Sun Life Exploits Family of Contractor Killed in Afghanistan
Posted by defensebaseactcomp on November 23, 2010
By Tom Schoenberg at Bloomberg Businessweek
(Updates with excerpt of judge’s order in third paragraph.)
Nov. 23 (Bloomberg) — Sun Life Financial Inc. lost a bid to dismiss a lawsuit claiming the insurer used the untapped death benefit of a contractor who died in Afghanistan for its own profit rather than to maximize the payout for his family.
U.S. District Judge Nancy Gertner in Boston ruled Nov. 18 that Thomas Luitgaren, the contractor’s brother, made a plausible claim against Sun Life. His suit contends the insurer paid the family a low, fixed rate of interest from a so-called financial benefit account while investing the proceeds of his brother Michael’s policy in higher-yielding securities.
“If the financial benefit accounts were plan funds, and Luitgaren was entitled to have those funds managed for his exclusive benefit, then he may argue he is still entitled to the amount that Sun Life made from his assets over and above the interest paid him,” Gertner wrote in her order.
Sun Life, based in Toronto, argued that once it paid funds into Luitgaren’s financial benefit account it no longer had a fiduciary duty to him so the suit should be dismissed.
The life insurance plan Michael Luitgaren participated in was offered through his company, Perini Corp., based in Framingham, Massachusetts. The beneficiaries of the policies under the plan had the option of taking the death benefit in a lump sum or leaving it in the financial benefit accounts.
Luitgaren’s lawyer, Stuart Rossman of the Boston-based National Consumer Law Center, said in a telephone interview that Sun Life violated its duties under the Employee Retirement and Income Security Act.
A Sun Life spokesman, Alexi Maravel, said by e-mail, “We believe the case is without merit and we will continue to defend ourselves vigorously.”
The case is Luitgaren v. Sun Life Insurance Company of Canada, 09-cv-11410, U.S. District Court, District of Massachusetts (Boston).
–Editors: Fred Strasser, Peter Blumberg