‘The Complaint here is filled with inflammatory and disingenuous rhetoric, but none of it shows any wrongful conduct by Pacific Life.’
This is the key component of the argument made by Pacific Life Insurance in a legal filing on Thursday morning that motioned Judge Kenneth D. Bell of the Western District of North Carolina to dismiss the lawsuit brought forth against it and an independent agent by two-time NASCAR Cup Series champion Kyle Busch and wife Samantha.
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The lawsuit, filed October 14 in a superior court before being transferred to the district court, accused Pacific Life and agent Rodney A. Smith of misrepresenting a complex life insurance policy as a ‘tax free retirement plan’ that would provide self-funding retirement income.
Specifically, this is an Indexed Universal Life policy that provides a death benefit with a cash value component. The growth component is tied to a stock market index with claimed market protections against market downturns.
The Busch couple claim losses of $8.58 million from a $10.4 million premium payment structure made from what they claim were misleading illustrations, undisclosed costs and general lies over what they would receive in return.
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Specifically, Busch said he was told that if he paid a million dollars for each year over five years, he would be able to take out $800,00 a year once he turned 52-years-old. Busch said he discovered most of his money was gone by time he received a sixth premium notice.
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For its part, Pacific Life argue in its filing that the Busch family purchased the policy under the guidance of their own legal representation and failed to managed it properly. The language from the filing can be read below in italics.
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‘Despite access to a team of their own professional advisors, Plaintiffs failed to manage their Policies and now proffer a series of baseless claims that ignore clear, repeated, and explicit disclosures that illustrated values were ‘not guaranteed’ and that the Policies would not be ‘paid up’ after five annual premium payments. While the Policies were in force, Plaintiffs had as much as $90 million of valuable insurance coverage on the life of Kyle Busch while he engaged in an ultra-hazardous activity (plus insurance on Ms. Busch). There is no legal basis to provide Plaintiffs with a massive windfall by refunding all of their premiums. The claims against Pacific Life should be dismissed with prejudice.’
Pacific Life also claims Judge Bell should dismiss the lawsuit due to its similarities to a similar complaint. That decision was also upheld on appeal to the Fourth Circuit Court in Richmond, Virginia. That complaint was also filed by attorney Robert Rikard, who represent Busch here.
‘These claims are remarkably similar to those rejected by the district court in Stegelin v. Pacific Life, which involved the same Pacific Discovery Xelerator (“PDX”) policy purchased in 2018 by Plaintiffs here. Stegelin. One of the plaintiffs in Stegelin alleged a producer sold him a Pacific Life IUL policy as ‘a strategy for creating ‘tax-free’ retirement income,’ and that he ‘was induced to purchase the Policy based on alleged misrepresentations or omissions in the Illustrations regarding how the Policy might- perform in the future.’ The court dismissed the misrepresentation claims with prejudice, holding that ‘Pacific Life’s conspicuous and repeated disclaimers that all non-guaranteed elements in the illustration were not guaranteed refute [plaintiff’s] theory ….’ The court further held, ‘because the Illustrations include written disclosures that refute any claim of reliance,’ ‘any reliance would not be justifiable as a matter of law.’ The Stegelin opinion was affirmed by the Fourth Circuit.’
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Pacific Life refutes Busch’s claim that could not understand the ‘real-world operation of the policies’ despite admitting ‘it fully discloses charges against premium over a 10-year period and shows the resulting cash value each year.’
The filing says the case should be thrown out because all but one claim are time-barred under a four-year statute of limitations. The trust was signed on April 3, 2018 after Smith approached Busch in 2017. The Busch filing last year claimed that Smith portrayed himself as a ‘wealth management and insurance specialist’ and ‘retirement planner.’
The reasons for the dismissal motion according to Pacific Life?
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First, except for one claim under the North Carolina Unfair and Deceptive Trade Practices Act (“UDTPA”) relating to the April 2022 Policy, all claims are time-barred by the four-year statute of limitations applicable to the UDTPA claim, or the three-year limitations period applicable to all other claims. Second, Plaintiffs fail to plead their fraud-based UDTPA and negligent misrepresentation claims with particularity, as required by Rule 9(b). Third, Plaintiffs fail to establish that Pacific Life violated any legal duty—as required for their negligence and breach of fiduciary duty claims. Fourth, the Complaint fails to allege any misrepresentation by Pacific Life of a past or existing fact. Indeed, the Complaint never identifies a single false statement by Pacific Life, because there is none. And fifth, given the Illustrations’ repeated disclosures that they were not intended to predict future performance, justifiable reliance does not exist as a matter of law.
In addition, the motion effectively argues that Busch and Busch agreed to terms.
‘In each Application, the proposed insured and policyowner acknowledged and agreed, among other things, that: ‘The policy as applied for in this application will meet my insurance needs and financial objectives based in part upon my age, income, net worth, tax and family status, and any existing insurance policies I own’; and that ‘only the Producer signing this application is responsible for ensuring that the policy meets my insurance needs and financial objectives, regardless of whether a [Pacific Life] employee attended any meetings to discuss the policy.’
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And
‘If this application is for a product with an indexed feature, I ACKNOWLEDGE that: I am applying for a product with an indexed feature, for which the crediting for the indexed account tracks the gains and the losses of an outside financial index, subject to a floor and either a growth cap or a threshold, whichever applies. I further understand that, while the values of the policy may be determined in part, by reference to an external index, the indexed feature does not directly participate in any stock or equity investments and values shown to me, other than the minimum values, are not guarantees, promises, or warranties.’
Pacific Life says that both Kyle and Samantha signed the aforementioned documents, including one that indicated they would pay planned premiums and hold the policies over 30 years through age 70 and beyond.
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‘Instead of keeping the policies long enough to capitalize on their growth potential, Plaintiffs failed to timely pay planned premiums, failed to monitor allocation of their policy values between indexed and fixed accounts and surrendered the policies or allowed them to lapse,” Pacific Life wrote in the filing. “Rather than accept responsibility for their own decisions, Plaintiffs now attempt to blame their negative outcome on the IUL product.’
Ultimately, Pacific Life claims that Busch and Busch acknowledged an understanding of the policy and cannot claim after seven years of making a mistake that it was a mistake all along when the decision simply didn’t work out.
‘A plaintiff cannot avoid the statute of limitations by remaining willfully blind: A man should not be allowed to close his eyes to the facts readily observable by ordinary attention, and maintain for his own advantage the position of ignorance. Such a principle would enable a careless man, and by reason of his carelessness, to extend his right to recover for an indefinite length of time.’
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Pacific Life says all five policies came with a cover letter in bold capitalized letters ‘READ YOUR POLICY CAREFULLY’ and offered a 20-day premium refund window for each one, that Busch never expressed a desire to utilize.
Read the motion here
Pacific Life motion to dismiss Busch lawsuit by mattweavermedia
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