Maloof v. John Hancock

  • 2010 - LC - Maloof v John Hancock, Alabama Supreme Court  ---  [BonkNote]
    • 60 So. 3d 263
    • Alabama Supreme Court Opinion - 39p
    • Google Scholar - [link]
    • Harriet Maloof and John A. Maloof, Jr. - Policyowners
    • Parker A. Glasgow - Agent, and also Policyowner
      • (6-7p) - On April 16, 2008, John Hancock moved the trial court to stay all proceedings pending a ruling from the United States District Court for the Southern District of California on whether the Maloofs' action was barred by the settlement of a class action overseen by that court in 1998 in which allegedly deceptive sales practices used by Manulife between 1982 and 1993 were challenged;
        • Glasgow subsequently joined in that motion.
  • Harriet Maloof and John A. Maloof, Jr., sued John Hancock Life Insurance Company ("John Hancock") and Parker A. Glasgow, an independent insurance agent, in the Jefferson Circuit Court, alleging:
    • fraudulent misrepresentation, suppression, breach of contract, negligent and/or wanton failure to procure insurance, and breach of fiduciary duties arising out of Glasgow's sale of two universal life-insurance policies to the Maloofs in 1989 and 1992.
  • The trial court entered a summary judgment in favor of John Hancock and Glasgow on all the claims, and the Maloofs appeal as to all the claims except the breach-of-contract claim.
  • We affirm. 

2010 - LC - Maloof v. John Hancock Life Ins. Co. -  60 So. 3d 263 - Alabama Supreme Court Opinion  ---  [BonkNote]  ---  39p  

  • (4-5p)
    • The Maloofs subsequently received a notice from John Hancock dated February 13, 2007, notifying them that an additional premium payment of $5,265.12 was required by April 15, 2007, in order to continue the 1992 universal-life policy until July 13, 2007; otherwise, the notice informed them, the 1992 universal life policy would terminate on April 15. 
    • They later received another notice from John Hancock, dated May 29, 2007, informing them that an additional premium payment of $7,573.15 was required by July 29, 2007, in order to continue the 1989 universal-life policy until November 29, 2007; otherwise, this notice informed them, that policy would terminate on July 29.
    • After receiving these notices, John <Policyowner> contacted Glasgow who had retired in 2000, to inquire why his policies would be terminating, even though he had timely paid the premiums on the policies for approximately 18 years.
    • John states that Glasgow told him that he would investigate the matter, and it appears that Glasgow did subsequently contact John Hancock;
    • ...however, John states that Glasgow ultimately told him that there was nothing Glasgow could do.
  • (6p)
    • The gravamen of their complaint was that Glasgow had misrepresented to them...
      • ....that the policies would provide benefits that would be available to pay any estate taxes due upon John's death when, in fact, based upon the projected insurance and interest rates at the time of sale, those policies would likely lapse when John was approximately 78 years old unless the Maloofs at some point substantially increased the amount of the premiums they paid.
  • (p20)
    • However, the Maloofs could not have reasonably relied on the alleged misrepresentations concerning the availability of benefits from those policies to pay estate taxes due upon John's death in light of the clear language of the insurance policies.
  • (p21)
    • The Maloofs allege that Glasgow agreed to procure life-insurance policies for them that would provide benefits available to pay estate taxes due upon John's death; however, they argue, they now have no such life-insurance policies.
    • The undisputed facts indicate that Glasgow did in fact procure two universal life-insurance policies for the Maloofs and that, had the Maloofs continued to pay sufficient premiums on those policies, they would have remained in effect and the benefits of those policies would have been available for any purpose after John died.
  • (p22)
    • Thus, the undisputed facts indicate that Glasgow in fact fulfilled the Maloofs' request to procure life-insurance policies that would provide funds that could be used to pay estate taxes upon John's death, and those policies were canceled only after the Maloofs failed to pay the required premiums.
  • (6-7p)
    • On April 16, 2008, John Hancock moved the trial court to stay all proceedings pending a ruling from the United States District Court for the Southern District of California on whether the Maloofs' action was barred by the settlement of a class action overseen by that court in 1998 in which allegedly deceptive sales practices used by Manulife between 1982 and 1993 were challenged;
    • Glasgow subsequently joined in that motion.
  • (p32) - David Lange - Defense Expert Witness
    • However, the evidence presented by the Maloofs' expert, Dr. David Lange, makes clear that these policies were so significantly underfunded that John Hancock knew at the time it issued the policies that significant additional payments would almost certainly be necessary. When asked about the language in Glasgow's letter that premium payments "may be" required, Dr. Lange stated:
      • "But [Glasgow is] an insurance sales person who sold this policy and ran the illustration and would certainly be aware of the Statement of Policy Cost and Benefit Information and be aware the interest rates had declined.
        • "In fact, the — that this policy by '92, and since he had run a large number of illustrations in these various documents, he had to know from the beginning it wasn't going to make it. It was going to make it to seventy-four or thereabouts. And since interest rates were coming down, was unlikely to do so. I'm amazed, absolutely amazed that he would use the phrase: `it may be necessary.'"
      • Further, when questioned about Glasgow's representation that the policy period could be extended by a reduction in the death benefit, Dr. Lange stated, "It's actually a complete falsity."
      • A reasonable person could understand from this evidence that it was readily apparent to John Hancock and to Glasgow that the policies were so underfunded at the time they were issued that they would fail in the purpose intended for the Maloofs. Moreover, an insurance expert like Dr. Lange, trained in the mathematics of insurance policies, could also uncover this fact. However, when questioned about a layman's ability to understand the policies, Dr. Lange stated:
        • "The difficulty I have with that is because of the calculations involved in there, that I'm not sure someone, even if they read it, would appreciate the mathematics involved."