Vol 12 No 4		April 2010

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Life, Death and Insurance

"Life, Death and Insurance" is the title of a boffo front page Wall Street Journal story of April 12, 2010 detailing the acquisition of a $15 million life insurance policy insuring Germaine Tomlinson by JB Carlson's Company. Mr. Carlson was a much younger social companion of Ms. Tomlinson, 74. Mr. Carlson drank with Ms. Tomlinson until 1 AM on September 27, 2008, then took her home. He was the last person to see her before her fully-clothed slip and fall into a bath tub, killing her. Incredible timing for Mr. Carlson since refinancing on a note to pay the premiums of this $15 million policy failed and the original note of some $1.3 million was due on September 30.

I have expressed concern about life insurance being treated as just another sophisticated asset to be bought and sold as one might corn futures. I have advised families dealing with a myriad of difficult issues, including their emotional stress, related to investor initiated life insurance, sale of life insurance, premium financing and investing in life insurance - but nothing with the drama of this Tomlinson / Carlson situation. I have had a front row view of this story for some time, providing lead reporter Leslie Scism with insights about the life insurance application process, premium financing and related matters. I heartily recommend, if you haven't read this story, to track it down. It is utterly fascinating and I'm sure we haven't seen the last of it. To follow are more details.

1. It is not clear whether insurance agent Geoffrey VanderPal brought the idea of insuring Ms. Tomlinson to Mr. Carlson or the other way around.

2. The insurance company American General has withheld payment of the $15 million and has filed suit to void the contract because, although unknown to American General at the time, they claim there was no insurable interest since the beneficial owner and beneficiary of the policy was Carlson Media.

3. During the underwriting process it was claimed that Ms. Tomlinson had a net worth of some $47 million, with some $40 million in Carlson Media stock. This was verified by a third party American General believed had knowledge of Ms. Tomlinson's true financial status. The firm was headed by a friend of Mr. Carlson and the WSJ could not locate him. In fact Ms. Tomlinson had practically no net worth and very meager income.

4. During the underwriting process it was claimed that the $15 million policy was for Ms. Tomlinson's estate planning needs. American General claims it wasn't told that Ms. Tomlinson's trust was signed over to Carlson Media. Later it has been claimed that the life insurance was a "key man" policy. Ms. Tomlinson was on Carlson Media's board.

5. The policy was financed with a non-recourse note for 30 months. The financing company was prepared to purchase the policy in 2008 but Mr. Carlson decided to refinance and retain it further.

6. The litigation plot over the policy is really messy because Ms. Tomlinson's family, which didn't know about the life insurance policy until her death, is disputing American General's claim to void the contract and Mr. Carlson's claim that his company is due the proceeds. The family wants the proceeds.

7. Mr. Carlson and his companies have debt problems with unpaid credit-card bills of $40,000. He claims he is conserving cash for the legal battle with American General.

8. To say the least, Ms. Tomlinson's family is suspicious about the events surrounding her demise. It will be interesting to see if the spotlight cast on this case by the WSJ will cause the Indianapolis police to look into the case further.