Thursday, April 4, 2013

Update: Consent order entered in enforcement case

In March 2014, the cease and desist order against Charles D. Oliver was superseded and replaced by a consent order levying a fine of $5,000 with $2,500 suspended on conditions, based on violations of the insurance code that did not include fraudulent, deceptive, or misleading conduct.

The original blog post follows:

Cease and desist order issued to Charles D. Oliver, American Equity Advisory Group, and "the Chuck Oliver team" 

A few minutes ago, we issued this cease and desist order telling Charles D. Oliver, American Equity Advisory Group LLC, and "the Chuck Oliver team," as well as their employees, agents and affiliates, to immediately stop selling insurance products in Washington without a license.

We received a complaint from a woman who -- despite the fact that she is unmarried and has no children -- had bought  two $1 million life insurance policies and an annuity from Oliver and an associate, Steven H. Minnich. From the order we issued today:
"In the end, Mr. Minnich and Mr. Oliver sold (the woman) two life insurance policies and an annuity, as part of a complex scheme they call `maximum funding' or the `Missed Fortune' concept. Essentially, the plan was to deposit a large amount of premium into the plans for the first five years, and then stop paying on the contract.

"Mr. Minnich and Mr. Oliver told (her) that, if she did not touch the life policies for 10 years after that, she would be able to borrow $75,000 per year against the life insurance death benefit to use as retirement income, without paying any taxes and with minimal or no interest. They told her she would be able to do that without paying any further premiums on the policies, and for as long as she may live.

"This is not correct. Based upon the non-guaranteed amounts in the illustrations provided, there is a theoretical possibility that it could occur. However, the guaranteed amounts show that, within a few years (the buyer) would run out of cash value in the policies against which to borrow. This would happen by operation of the loans themselves, in addition to the accrued interest. In addition, the death benefits would decrease when (she) reached certain age milestones. Thus, not only would (she) not be able to use the policies for retirement income, she would also need to pay additional premiums simply to keep the policies in force. Thus, it is vastly more likely that the plan would not have performed as represented to her by Mr. Minnich and Mr. Oliver, and would leave her in a far worse financial state than if she had left her money where it was.

"Neither Mr. Minnich nor Mr. Oliver even suggested to (the buyer) that this was a possibility, let alone informed (her) of the extreme risks she was taking."
In this case, the premiums amounted to $110,000 a year. The woman, who had minimal annual income, was only able to make the first two years' payments by borrowing from one life insurance policy, cashing in another, borrowing from her IRA, and opening a home equity line of credit. Mnnich and Oliver, according to our order, "knew that she does not, and never did, have the assets to be able to make the $110,000 payments for five years."

Our order alleges that these transactions included nearly a dozen violations of Washington state law, including Oliver's selling insurance without a license, selling an unapproved policy, taking a commission without being licensed, describing the plan in a way that could be misleading, engaging in unfair or deceptive practices, and "by knowingly making, publishing or disseminating false, deceptive or misleading representations" of an insurance transaction.

The respondents can demand a hearing. The order, which was signed today, takes effect immediately.

"My lender wants my homeowners policy to cover the home AND the land value. Can they do that?"

No, not in Washington state.

Since the land itself is not considered covered property, including it would inflate the cost of your insurance premium. And you could never collect on a claim for the value of that land, since it's not covered property.

To preclude such a waste of your premium dollars, Washington state law bans insurers from issuing a policy that includes the value of non-covered land. The title of the relevant section of law says it all: "Over-insurance prohibited."

That said, however, you can get a policy for what's called "replacement cost" coverage for your home. With that kind of coverage, you could collect the cost to replace the home in the event that it was totally destroyed by a covered event and had to be rebuilt. And that replacement cost can be more than a home's current market value, particularly if the home is older or in less-than-sterling condition.

Questions? The law we're referring to is RCW 48.27.