INSURANCE FORMS NOT END ALL REGARDING BENEFICIARY DISPUTES

An interesting case regarding a dispute of insurance proceeds in the Eleventh Circuit, US Court of Appeals, came down this past July. (Prudential Insurance v. Kopp). The case involved a dispute about who was entitled to death benefits under a decedent’s life insurance policy. Specifically, the question was whether a written request to change the beneficiary of the policy that the insurance company never processed is valid. The insurance company stated that since it never processed the paperwork, the initial beneficiary remains the beneficiary. However, the court held that strict compliance to an insurer’s internal regulations about changing beneficiaries is not always necessary. The court sent the case back to the district court to review the facts behind the matter to determine who should get the insurance proceeds.

In this case, the question was whether a written request to change the beneficiary of the policy to the wife of the decedent, submitted to the insurance company and signed by the decedent and one of his sons was sufficient to show that the wife was the beneficiary notwithstanding the fact that the insurance company did not process the request. The district court denied the request of the wife. The wife argued that the district court applied too strict a standard of compliance and that, as an equitable matter, she is entitled to receive the death benefits from her husband’s life insurance policy. The district court ruled against the wife.

Specifically, the form that the decedent and one of his sons submitted to change the beneficiary to the wife was to change the owner of the policy from a trust to the decedent, and the beneficiary to his wife. However, the insurance form stated that each trustee was to sign unless the trust itself or state law provides otherwise. In this case, the second trustee, the other son, never signed the form even after the insurance company sent notice it did not process the request because of that reason.

The appeals court disagreed with the district court with regard to the standard that it used to deny the wife’s claim. Applying, Georgia law, the court stated that when a insurance company stands indifferently to the parties, strict compliance with the insurer’s regulations are not required, and the court is permitted to use its equitable powers to determine which claimant should receive the benefits. The court reasoned that an insurer’s regulations are made solely for its benefit and protection. So if the insurer is not an interested party, the court may award the funds on equitable principles. The court held that the insurer’s regulations merely serve as an indication of the possible intent of the insured or other party authorized to request a change in the beneficiary.

Finally, the court held that a change in beneficiary request is effective where it is clear that the requesting party has a right to make a change, intends to change it, and takes reasonable step to bring about the change.

What does this all mean

This case is interesting because most people believe that insurance forms and the details of the forms are a matter of law, rather than an insurance company’s internal regulations. This means that there may be flexibility when someone claims to be a beneficiary even if the forms are not fully completed. The laws vary in each state, but this case shows that the policy holder’s intent is key. Unfortunately, the flip side is that there can be more reason for litigation.

For further discussion feel free to contact me at DBosco@boscolegal.com, or connect with me on LinkedIn if were are not already connected.

STAGES OF A CIVIL LAWSUIT

Many people may be generally aware of what occurs in a civil lawsuit. However, many people do not know the details of what procedurally occurs in one. This article covers the basic stages of a civil lawsuit.
A civil lawsuit is generally a case for money damages or equitable relief (e.g. what is fair) as appose to a criminal lawsuit wherein the government through a prosecutor brings charges against someone or some entity for criminal misconduct.
Each state and the federal government have their own rules and procedures for a civil lawsuit, and may have different names for each of its proceedings. Your legal counsel should be familiar with your state’s procedure or federal civil procedure. Depending on what type of claim you have, or may have against you, you may find yourself in state or federal court.
In any event, procedurally, the stages of a civil law suit generally occur within following the categories:
1. Pleadings
2. Discovery
3. Motions
4. Pre-trial
5. Trial
6. Post Trial
Pleadings
Pleadings include:
a complaint wherein the plaintiff bringing the claim must set forth the facts supporting the claims and state the causes of action;
an answer wherein defendant must admit, deny or deny knowledge of any alleged facts in the complaint
affirmative defenses, wherein the defendant provides defenses to the complaint;
counterclaims wherein the defendant brings an action against the plaintiff;
and a reply to counterclaims, similar to an answer.

