchins Declaration
In addition to the Sun Life lawsuit, there were other cases involving Houchins. They suggest that he was involved with companies other than Sun Life, such as Pacific Life Insurance Company and Phoenix Life Insurance Company, that there was a $2 million Pacific Life policy on Collins, and that Houchins was involved with several trusts other than the Collins trust. Pacific Life filed an interpleader lawsuit in California when it received claims for the death benefit on the Collins policy from not only the Collins trust but also from a firm that had loaned money to the trust to pay premiums on the policy. In the interpleader case, Houchins filed a declaration describing his involvement in the Pacific Life case. To provide readers with his description, I am offering the Houchins declaration.

General Observations
I first wrote in 1999 about what later came to be known as STOLI. I sometimes called it speculator initiated life insurance (spinlife). I have criticized lax underwriting of policies with large face amounts on the lives of elderly individuals. It is difficult to understand how the companies allowed such cases to be approved, considering all the shenanigans that STOLI promoters used.

It should be noted that many STOLI schemes originated during the STOLI heyday before life insurance companies became aware of the full extent of the fraudulent activity. Here are some of the STOLI tactics I wrote about over the years: lying to proposed insureds, telling proposed insureds to sign blank forms, lying to insurance companies about the income and wealth of proposed insureds, coaching proposed insureds about how to respond if companies or inspection firms asked questions, paying accountants and inspection firms to lie in their reports, forging documents, paying notaries to certify forged signatures, lying to banks and premium lenders, paying attorneys to prepare trust instruments and loan documents, destroying evidence, and finding life insurance companies that were willing to look the other way and allow the issuance of STOLI policies.

I think Judge Reeves got it right. Although the Collins policy was well beyond the two-year period of contestability, she declared the policy void from inception. Also, despite the fact that Sun Life had incurred costs, including expenses associated with issuance of the policy and expenses associated with the lawsuit, the judge required Sun Life to return the premiums Conestoga had paid so as to avoid a windfall for Sun Life. In my view, Sun Life had only itself to blame for the lax underwriting that allowed the policy to be issued.

Available Material
I am offering a 57-page complimentary PDF consisting of the Sun Life complaint (12 pages), an excerpt from the Houchins deposition in the Sun Life case (18 pages), the Houchins declaration in the Pacific Life interpleader case (9 pages), the memorandum opinion by Judge Reeves (17 pages), and the judgment (1 page). Email and ask for the August 2017 package about the Sun Life/Conestoga case.