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Monday, April 12, 2010

Ind. Courts - "Life, Death and Insurance: Indiana's $15 Million Mystery "

That is the headline to this long story today in the WS Journal, reported by Leslie Scism and Mark Maremont. It begins:

INDIANAPOLIS—It is a tale worthy of an airport-kiosk thriller.

The mother-in-law of a nationally known executive is found dead in her bathtub. She is fully clothed from an evening out at a martini bar, high heels still on her feet. The authorities rule she accidentally drowned.

Months later, her family learns that the last person to see the woman alive—a local businessman half her age—had a $15 million insurance policy on her life, payable to his company.

The scenario is playing out in real life in a civil lawsuit in federal court here. The mother-in-law, Germaine "Suzy" Tomlinson, died in September 2008 at age 74. The son-in-law is Stephen Hilbert, who co-founded insurance company Conseco Inc. and now runs an investment fund. His family is seeking to wrest control of the $15 million policy from its beneficial owner, a company controlled by entrepreneur JB Carlson. The Hilbert family maintains that the 36-year-old Mr. Carlson, who was a social companion to the older woman for several years and had some business dealings with her, had no legitimate reason to obtain the policy.

Mr. Hilbert says: "I'm not accusing anybody of anything. There's still incredible suspicion from the family as far as her demise."

Mr. Carlson says suggesting the death is anything but a tragic accident "is just ridiculous." He says the loss of a friend has been "tremendously painful."

He says that he drove a tipsy Ms. Tomlinson home from the bar about 1 a.m., escorted her inside and left her—alive—in her living room. Mr. Carlson maintains that he legitimately bought the insurance on Ms. Tomlinson as a "key man" policy, sometimes taken out by a business to protect itself from financial damage if a top executive dies. Ms. Tomlinson introduced him to potential investors and told people she was a board member of his company.

The long story continues and covers the issue of "stranger-originated policies." A sample:
In recent years, insurance agents, hedge funds and other investors have induced thousands of elderly people to take out giant policies. Investors then buy these policies, pay the premiums, and collect when the insured dies.

Insurers argue the practice violates "insurable interest" laws that require a buyer to be a relative, employer or someone else more interested in having the insured person alive than dead. U.S. courts long have supported this concept, including a 1911 ruling in which Supreme Court Justice Oliver Wendell Holmes Jr. wrote: "A contract of insurance upon a life in which the insured has no interest is a pure wager that gives the insured a sinister counter interest in having the life come to an end."

Posted by Marcia Oddi on April 12, 2010 12:41 PM
Posted to Indiana Courts