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Pacific Life Insurance has filed a motion with the Western District of North Carolina, urging Judge Matthew E. Orso to dismiss the $8.5 million lawsuit brought forth by two-time NASCAR Cup Series champion Kyle Busch and his wife, Samantha. The insurance giant argues that the complaint is laden with "inflammatory and disingenuous rhetoric" and fails to demonstrate any wrongdoing on Pacific Life’s part.
The legal battle, initially filed in a North Carolina superior court on October 14 before being transferred to the federal district court, centers on an Indexed Universal Life (IUL) insurance policy. The Busches allege that Pacific Life and an independent agent, Rodney A. Smith, misrepresented the complex financial product as a "tax-free retirement plan" capable of providing self-funding retirement income.
According to the lawsuit, the IUL policy, which includes a death benefit and a cash value component, was presented with illustrations that allegedly misled the couple regarding its growth potential and associated costs. The growth of the cash value is tied to a stock market index, with purported protections against market downturns. The Busches claim to have suffered losses totaling $8.58 million from a premium payment structure of $10.4 million, citing misleading illustrations, undisclosed fees, and outright falsehoods concerning their expected returns.
Kyle Busch has stated that he was led to believe that by investing $1 million annually for five years, he would be able to withdraw $800,000 per year upon reaching the age of 52. He claims to have discovered the significant depletion of his funds by the time he received a sixth premium notice.
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In its defense, Pacific Life asserts that the Busches purchased the policy with the guidance of their own legal counsel and subsequently failed to manage it appropriately. The insurance company’s filing states, "Despite access to a team of their own professional advisors, Plaintiffs failed to manage their Policies and now proffer a series of baseless claims that ignore clear, repeated, and explicit disclosures that illustrated values were ‘not guaranteed’ and that the Policies would not be ‘paid up’ after five annual premium payments."
Pacific Life further highlights that during the policy’s active period, the Busches held substantial insurance coverage, estimated at up to $90 million on Kyle Busch’s life, who participates in "ultra-hazardous activity" as a professional race car driver, in addition to coverage for Samantha Busch. The company contends that there is "no legal basis to provide Plaintiffs with a massive windfall by refunding all of their premiums" and requests the dismissal of claims against Pacific Life with prejudice.
Adding another layer to its argument, Pacific Life points to the striking similarities between the Busches’ lawsuit and a previously rejected complaint. This prior case, also involving an IUL policy purchased in 2018 and filed by the same attorney representing the Busches, Robert Rikard, was similarly dismissed by a district court and upheld on appeal by the Fourth Circuit Court in Richmond, Virginia.
The company’s filing quotes the previous ruling: "These claims are remarkably similar to those rejected by the district court in Stegelin v. Pacific Life, which involved the same Pacific Discovery Xelerator (‘PDX’) policy purchased in 2018 by Plaintiffs here. Stegelin. One of the plaintiffs in Stegelin alleged a producer sold him a Pacific Life IUL policy as ‘a strategy for creating ‘tax-free’ retirement income,’ and that he ‘was induced to purchase the Policy based on alleged misrepresentations or omissions in the Illustrations regarding how the Policy might- perform in the future.’"
The previous court’s decision in Stegelin found that Pacific Life’s "conspicuous and repeated disclaimers that all non-guaranteed elements in the illustration were not guaranteed refute [plaintiff’s] theory." The court also concluded that the illustrations included written disclosures that refuted any claim of reliance, making any reliance "not justifiable as a matter of law."
Pacific Life also refutes the Busches’ claim of being unable to understand the "real-world operation of the policies," noting that the company "fully discloses charges against premium over a 10-year period and shows the resulting cash value each year."
A significant point in Pacific Life’s motion is the assertion that most of the claims are time-barred by a four-year statute of limitations. The trust for the policies was established on April 3, 2018, following an approach by agent Rodney A. Smith in 2017. The Busches’ complaint alleges that Smith presented himself as a "wealth management and insurance specialist" and "retirement planner."
Pacific Life outlines several key reasons for its dismissal motion, including:
- Statute of Limitations: The majority of the claims are alleged to have accrued more than four years prior to the filing of the lawsuit.
- Failure to State a Claim: The Busches have not sufficiently alleged facts that would establish a viable legal claim against Pacific Life.
- Contractual Agreements: The Busches entered into explicit agreements that limit their ability to sue, including acknowledgments of the policy’s terms and conditions.
- Lack of Justifiable Reliance: The Busches could not have justifiably relied on any alleged misrepresentations, given the clear disclosures within the policy documents.
The filing emphasizes that both Kyle and Samantha Busch acknowledged and agreed to specific terms within each policy application. These included statements confirming that the policy would meet their insurance needs and financial objectives based on their personal circumstances, and that only the producer signing the application was responsible for ensuring the policy’s suitability.
Furthermore, the applications contained explicit acknowledgments for products with indexed features. The Busches agreed to understand that "the crediting for the indexed account tracks the gains and the losses of an outside financial index, subject to a floor and either a growth cap or a growth cap or a threshold, whichever applies." Crucially, they acknowledged that while policy values might be referenced to an external index, the indexed feature does not directly participate in stock or equity investments, and that "values shown to me, other than the minimum values, are not guarantees, promises, or warranties."
Pacific Life asserts that both Kyle and Samantha Busch signed these documents, which included commitments to pay planned premiums and maintain the policies for over 30 years, extending beyond age 70.
"Instead of keeping the policies long enough to capitalize on their growth potential, Plaintiffs failed to timely pay planned premiums, failed to monitor allocation of their policy values between indexed and fixed accounts and surrendered the policies or allowed them to lapse," Pacific Life stated in its filing. "Rather than accept responsibility for their own decisions, Plaintiffs now attempt to blame their negative outcome on the IUL product."
The insurance company concludes that the Busches, having acknowledged their understanding of the policy’s complexities and signed agreements confirming this understanding, cannot retroactively claim a mistake occurred seven years later simply because the investment did not yield the desired results. Pacific Life invokes the principle that "a plaintiff cannot avoid the statute of limitations by remaining willfully blind."
Pacific Life also points out that each of the five policies was accompanied by a cover letter prominently featuring the instruction in bold capitalized letters: "READ YOUR POLICY CAREFULLY." Additionally, each policy offered a 20-day refund window, a provision that the Busches never sought to utilize. The motion essentially argues that the Busches made informed decisions and cannot now seek to reverse those decisions due to unfavorable outcomes.
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