Court Affirmed Judgment Against Trust Settlor Who Raised Fraud And Other Related Claims Against An Insurance Agent

by Winstead PC
Contact

In Jessen v. Duvall, an investor who established trusts to purchase life insurance policies sued an insurance agent for tort claims, including fraud, conspiracy, and aiding and abetting breach of fiduciary duty based on the insurance policies not being good investments and the investor losing more than $3.2 million dollars. No. 14-16-00869-CV, 2018 Tex. App. LEXIS 1369 (Tex. App.—Houston [14th Dist.] February 22, 2018, no pet. history). Three alleged events formed the plaintiff’s claims: the defendant mispresenting the resale value of the policies, the failure to disclose the commission structure of the policies, and that he failed to disclose that he paid a referral fee to the plaintiff’s tax attorney’s son. The defendant filed a motion for summary judgment, which the trial court granted. The plaintiff appealed.

The court of appeals first addressed whether the plaintiff had standing to assert the claims because the insurance policies were owned by the trusts and the plaintiff was not the trustee. The court of appeals held that the plaintiff did have standing because he asserted claims based on the advice given to acquire the policies and not a breach of contract claim under the policy:

[W]hile it is undisputed that the trustees purchased and sold the insurance policies, Jessen does not pursue claims based on duties created by the policies (contractual claims). Rather, Jessen asserts claims arising under state law (extra-contractual claims). Specifically, Jessen’s claims for fraud, aiding and abetting and conspiracy to breach a fiduciary duty, and equitable theories remain viable because he seeks redress for misrepresentations made to him prior to the trusts being created and policies purchased. There is no indication here that Jessen assigned or relinquished the extra-contractual causes of action to the trustees. As such, Jessen has standing to assert them in this litigation. See Lee v. Rogers Agency, 517 S.W.3d 137, 144-153 (Tex. App.—Texarkana 2016, pet. filed) (op. on rehearing).

Id. Regarding the claims based on the alleged failure to disclose the market value of the policies, the court held that the plaintiff failed to provide evidence that the defendant made any representations, indirectly, regarding the future market value of the policies, caused the reduced market value of the policies, or caused the plaintiff to receive a reduced value by some fraud or conspiracy. Rather, the court stated that the defendant was the only party to offer an explanation as to why the policies were sold at a loss by submitting an uncontroverted affidavit of the vice president of a company that traded in life policies, who attested to the financial collapse in the life insurance industry in 2008 and the negative financial impact it had on the resale market for life insurance policies. The court concluded that the plaintiff proffered no evidence that the reduced resale value of the policies was the result of anything more than unforeseen market conditions.

Regarding the commission structure, the court held that there was no evidence that the defendant had a duty to disclose the commission structure or that the commissions received by him were the result of a conspiracy to defraud. The evidence demonstrated that the commission was in line with industry standards, and the court held that there was no evidence that the defendant had a duty to disclosure the commission structure that was within industry norms. Moreover, in terms of damages, the plaintiff did not show he was damaged by the defendant receiving a commission as the plaintiff’s damages were based upon the decreased resale value of the life policies.

Regarding the referral fee, the plaintiff maintained that the nondisclosure of the referral fee paid by defendant was fraudulent. The court held that it was undisputed that referral fees were customary in the insurance industry and that defendant gave up part of his compensation to pay a referral fee. There was no evidence that the plaintiff paid more for the policies due to the referral fee, and the court held that there was no evidence that the defendant had any duty to disclose the referral fee. The court affirmed the summary judgment on the fraud and conspiracy to commit fraud claims.

The court then turned to the aiding and abetting breach of fiduciary duty claims. The plaintiff alleged that the defendant’s nondisclosure of the referral fee provided substantial assistance in his tax attorney’s breach of his fiduciary duty by “secretly agreeing to and then paying Bond’s son a part of the commission generated from the sale of the insurance policies to Plaintiff.” Id. “To establish aiding and abetting, the plaintiff must demonstrate that the defendant, with unlawful intent, substantially assisted and encouraged a wrongdoer in a tortious act.” The court noted that “[a]iding and abetting is a dependent claim which is premised on an underlying tort.” Id. The court then held that because the plaintiff failed to establish his breach of fiduciary duty claim against his attorney, his aiding and abetting claim also failed:

With respect to the second element, Jessen contends “Jessen has submitted evidence that Bond breached that fiduciary duty by enticing Jessen to participate in the scheme alleged, while knowing that Jessen would not be able to sell the policies for a substantial profit in the manner intended.” Jessen further claims “there is evidence that Duvall paid Jessen’s attorney Bond a kickback in order to induce him to recommend that Jessen invest in the insurance policies at issue.” … Jessen makes no reference to any part of the Texas Disciplinary Rules of Professional Conduct or case law to support his claim that Bond breached his fiduciary duty. Without the underlying tort being established, there can be no claims of aiding and abetting a breach of Bond’s fiduciary duty and/or conspiracy to breach Bond’s fiduciary duty. Moreover, even assuming, arguendo, that Jessen could establish the underlying tort, there is no evidence of Duvall knowingly aiding and abetting Bond, Sr. with such a breach. Similarly, there is no evidence of any meeting of the minds between Duvall and Bond to breach Bond, Sr.’s, fiduciary duty to Jessen. Because Jessen failed to raise any evidence to support his claim of aiding and abetting and conspiracy to breach fiduciary duty claim, summary judgment was proper.

Id. The court of appeals affirmed the summary judgment on all of the plaintiff’s claims.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Winstead PC | Attorney Advertising

Written by:

Winstead PC
Contact
more
less

Winstead PC on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.