After 10 years and a trip up to the 8th Circuit, attorneys at Reilly Pozner received a more-than $102 million judgment for a group of plaintiffs who alleged breach of duty by banks acting as trustees for pre-need funeral trusts.
Reilly Pozner partner Dan Reilly said the case boiled down to a few essential questions: What obligations does a professional bank trustee have to protect its beneficiaries’ interests? And what are the consequences for the bank trustee if they don’t meet those obligations?
He said professional trustees’ duties are well established. They have to control the trust assets, protect them and keep accurate records of activities in the trust.
In this case, National Prearranged Services Inc., which no longer exists, sold pre-need funeral contracts that were supposedly backed by life insurance policies sold by two companies affiliated with NPS. But Reilly said NPS was running a Ponzi-like scheme by using money from new policy customers to pay out current funeral claims. According to an amended complaint filed in 2012, people at NPS stole money from the pre-need trusts. They also depleted the policies’ cash value through actions such as taking out policy loans and replacing fully paid
life insurance policies with policies that were to be paid on a monthly basis over time, which allowed the people at NPS to keep large amounts of consumer money, a firm spokesperson said in an email.