Discovery
After the pleadings, the lawsuit enters the discovery stage. Usually discovery entails:
Depositions, wherein the parties can depose (interview) under oath the other party prior to trial;
Interrogatories, wherein each party can ask written questions of the other party prior to trial
Document Demands, wherein each party can request relevant documents from the other party; and
Subpoenas, wherein each party may serve a subpoena on a third party for documents, to answer written question or to be interviewed under oath.
Motions
There are many different types of motions that can occur in a civil lawsuit. Some of the more common ones are a:
motion to dismiss the case outright before answering the complaint;
motion for summary judgment for the court to make its decision when there is no dispute in facts and no need to proceed to trial,
motion to compel usually when a party is not providing documentary evidence or required information;
motion to strike usually when a party is violating an order;
motion to renew or reargue a previous motion; and
various pre-trial and post trial motions.

Pre-Trial
After the discovery stage, the parties must prepare for trial. This task is very time consuming as each party must develop its case and defenses so it is well prepared for the trial. This includes developing opening and closing statements, direct and cross examinations and jury instructions as well as preparing the witnesses.
Trial
Most people are familiar with the trial procedure. However, usually a civil trial is not a dramatic as a criminal trial mostly seen on television. The trial is usually on specific facts supporting a money damage claim or equitable STAGES OF A CIVIL LAWSUIT
Many people may be generally aware of what occurs in a civil lawsuit. However, many people do not know the details of what procedurally occurs in one. This article covers the basic stages of a civil lawsuit.
A civil lawsuit is generally a case for money damages or equitable relief (e.g. what is fair) as appose to a criminal lawsuit wherein the government through a prosecutor brings charges against someone or some entity for criminal misconduct.
Each state and the federal government have their own rules and procedures for a civil lawsuit, and may have different names for each of its proceedings. Your legal counsel should be familiar with your state’s procedure or federal civil procedure. Depending on what type of claim you have, or may have against you, you may find yourself in state or federal court.
In any event, procedurally, the stages of a civil law suit generally occur within following the categories:
1. Pleadings
2. Discovery
3. Motions
4. Pre-trial
5. Trial
6. Post Trial
Pleadings
Pleadings include:
a complaint wherein the plaintiff bringing the claim must set forth the facts supporting the claims and state the causes of action;
an answer wherein defendant must admit, deny or deny knowledge of any alleged facts in the complaint
affirmative defenses, wherein the defendant provides defenses to the complaint;
counterclaims wherein the defendant brings an action against the plaintiff;
and a reply to counterclaims, similar to an answer.

Discovery
After the pleadings, the lawsuit enters the discovery stage. Usually discovery entails:
Depositions, wherein the parties can depose (interview) under oath the other party prior to trial;
Interrogatories, wherein each party can ask written questions of the other party prior to trial
Document Demands, wherein each party can request relevant documents from the other party; and
Subpoenas, wherein each party may serve a subpoena on a third party for documents, to answer written question or to be interviewed under oath.
Motions
There are many different types of motions that can occur in a civil lawsuit. Some of the more common ones are a:
motion to dismiss the case outright before answering the complaint;
motion for summary judgment for the court to make its decision when there is no dispute in facts and no need to proceed to trial,
motion to compel usually when a party is not providing documentary evidence or required information;
motion to strike usually when a party is violating an order;
motion to renew or reargue a previous motion; and
various pre-trial and post trial motions.

