The Pension Benefit Guaranty Corp. makes a chilling projection about the current multi-employer pension system.
A subsidiary of American International Group Inc. is seeking to void a $15 million dollar life policy it issued on the now-deceased mother-in-law of the former chief executive officer of Conseco Inc., alleging the policy was part of a fraudulent stranger-originated life insurance scheme.
American General Life Insurance Co., the unit of AIG, filed its lawsuit in December 2008 in the U.S. District Court for the Southern District of Indiana. The case is scheduled for a jury trial in October, court documents show.
The defendants' procurement of the policy "was without a legitimate insurable interest that voids the policy under state insurable interest laws," American General alleged.
In its suit, American General says it issued the policy in January 2006 insuring the life of Germaine "Suzy" Tomlinson, then 71 years old, with a face amount of $15 million.
Tomlinson, who died in September 2008, was the mother-in-law of Stephen Hilbert, the former chairman and CEO of Indiana-based insurer Conseco (NYSE: CNO).
American General alleges it relied on documents the defendants submitted "in a fraudulent scheme designed to procure life insurance on individuals for which there is no insurable interest and sell the policy to investors who are unrelated to the insured and who were speculating on the life of the insured." The company is referring to stranger-originated life insurance transactions.
All STOLI transactions "have one thing in common: Their objective is to give investors who have no insurable interest in the life of the insured a stake in the life insurance policy of a complete stranger that is intended to produce a windfall to the investor that becomes more valuable the earlier the insured dies," American General said.
Defendants in its original complaint included, among others, Germaine Tomlinson Insurance Trust; J.B. Carlson, as a trustee of the trust; The Carlson Media Group, as beneficial owner of the trust; and Geoffrey A. Vanderpal, a Nevada-based independent broker.
The life insurer seeks a declaratory judgment for rescission and/or voiding of the policy and a declaratory judgment for payment of commission chargebacks owed to it by Vanderpal on the void policy.
But in a motion for summary judgment filed April 12, Vanderpal, who says he was the life insurance agent who procured the policy, argues American General "failed to contest the policy within the two-year period set forth in the policy." As a result, the company can't contest the policy's validity, Vanderpal contends.
Summary judgment is a determination made by a court without a full trial. Without an award of summary judgment, or some other type of pretrial dismissal, a suit would generally go to trial.
Vanderpal wrote he incorporates arguments previously made by the other defendants -- the trust, Carlson and Carlson Media -- in their motion for summary judgment.
Mark Herr, a spokesman for AIG (NYSE: AIG), said American General "acted appropriately in the sale of this policy.The legal issues raised by this case will be decided by the court handling this case.”
"This scheme consisted of a plan to recruit older persons to pose as applicants for and proposed owners of large-face amount life insurance policies that were never meant to be for the benefit of the ostensible owners," American General alleged.
American General Life Insurance Co. currently has a Best's Financial Strength Rating of A (Excellent).
(By Fran Matso Lysiak, senior associate editor, BestWeek: email@example.com)