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7. Rights Under the Commercial Union Life Insurance Policy
a. NHF’s Rights
The life insurance policy had an initial death benefit of
$991,789. Under the DBOA, NHF became entitled to $557,280 of
that amount when it paid the $36,000 premium to Commercial Union
Life in 1997. NHF’s portion of the death benefit was fixed at
$557,280, even if the total death benefit increased under the
policy.
Under the DBOA, NHF was guaranteed to receive either:
(1) $557,280 when Mrs. Addis died; or (2) the termination account
or cash surrender value of the insurance policy if the policy was
terminated before Mrs. Addis died. NHF was guaranteed to receive
the termination account value upon termination of the policy,
i.e., the cumulative amount of premiums paid by NHF, less the
cumulative cost of insurance that NHF was charged for its share
of the death benefit.
b. The Addis Family Trust’s Rights
In 1997, petitioners’ family trust was entitled to receive
$434,5094 of the death benefit. Under the DBOA, the Addis family
trust could borrow against the life insurance policy only to the
4 Lawrence D. Cronin, the president of Cronin Insurance
Services, testified that petitioners’ family trust was entitled
to receive $424,509. The initial death benefit was $991,789.
NHF was entitled to receive $557,280 of that amount, and
petitioners’ family trust was entitled to receive the remainder.
The difference between $991,789 and $557,280 is $434,509.
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