An Oklahoma couple claims they were misled by an advisor and Pacific Life Insurance Co. on a premium financing program to fund a $15 million life insurance policy.
Tom D. Le and Trang H. Nguyen are suing PacLife, Arvest Bank and advisor Kory Allsop in Tulsa County district court. In a response, PacLife denied all claims and added that "the policy speaks for itself."
District Court Judge Doug Drummond granted PacLife's motion to dismiss in June, which led to an amended complaint filed a month later. In a September ruling, Drummond allowed fraud and negligence claims against PacLife to go forward, although he labeled the allegations, "razor thin."
Nguyen is a doctor in Tulsa and she and her husband "accumulated substantial assets for many years," the lawsuit stated. The couple claims Allsop and Arvest approached them in June 2021 with a plan to purchase a $15 million PacLife Indexed Estate Preserver 3 life policy for the premium payment of $2 million.
The couple declined, court documents say, because they are "very conservative." Allsop returned two months later with a "joint Arvest/Pacific Life plan to finance the $2M premium by utilizing a life insurance premium financing program," the lawsuit stated.
"The plan created by Allsop and the Arvest/Pacific Life Team involved the Plaintiffs forming a Life Insurance Trust that would own the Policy," the lawsuit explained. "The Policy premiums for the first 10 years would be financed through an Arvest Bank line of credit in the original amount of $1,025,000 for the first five years and then raised to $2,250,000 in years 5-10."
The Arvest loan was secured by an assignment of the policy, as well as $500,000 of the plaintiff's investment funds, the lawsuit said. The plan called for the first 10 years of policy premiums to be paid for through a drawdown on the Arvest loan.
What was to happened after 10 years forms the crux of the dispute.
According to the plaintiffs, "After year 10, there would be no more premiums due under the Policy. However, the Plaintiffs would still make yearly interest payments only on the Arvest Loan until year 15, when the cash balance of the Policy was supposed to be sufficient to pay off the $2.25M principal of the Arvest Loan. The Plaintiffs would then end up with a fully paid up $15M policy for only the payment of the yearly interest on the Arvest Loan, which was estimated to be approximately $600,000 total."
A PacLife illustration was used to show plaintiffs that the cash value of the policy would be $2.8 million in year 15, the lawsuit said, while the Arvest loan balance used to pay the premiums would be $2.25 million.
"Allsop repeatedly represented to Plaintiffs that in year 15 the Policy cash value could then be used to pay off the Arvest Loan in full," the lawsuit stated. "The result, according to Allsop, was supposed to be that the Plaintiffs would have a fully paid up $15M life insurance policy with no further financial risk."
'Claiming to be unsophisticated'
Plaintiffs claim that a PacLife representative joined two separate meetings via Teams to confirm the details of the plan.
Allsop recalled the events differently in a response filed with the court. He noted that plaintiffs are "claiming to be unsophisticated," yet Nguyen is a doctor and they were represented by legal counsel.
In the response, Allsop agrees with the plaintiff's characterization that there were many meetings, during which "the plan was discussed, broken down and the Plaintiffs were even shown illustrations."
"In short, it appears Plaintiffs are unhappy with the premium payments for the Policy, and now attempt to rescind the applicable agreements because they did not understand them," Allsop's response reads.
InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.