Vermont judge dismisses two National Life companies from IUL lawsuit

A Vermont judge dismissed a pair of National Life companies from a lawsuit over an indexed universal life policy that returned 0%.

Sanya Virani, of Indiana, claims the IUL relies on back-tested historical performance that does not match reality and is “a fraudulent sham.” She initially filed suit nearly a year ago in the U.S. District Court for the District of Vermont, where NLV Financial Corp. is headquartered.

Chief District Judge Christina Reiss held a hearing on Monday on National Life's motion to dismiss. She dismissed NLV and National Life Insurance Co., a subsidiary, from the lawsuit. Claims against a second subsidiary insurer, Life Insurance Co. of the Southwest, remain active.

"Motion to Dismiss is granted in part as stated on the record, and the remaining claims are taken under advisement," a court docket update reads.

In its motion to dismiss “for failure to state a claim,” filed in January, NLV noted that IUL illustrations are “heavily regulated by insurance authorities.” Illustrations are not a contract. Virani’s original complaint claims breach of contract and RICO violations, which NLV characterized as “a posterchild” for judicial scrutiny.

“The notion that Defendants are operating a racketeering enterprise to commit mail and wire fraud—as opposed to making routine issuances of life insurance policies—is baseless,” the motion reads.

Viriani’s complaint includes a third claim: Violation of the Massachusetts law commonly known as its Consumer Protection Act, and “Other States’ Similar Unfair and Deceptive Trade Practices Statutes.”

The Massachusetts law prohibits unfair methods of competition and unfair or deceptive acts or practices in trade or commerce. Most states have similar laws.

Point-to-point strategy

Viriani resided in Massachusetts when she purchased an IUL policy on Sept. 8, 2023, the amended complaint said, with a face or base coverage amount of $2,767,336. The policy offered Virani interest crediting strategies, including “Fixed-Term Strategies” and “Indexed Strategies” – the returns from which are credited to the policy’s accumulated value.

The lawsuit describes the US Pacesetter No Cap Annual Point-to-Point Indexed Strategy.

Virani allocated 100% of the accumulated value under her policy to the US Pacesetter Index, the complaint states. According to her 2024 Annual Statement issued by National Life, 0% interest was credited to her account as a result of that allocation for the period September 22, 2023, to September 21, 2024.

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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.