Justia Contracts Opinion Summaries

Morady sold life insurance policies. Davis, a former lawyer, approached elderly African-Americans and paid them small amounts to become the nominal applicant-buyers of the policies, with Morady as the insurance agent, and to put the policies into an irrevocable trust, with Davis as trustee. The beneficial interest in the trust would be sold to an investor who would pay the remaining premiums and wait for the death of the insured. The insurer would not have sold the policies had it known that the premiums would be paid by an unrelated third party in the expectation that the policy would be transferred to him; its contracts with agents, including Morady, required them to conform to an “absolute prohibition against participation in any type of premium financing scheme involving an unrelated third party,” but the law allows an investor to purchase the beneficial interest in an existing life insurance policy. The net loss to Ohio National (beyond $120,000 commissions paid to Morady) was $605,000 in litigation expenses to void the policies. The total death benefits specified in the illegal policies amounted to $2.8 million. The Seventh Circuit agreed that Morady’s conduct constituted fraud and a breach of her contract and affirmed summary judgment, with damages of $726,000. View "Ohio Nat'l Life Assurance Corp. v. Davis" on Justia Law