Pre-Trial
After the discovery stage, the parties must prepare for trial. This task is very time consuming as each party must develop its case and defenses so it is well prepared for the trial. This includes developing opening and closing statements, direct and cross examinations and jury instructions as well as preparing the witnesses.
Trial
Most people are familiar with the trial procedure. However, usually a civil trial is not a dramatic as a criminal trial mostly seen on television. The trial is usually on specific facts supporting a money damage claim or equitable relief. The trial could be a jury trial, or a non-jury trial. If it is a jury trial, the parties must pick the jury prior to trial.
Post-Trial
If the trial was a “bench trial,” wherein the Judge heard the case and not the Jury, the Judge may request each party to submit a post-trial memoranda or brief setting forth its case so the Judge can review the positions of each party prior to making a decision. After the Judge provides a decision, or a jury provides its findings, the losing party may attempt to vacate the decision or want to appeal the decision.
In conclusion, the stages of a civil lawsuit can involve cumbersome tasks. Depending on the parties involved in the action, many lawsuits can become extremely expensive and take years to complete. So, if you ever thought, “I am going to sue them,” or heard someone say “I am going to sue you,” think twice before getting involved in a lawsuit. Attempting settlement may save you money and time, and most importantly, peace of mind.
Feel free to contact me for further discussion at dbosco@boscolegal.com; or feel free to connect with me on LinkedIn. . The trial could be a jury trial, or a non-jury trial. If it is a jury trial, the parties must pick the jury prior to trial.
Post-Trial
If the trial was a “bench trial,” wherein the Judge heard the case and not the Jury, the Judge may request each party to submit a post-trial memoranda or brief setting forth its case so the Judge can review the positions of each party prior to making a decision. After the Judge provides a decision, or a jury provides its findings, the losing party may attempt to vacate the decision or want to appeal the decision.
In conclusion, the stages of a civil lawsuit can involve cumbersome tasks. Depending on the parties involved in the action, many lawsuits can become extremely expensive and take years to complete. So, if you ever thought, “I am going to sue them,” or heard someone say “I am going to sue you,” think twice before getting involved in a lawsuit. Attempting settlement may save you money and time, and most importantly, peace of mind.
Feel free to contact me for further discussion at dbosco@boscolegal.com; or feel free to connect with me on LinkedIn.

FRAUD AND THE INVESTMENT ADVISER (HOW YOU CAN GET INTO TROUBLE)

A recent opinion in an SEC administrative proceeding (SEC v. J.S. Oliver Capital Management, LP & Mausner, June 2016) highlights how an investment adviser can get in trouble through acts of its own. The commission held, among other holdings, that the registered investment adviser and its principal in question violated antifraud provisions by “cherry picking,” profitable transactions for favored accounts, by failing to disclose uses of soft dollars to their client, and by engaging in compliance and record keeping violations.

Cherry picking is a practice in which securities professionals allocate profitable trades to a preferred account (like there own) and less profitable or unprofitable trades to a non-preferred account (like a customer’s). In that way, an investment adviser can increase the performance of favored accounts, or at least make it more likely that they will out perform other accounts.

One form of cherry picking involves an adviser’s allocation of block trades. When an adviser executives a block trade at multiple prices, it may allocate the highest-price sales to favored accounts and the lowest-price sales to disfavored accounts. An Adviser can also cherry pick by allocating profitable trades entirely to favored accounts.

This is what happened in this case even after the brokerage firm where trades occurred informed and warned that investment adviser that the record of trades show bias trade allocation. Moreover, in the hearing, an expert witness confirmed this statistically undeniable fact. Even though there was in place an order management system, the principal went into the accounts and made manual allocations, despite written policy to allocate trades fair and equitable.

The commission found that the investment adviser had scientor when allocating trades. Scientor is a mental state embracing intent to deceive, manipulate or defraud, and includes recklessness defined as conduct that is an extreme departure from the standards of ordinary care.

The investment adviser and the principal were also liable for using soft dollars to pay expenses to benefit them without disclosing these uses to clients. Soft dollar practices are arrangements under which products or services other than execution of securities transactions are obtained by an adviser from or through a broker in exchange for the direction by the adviser of client brokerage transactions to the broker. The Exchange Act creates a limited safe harbor that applies to certain payments of research and brokerage expenses.

The liable use of soft dollars in this case included making payments to a former spouse and to a residence club for a timeshare. Even without these egregious acts, the commission held that the investment adviser did not abide by its duty to disclose soft dollar arrangements to its clients, or to disclose potential conflicts of interests accurately and completely.

The commission also held that the investment adviser violated compliance and record keeping requirements and the principal aided, abetted and caused these violations. For one, the investment adviser did not adhere to its own written policy. Also, the commission found that there was a failure to maintain trade blotters and a failure to comply with document retention obligations.

The moral of the story

No matter how hard your personal life gets complicated and how you want to live at a high standard of living, or how hard you want to please certain clients over other clients, violating anti-fraud provisions or even poor record keeping can lead to a finding of liability (and to large damages and to the removal from the industry).

For further discussion please feel free to contact me at dbosco@boscolegal.com; or feel free to connect with me on LinkedIn, if we are not already.