Fraud Sufficiently Alleged Against Agents and Life Insurers

Court Limits Lengthy Decision to Decide Case Can Go to Trial
Posted on August 26, 2025 by Barry Zalma

USDC Tries to Keep it Simple

In Todd F. Stevenson, an individual et al v. Massachusetts Mutual Life Insurance Company; et al, No. CV 24-109-M-DLC, United States District Court, D. Montana, Missoula Division (August 13, 2025) Plaintiffs alleged various claims including ordinary and professional negligence, negligent misrepresentation, breach of fiduciary duty, statutory violations, constructive fraud, actual fraud, fraudulent inducement, unjust enrichment, punitive damages, rescission and restitution, and a claim for an accounting. The claims asserted involve complex financial products and the alleged misrepresentations and omissions by the defendants regarding the stability and suitability of these products.
Claims and Legal Theories:

Plaintiffs have alleged various claims including ordinary and professional negligence, negligent misrepresentation, breach of fiduciary duty, statutory violations, constructive fraud, actual fraud, fraudulent inducement, unjust enrichment, punitive damages, rescission and restitution, and a claim for an accounting.
Montana Law:

Under Montana law, punitive damages may be awarded when the defendant has been found guilty of actual fraud or actual malice. The Montana Supreme Court has recognized that allegations of agency generally involve questions of fact and therefore cannot be resolved summarily.
Constructive Fraud, Fraud, and Fraudulent Inducement

“To allege fraud with particularity, . . . a plaintiff must set forth what is false or misleading about a statement, and why it is false.” In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994). Here, Plaintiffs allege that Gardner Defendants encouraged Plaintiffs to take out additional life insurance-including Penn Defendants’ policies-and represented that these additional policies would “keep the loan balance from getting out of control.” Plaintiffs further allege that the representations and omissions of the stability of the tripartite structure were false, because the structure was not stable nor suitable for the Stevenson Family’s low-risk estate and retirement planning goals. The Court found that these facts are sufficiently particular to state plausible claims for constructive fraud, actual fraud, and fraudulent inducement. Therefore, Penn Defendants’ motion for judgment on the pleadings must be DENIED.
Punitive Damages

Under Montana law, punitive damages may be awarded “when the defendant has been found guilty of actual fraud or actual malice.” Mont. Code Ann. § 27-1221(1). “A defendant is guilty of actual malice if the defendant has knowledge of facts or intentionally disregards facts that create a high probability of harm to the plaintiff and: (a) deliberately proceeds to act in conscious or intentional disregard of the high probability of injury to the plaintiff; or (b) deliberately proceeds to act with indifference to the high probability of injury to the plaintiff.” Mont. Code Ann. § 27- 1-221(2). “A defendant is guilty of actual fraud if the defendant: (a) makes a representation with knowledge of its falsity; or (b) conceals a material fact with the purpose of depriving the plaintiff of property or legal rights or otherwise causing injury.” Id. § 27-1-221(3).
Conclusion

Under Montana law, Defendants owed Plaintiffs a duty of care. Taking the allegations in the SAC as true, Plaintiffs have pled sufficient facts to support plausible claims of relief against Gardner Defendants, Wintrust, CMS, and Penn Mutual.
ZALMA OPINION

Insurance fraud is a tort that can be brought by the victim of the fraud who seeks damages and punishment damages if the plaintiff can prove he was defrauded by his insurance agents and the insurers sold by the agents to the insureds. The plaintiffs in this very complex set of claims and legal issues resolved the motions to dismiss and has established that there were sufficient allegations of fraud that will allow this case to go to trial.

(c) 2025 Barry Zalma & ClaimSchool, Inc.

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