Facts

Dana and Darrin Gorra purchased a viatical policy, whereby the policy holder, most likely a person with a terminal or chronic illness, is allowed to sell his or her life insurance policy to a third party. In this case, a special arrangement permitted by law through a loan agreement utilizing funds from IRA accounts. The premiums were to be paid by the administrator of the trust agreement. The administrator resigned and transferred the responsibilities to First Regional Bank and Trust Administration Services.

Plaintiffs claimed that First Regional and Trust Administration initially fulfilled its duties by paying the premiums when due. However, they later breached their responsibilities and failed to make payments and otherwise failed to notify plaintiffs that premiums were due and that the viatical policies were about to lapse due to non-payment.

Plaintiffs sued First Regional and Trust Administration for breach of fiduciary duty. In the interim, defendants were taken over by the Federal Deposit Insurance Corporation (FDIC), which instructed plaintiffs to file a claim. Their claim was denied in its entirety and plaintiffs decided to go forward with the litigation.

Defendants were unable to produce anyone to testify on certain material topics, but maintained that there was not enough funds in plaintiffs IRAs to pay the premiums and that they were not obligated to notify plaintiffs when premiums were due.

Damages

Dana Gorra lost the viatical policy benefits of $360,000 and Darrin Gorra lost the benefits of a second viatical policy in the amount of $360,000. Plaintiffs therefore sought recovery in the amount of $720,00 and attorney fees pursuant to the IRA agreements.

Result

The court issued discovery sanctions against defendants, and an agreement was reached to grant plaintiffs' claim and allow a claim of $500,000 to be shared with other claimants through the FDIC process.