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Sept. 2 — The Chubb Corp. and Goldman Sachs Group subsidiary Ayco Co. must defend a lawsuit by three former Chubb executives who allege they waived their accrued pension benefits in exchange for life insurance policies that became worthless ( Motamed v. The Chubb Corp. , 2016 BL 287500, D.N.J., No. 3:15-cv-07262-AET-TJB, unpublished 9/1/16 ).
Judge Anne E. Thompson of the U.S. District Court for the District of New Jersey denied in part motions to dismiss by Chubb and Ayco. The executives alleged sufficient facts to state claims for breach of contract and detrimental reliance against Chubb, Thompson said.
In denying in part Ayco’s motion to dismiss, Thompson held Sept. 1 that the executives’ second amended complaint added factual allegations sufficient to support claims of negligent misrepresentation and professional malpractice against the financial counseling company.
The dispute stems from Chubb’s decision to offer certain executives a chance to participate in a benefit program designed to allegedly save them taxes and provide them with better benefits. The three executives in this case chose to participate and waived between $100,000 and $462,500 in pension benefits in exchange for life insurance policies with face values of between $3.6 million and $15 million.
Years later, they were notified that the policies would end unless they made additional premium payments. They sued Chubb and Ayco, alleging the program was inadequately designed and marketed and shouldn’t have been offered to Chubb’s executives.
In declining to dismiss the executives’ claims of breach of contract and detrimental reliance against Chubb, the court said that because the policies’ terms were at issue, it was premature to throw out the claims at this stage of the litigation.
The executives’ allegation that they relied on Ayco’s misrepresentations because the company held itself out as a national expert on designing and evaluating retirement benefits and was hand-selected by Chubb was sufficient to adequately plead a claim against Ayco.
The injuries alleged by the executives, including the damages they would suffer when the policies lapse and the unsustainable income tax payments they have to make, are sufficient to sustain a claim of professional malpractice against Ayco, the court said.
However, the court dismissed the executives’ breach-of-contract claim against Ayco, holding that it was duplicative to their malpractice claim.
Kleinbard LLC represented the executives. Hogan Lovells US LLP represented Chubb. Cohen & Gresser LLP and Robinson Miller LLC represented Ayco.
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