Lincoln National Wins Lawsuit Over Life Policies Benefiting a University

March 18, 2012 by Jeff Jeffrey

A federal judge in Texashas handed Lincoln National Life Insurance Co.a victory in a lawsuit filed by Oklahoma State Universityover a unique fund-raiser in which alumni were encouraged to purchase $10 millionlife insurance policies and list the university as the beneficiary.

Cowboy Athletics, the fund-raising foundation of Oklahoma State University’s athletics department, and billionaire financier T. Boone Pickens sued Lincoln National Life Insurance Co. over premiums related to the foundation’s “Gift of a Lifetime” insurance program targeted at generating roughly $350 million for the university’s athletic programs over the next 25 years.

Under the “Gift of a Lifetime” program, in 2007, Cowboy Athletics bought individual universal life insurance policies issued by Lincoln National on 27 OSU supporters. Each policy was written for $10 million in death benefits with Cowboy Athletics as beneficiary of each.

Oklahoma State filed suit against Lincoln National in 2010, seeking $33.3 million in premiums for the policies. But the life insurer refused to return the money, even though Cowboy Athletics argued it canceled the policies under the “10-day free look” period (Best’s News Service, Feb. 5, 2010).

Judge Jorge Solis of the U.S. District Court for the Northern District of Texas, granted Lincoln National’s request for summary judgment in the case after determining the university was not entitled to cancel the policies under the free-look period because they were purchased in 2007 and were canceled in 2009. “Lincoln has a right to the premium payments made by Cowboy in 2007 and 2008 under the policies,” Solis wrote in the order granting summary judgment.

Solis went on to write that because athletic director Mike Holder signed policy delivery receipt forms in 2007 earlier and failed to request complete copies of the policies from Lincoln National, which had kept them, but the university continued to pay premiums, the contract should be considered valid.

“It was Holder’s own decision not to read the legal documents he signed and to not read the policies. Based on these documents, both Lincoln and Cowboy subsequently treated the issued policies as valid and they both performed under the contracts,” Solis said. “For Cowboy to now claim breach of contract based on an alleged failure of delivery of the policies would itself be inequitable.”

Efforts to reach a spokeswoman for Oklahoma State University were unsuccessful. Efforts to reach Lincoln National for comment were also unsuccessful.

Lincoln National Life Insurance Co. currently has a Best’s Financial Strength Rating of A+ (Superior).

(By Jeff Jeffrey, Washington Correspondent: jeff.jeffrey@ambest.com)

Originally Posted at InsuranceNewsNet on March 14, 2012 by Jeff Jeffrey.