Von Hoffman v. Prudential Insurance Co. of America
United States District Court for the Southern District of New York
202 F. Supp. 2d (2002)
- Written by Alex Ruskell, JD
Facts
Ladislaus Von Hoffman (plaintiff) bought $30 million worth of “vanishing premium” life insurance from The Prudential Insurance Company of America (defendant). The broker that sold the policy was Alexander & Alexander, Inc. (defendant). Under the terms of the policy, the policy’s premiums were to vanish after seven years because the first seven years’ worth of premiums would generate sufficient dividends so that Von Hoffman would no longer need to pay premiums. Although the policy came with a disclaimer, it proved that its premium would vanish by using calculations of the past 20 years of the policy’s dividend performance. Von Hoffman bought the policy. However, the premiums did not vanish after seven years, and the policy cost exceeded projections by $3.3 million. Von Hoffman sued both Prudential and Alexander for fraud. Prudential settled, but Alexander moved to dismiss. Von Hoffman argued that Alexander had defrauded Von Hoffman by failing to disclose that Prudential had changed its methodology for calculating dividends and that Alexander had used the older calculation of dividends to prove the worth of the policy over 20 years even though Alexander knew that the calculation was no longer applicable and was misleading.
Rule of Law
Issue
Holding and Reasoning (Chin, J.)
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