PacLife settles with Washington state plaintiffs in IUL illustration suit

Pacific Life settled a lawsuit brought by a Washington state couple who claimed they lost substantial retirement funds after being misled on an indexed universal life insurance policy.

The tentative settlement announcement came two days after U.S. District Judge Rebecca L. Pennell disallowed key testimony from the plaintiff’s lone disclosed witness.

Simona G. Marie and Thomas Lewis, from Richland, Wash., filed a lawsuit in June 2023 against PacLife, Harding Financial Partners and Andrew Brown, the producer who sold them a PacLife PDX life insurance policy.

John Duval, a former Merrill Lynch annuity specialist and regulator for the Securities and Exchange Commission, was to testify for plaintiffs on “the likely performance of the PDX and the accuracy of Defendants’ illustrations and representations.”

Judge Pennell accepted Duvall as an expert witness on general IUL matters and even specifics on the PacLife product. But she drew the line at allowing actuarial opinions.

"Duval is not an actuary, and appears to lack the necessary experience, education, or training to opine as to actuarial matters," Pennell wrote in a Sept 9 decision. "Duval opines extensively on how realistic the PDX policy’s projected returns were, an opinion which requires actuarial analysis."

The plaintiffs similarly asked the court to block testimony from the four disclosed witnesses for PacLife, a request Pennell denied because plaintiffs did not "specifically identify any irrelevant testimony."

Pennell signed a notice of settlement on Wednesday, striking the case from the court calendar. A hearing had been scheduled for Oct. 8 on a defense motion for summary judgment.

'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.

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.

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.

PacLife said its 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," a PacLife response reads.

The insurer did not respond to a message seeking further information on the settlement.

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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 [email protected]. Follow him on Twitter @INNJohnH.