Who: Plaintiffs: CDA Wealth Consulting, LLC and Sheik “Abida” Khan

Defendant: Global One Financial, Inc. and American General Life Insurance Company

What: This is the latest in our continuing series of life insurance alerts. This case concerns a term life insurance policy, however the complaint alleges that Plaintiffs believed they were obtaining a premium financed equity indexed universal life (EIUL) policy. While an EIUL policy was not ultimately issued, this complaint nevertheless highlights litigation risks associated with EIUL products.

CDA Wealth Consulting, LLC (CDA Wealth) and Sheik “Abida” Khan (Khan) (collectively, Plaintiffs) filed an action against Global One Financial, Inc. (Global One) and American General Life Insurance Company (American General) (collectively, Defendants) arising from Defendants’ purported breach of contract and misrepresentations relating to a keyperson equity index universal life insurance policy. According to the complaint, Plaintiffs submitted an application to American General for a keyperson equity index universal life insurance policy, financed by a premium financing arrangement between Global One and Plaintiffs. Plaintiffs assert that one year after the policy was issued, they discovered that the policy “was amended and altered into a term policy without [their] consent, approval, or authority,” and that Global One had “unilaterally and improperly amended the subject Keyperson Life Insurance Policy from an Equity Index UL policy as Plaintiffs intended into a term life insurance policy, which was never agreed to or consented to by Plaintiffs.” It is further alleged that “the policy’s base amount was changed to $12,338.00 with a 1.2 million term rider with an annual premium of $50,000 and a five year index with zero return.” Plaintiffs allege that the original policy provided by American General did not have a term life insurance policy rider.

According to the complaint, Plaintiffs sought to cancel the policy, but Global One informed them that the policy could not be cancelled without penalties. Plaintiffs further allege that they surrendered the policy, but due to the Defendants’ breach of contract, they were required to treat the policy as a “Modified Endowment Contract, with its attendant negative tax consequences.”

Plaintiffs assert causes of action for: (1) breach of contract; (2) negligent misrepresentation; (3) intentional misrepresentation; (4) fraud; (5) rescission of contract; and (6) unfair competition in violation of California’s business & professional code §§ 17200. Plaintiffs seek monetary damages in an amount equal to or in excess of $150,000, in addition to restitution, statutory penalties, disgorgement of profits, punitive damages, rescission of the policy, a determination that the premium finance arrangement was the product of fraud, attorneys’ fees, and costs.

Where: United States District Court for the Central District of California

When: August 28, 2013