Pacific Life Faces Lawsuit Over Indexed Universal Life Policies

Pacific Life Insurance Company is seeking a federal court's dismissal of a lawsuit filed by NASCAR driver Kyle Busch and his spouse. The $8.5 million claim alleges misleading insurance product sales with false promises of tax-free retirement income. Filed in North Carolina's Western District, this case parallels a recent antitrust lawsuit by Michael Jordan against NASCAR.

Between 2018 and 2022, the Buschs acquired five Indexed Universal Life (IUL) policies. Designed to provide substantial life insurance coverage over $90 million while allowing cash value growth, these policies aimed to offer both death benefits and long-term cash accumulation. However, Pacific Life argues that Busch did not sufficiently fund the policies, causing some to lapse and others to be surrendered.

Busch claims a financial loss of approximately $10.4 million, asserting that Pacific Life failed to sufficiently communicate policy risks. The insurer counters that the couple signed acknowledgments of understanding the policy's structure and their financial obligations. The company emphasizes the importance of regulatory compliance requirements, stating that the Buschs did not meet their planned premium payments or manage policy allocations appropriately.

An IUL policy facilitates cash value accumulation linked to a stock market index, offering a safety margin against market downturns. In the suit, Busch mentions he was advised that a $1 million annual contribution over five years would yield $800,000 per year starting at age 52. Doubt arose upon receiving a notice for a sixth premium, leading to the discovery of significant fund depletion.

Pacific Life argues the allegations exceed the applicable three-year statute of limitations, as the claims of fiduciary breach and negligent misrepresentation arose seven years post-purchase. The insurer insists on full disclosure, highlighting bold directions within the signed policies and a 20-day cancellation period that allowed for a full premium refund.

The lawsuit also targets agent Rodney A. Smith, accusing him of advising a high-risk investment without properly disclosing his commission fees. This raises questions about industry standards and regulatory compliance in policy advisory and sales processes.