A hearing has been scheduled in California federal court on a class action lawsuit being closely watched by the life settlement industry dealing with an alleged failure-to-disclose issue by an insurance company.
In the case, a California couple allege that they lost money because Lincoln National Life Insurance Co. didn't tell them they may have been able to sell their policy rather than reduce their coverage if their agent had told them about the life settlement market.
In a reply brief submitted to the court March 13, Lincoln National argues that the case should be dismissed for a variety of reasons. A hearing has been scheduled for April 21 on Lincoln National's motion to dismiss.
Among the reasons it thinks the case should be dismissed, Lincoln National alleges through its lawyers that the lawsuit "… is an effort to impose upon insurers a life settlement disclosure obligation" that California law does not require and that the California legislature has considered and rejected.
Court documents indicate that the couple had been struggling to pay premiums on a $7.2 million policy, and that they ultimately were forced to reduce the face amount to $2 million to afford the premiums.
See also: Life settlements: What makes a case?
"The active concealment of the option of a life settlement is a common and regular practice employed by [Lincoln National], and indeed is a pervasive practice in the life insurance industry," the complaint said. It was filed in Federal District Court in Riverside, Calif.
The lawsuit further alleges that Lincoln National "instructs its own agents as well as independent agents that transact insurance on defendant's behalf to conceal the option of a life settlement from its insureds."
The plaintiffs allege this is a "common and systematic practice by defendant of failing to inform and/or actively concealing from their insureds the option of a life settlement in connection with their life insurance policies."
