American National Seeks to Void a Life Insurance Policy Over Alleged Fraud
What You Need to Know
American National says the defendant intentionally bought the policy without having an insurable interest in the life of the insured.
The insurer alleges that the purchase was part of a $535 million life application fraud effort.
In the past, attorneys for the defendant have argued that the insurer has paid out no death benefits and suffered no injury.
A life insurer is asking a federal court to void a life insurance policy based on the argument that the policy was purchased through an organized application fraud effort.
The insurer, American National Insurance Co., last week filed a complaint seeking a judgment declaring the policy, which was sold to Cathy T. Sherlock of South Carolina, to be unenforceable.
Insurers sometimes respond to allegations of insurance application misrepresentation or fraud by seeking to rescind policies, meaning that they take back the coverage and return the premiums to the purchasers.
In this case, American National argues that the policy was purchased with fraudulent intent, in violation of the federal Rackteer-Influenced and Corrupt Organization Act, or RICO; that the policy was void from the beginning; and that the court should let it keep the premiums, according to a complaint filed with the U.S. District Court of South Carolina, and available on Law.com Radar.
American National said it does not comment on litigation.
Sherlock could not immediately be reached for comment. No attorney has appeared in court on her behalf at this time. Jeffrey Peil, an Evans, Georgia, attorney who represented Sherlock in a 2022 case that was resolved confidentially through mediation, declined to comment on the new case.
The Complaint
American National alleged that Sherlock intentionally bought two policies insuring the lives of individuals in whom she lacked an insurable interest.
One of the policies has already been rescinded. Sherlock applied for the second policy in 2013, with the help of Wade Williamson, a former life insurance agent, on the life of a man in her community, Murphy Village, South Carolina.
Williamson was sentenced to 60 months in prison in 2018, in part because of an FBI agent’s allegations that he had helped clients submit 398 inaccurate life insurance applications as part of a fraud conspiracy, according to the American National complaint.
The application identified Sherlock, incorrectly, as the daughter of the insured, and contained material misrepresentations about the insured’s annual income, net worth, employment status, employer, health status and association with other life insurance policies, the insurer told the court.
A woman identified as the insured’s spouse was the primary beneficiary, and Sherlock was the original contingent beneficiary, or backup beneficiary. Sherlock later changed the contingent beneficiary to Patrick Sherlock, who was not related to the insured, and who was identified as the insured’s son-in-law, according to the complaint.
