Judge denies PacLife motion to dismiss lawsuit over IUL illustration

A judge denied a motion Wednesday by Pacific Life to dismiss a lawsuit brought by a Washington couple dissatisfied with a PDX indexed universal life policy.

The lawsuit – filed in U.S. District Court for the District of Washington – is another case involving controversial IUL illustrations. Simona G. Marie and Thomas Lewis, from Richland, Wash., initially filed a lawsuit June 27 against PacLife, Harding Financial Partners and Andrew Brown, the producer who sold them a PacLife PDX life insurance policy.

After PacLife made a motion to dismiss for failure to state a claim, Judge Stanley A. Bastian gave the plaintiffs an opportunity to file an amended complaint. They did so on Sept. 18. PacLife filed a second motion to dismiss.

Judge Bastian held a hearing Tuesday and quickly denied the motion to dismiss without comment.

Illustrations used to sell FIA and indexed universal life insurance have been subjected to several lawsuits, with mixed results. Industry analysts and many regulators agree that illustrations are problematic and unrealistic.

Starting December 2017, plaintiffs made five premium payments to PacLife totaling $505,000, the lawsuit states. Their investment gain added $248,650. The couple surrendered the policy in April 2022 and received a $202,655 check from PacLife. They claim the insurer made nearly $551,000 from the IUL contract.

Plaintiffs allege negligent misrepresentation, breach of fiduciary duty, professional negligence, breach of contract and violation of the Washington Consumer Protection Act.

'Income in retirement'

Marie and Lewis were successful married business owners in 2017 when they bought a PDX policy with a "Performance Factor," paid with annual $200,000 premiums for five years, the lawsuit said.

"Simona Marie and Tom Lewis purchased the policy with the intent to provide them with income in retirement," the lawsuit said.

After making $200,000 premium payments in 2017 and 2018, Marie and Lewis decided to reduce their final three premium payments to $35,000. Brown indicated that the couple could reduce their premium in exchange for reduced financial benefits, including reduced annual income to $ 117,000 per year from ages 65 to 100, the lawsuit claims.

On Nov. 14, 2021, the couple made the final $35,000 premium payment. A month later, they joined Brown on a Zoom call to discuss their investment, the lawsuit said. Instead, Brown informed Marie and Lewis they would need to pay further premiums to maintain their contract.

PacLife said their policy performed within the parameters outlined in the policy the plaintiffs signed.

"When Marie grew unhappy with the consequences of her own financial decisions, Plaintiffs brought the present suit in an attempt to place blame on anyone else," the PacLife response reads. "The Amended Complaint demonstrates that any alleged harm Plaintiffs claim to have suffered was a result of Marie’s decision to purchase the Policy and pay a $1,000,000 premium over five years.

"Marie later decided to pay only half of the total premiums, and nevertheless expected the Policy to perform precisely as originally illustrated."

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.