DES MOINES (Legal Newsline) – A Texas-based trust born out of the bankruptcy reorganization of a high-profile life settlement company is now involved in a lawsuit against an insurance company over claims it inflated monthly charges on policies.
The suit was filed by Advance Trust and Life Escrow Services, which grew out of a division of the Dunnam & Dunnam law firm, acting as an agent for the Life Partners Position Holder Trust.
The suit was filed Feb. 25 in the U.S. District Court for the Southern District of Iowa over allegations North American Co. for Life and Health Insurance wrongly hiked up monthly charges. The plaintiffs are seeking to certify a class action.
North American allegedly inflated the cost of insurance (COI) charges and violated "the terms of the subject policies by failing to base cost of insurance rates on its expectations as to future mortality experience, and, instead, using cost of insurance charges as a way to bolster its profits," the lawsuit states.
In a response filed in March, North American denies it "committed any wrongdoing or breached any contract." It also is opposes class certification.
On April 9, Chief Magistrate Judge Helen Adams of the Iowa court issued a protective order covering a wide range of what she deemed confidential information that may be produced during discovery, but that the trial court will decide later whether it should remain confidential.
Life Partners Position Holder Trust was set up to manage the interests of investors following the re-organization of Life Partners, a Waco-Texas based company run for many years by Brian Pardo. It was involved in the buying of life settlements, for which Dunnam and Dunnam were escrow agents.
Life settlements involve companies buying life insurance policies for a cash sum. The company sells to institutional investors who collect the death benefit when the holder passes away.
Court hearings, including the bankruptcy proceedings, heard how Pardo and his company allegedly sold "fractionalized" interests in the $2.4 billion portfolio to some 22,000 retail investors, many of them elderly, who later found they faced strict premiums payments.
Following a lawsuit brought by the Securities and Exchange Commission, the company, Pardo, and a secretary, R. Scott Peden, were ordered to pay $46.9 million in fines for misleading investors in 2014.
The bankruptcy trustee H. Thomas Moran, in a press release issued following reorganization, projected investors could receive up to 90 percent of their capital.
Nevertheless, in 2017, a jury in Fort Worth found that Pardo and family members committed fraud while operating the company after the Life Partners Creditor Trust sued.
According to a 2017 Waco Tribune-Herald article, Trust attorney Jennifer Ecklund said that the "finding could result in Pardo owing creditors as much as $65 million."