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Macomber v. Travelers Property and Casualty Corp.9/3/2002
Beginning in January, 1994, Travelers Casualty also entered into an exclusive arrangement with Smith Barney, whereby Travelers Casualty agreed to purchase all of its annuities through SBHU. SBHU would arrange annuity purchases by Travelers Casualty from various life insurance companies, receiving commissions from those companies in return. Smith Barney, after receiving the commissions from SBHU, would pay Travelers Casualty 50 percent of the gross commission. In January, 1998, Travelers Casualty entered into a similar arrangement with Ringler Associates, and with Wells and Associates, both of whom are not parties to this action. Pursuant to this arrangement, the brokers agreed to ''place a significant portion of their [nonTravelers Casualty] generated premiums with [Travelers Annuity]'' and give 50 percent of their annuity commissions to Travelers Casualty. In the remainder of this opinion, we refer to this transfer of a portion of the commissions from the brokers to Travelers Casualty as the ''rebating scheme.''
In addition to the rebating scheme, the plaintiffs alleged that Travelers Casualty frequently spends less on its purchase of annuities than the amounts that its agreements with claimants call for, by overstating the present net worth of the annuities. Hereafter, we will refer to this course of conduct as the ''short-changing scheme.''
The plaintiffs further alleged that Travelers Casualty ''regularly and routinely solicits the sale of life insurance products'' without a license to do so. The plaintiffs contend, specifically, that the Travelers Casualty claim adjusters, through their training, sales presentation, and use of '' 'Quote Partner' '' software, which converts a settlement amount into an annuity, ''provide expertise life insurance interpretations and guidance concerning annuity valuations and the purported advantages and disadvantages of having annuities,'' and attempt to convince claimants, whose settlements exceeded certain amounts, to receive their settlements in the form of annuities.
Given this factual background, as alleged in general, we now turn to the specific allegations of the two plaintiffs. In 1988, Macomber was involved in an automobile accident. Thereafter, she settled her claim against the alleged tortfeasors, who were insured by Travelers Casualty, for $85,000. Under the terms of the settlement, Travelers Casualty agreed to pay the plaintiff $70,000 and to purchase an annuity ''with an estimated present value'' of $15,000. This annuity was to provide Macomber with an income stream of $1015.18 annually, with thirty payments guaranteed. Macomber's attorneys' fees were calculated using a total settlement value of $85,000. The plaintiffs alleged however, that Travelers Casualty spent materially less than $15,000 for Macomber's structured settlement because Travelers Casualty ''received undisclosed rebates in connection with the purchase of the annuity used to fund the structured settlement.''
Huaman, acting as the guardian of a minor child who also was involved in an automobile accident, entered into a similar structured settlement with Travelers Casualty. Travelers Casualty settled her claim for the full policy amount, namely, $10,000, of which Huaman would pay $3333 in attorneys' fees, and Travelers Casualty would purchase an annuity for Huaman's ward ''that was represented to be of a value and cost of $6667 . . . .'' This structured settlement was to provide her with payments of: $2500 on January 21, 2005; $3000 on January 21, 2006; $3500 on January 21, 2007; and $5000 on January 21, 2008. The plaintiffs alleged that Travelers Casualty, as it did when purchasing Macomber's annuity, spent materially less than $6667 to purchase the annuity
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