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Richard Hirsch, et al v. Schiff Benefits Group

March 25, 2011

RICHARD HIRSCH, ET AL.,
PLAINTIFFS,
v.
SCHIFF BENEFITS GROUP, LLC, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Pratter, J.

MEMORANDUM

INTRODUCTION

The Plaintiffs, Richard and Jo Anne Hirsch, are a married couple from Florida. They allege in a five-count Complaint that the Defendants, the Schiff Benefits Group ("SBG") and its principal Matthew Schiff, misled them in order to induce them to create and invest in a premium-financed insurance trust. The Hirschs assert that this investment turned sour, leaving them with losses in excess of $238,000. Counts I and IV of the Complaint allege breach of contract; Count II alleges professional negligence; Count III alleges several violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("the CPL"), 73 P.S. §201-1, et seq.; and Count V alleges negligent misrepresentation.*fn1

SBG and Mr. Schiff have moved to dismiss the Complaint in its entirety. For the reasons set forth below, the Motion to Dismiss will be granted in full.

JURISDICTION

This Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332(a).

FACTUAL AND PROCEDURAL BACKGROUND

For the purposes of a motions to dismiss, facts alleged in the Complaint are considered to be true. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-556 (2007). On that basis, the facts are as follows.

The Complaint asserts that in January of 2008, the Richard L. Hirsch Irrevocable Life Insurance Trust ("the Trust") purchased a premium-financed life insurance policy upon the life of Mr. Hirsch from John Hancock Insurance.*fn2 Premium payments on this policy were financed by a lender, A.I. Credit, which was succeeded by First Insurance Funding ("First"). The Hirschs executed a written guaranty in favor of the lender in connection with the financing plan, and they pledged personal collateral to secure the Trust's obligations.

According to the Hirschs, their decision to enter into this transaction was based on their belief that in five years, there would be a secondary market for the life insurance policy which would assign a value to the policy exceeding the Trust's then-outstanding obligation to First.*fn3

They say that they had this belief because of an assurance to them by SBG, a licensed Pennsylvania insurance broker, and its principal, Mr. Schiff. They also assert that without this assurance, the Trust would not have purchased the policy, and they would not have executed the guaranty.*fn4

As evidence that SBG and Mr. Schiff "guaranteed" that there would be a secondary market for the insurance policy, the Hirschs cite a letter on SBG letterhead dated December 17, 2007 and signed by Mr. Schiff ("the December 17 Letter"). The use of the word "guarantee" comes from the Complaint, not from the December 17 Letter. Indeed, no quote or excerpt from the Letter appears in the Complaint.*fn5 The Complaint characterizes the December 17 Letter as a "contract" between the parties, which allegedly obligated SBG and Mr. Schiff to ensure that the Hirschs would bear little or no risk on their investment, at least after the passage of five years.

The Complaint alleges that SBG contacted the Trust's trustee in February of 2010, and announced that the Trust's obligation to the lender would "never" be satisfied by a sale of the policy, because there was actually no secondary market within which the policy could be sold. SBG also apparently advised the trustee and the Hirschs that if the Trust was unable or unwilling to maintain the policy, then it should mitigate its losses by terminating the policy and repaying First. In May of 2010, the Trust surrendered the policy, and the Hirschs had to pay $238,519 to satisfy the Trust's debt to First, which debt had been incurred to pay premiums on the policy.

In their claim against SBG and Mr. Schiff, the Hirschs present two theories of contract breach. The first, set forth in Count I, is based on the December 17 Letter. The second, which appears in Count IV, seems to suggest that SBG and Mr. Schiff breached an implied agreement to use their "best efforts to research, ascertain, evaluate and formulate recommendations" for the Trust and the Hirschs. This claim is related to the professional negligence claim, presented in Count II. Count III alleges that SBG and Mr. Schiff violated the CPL by (1) failing to comply with the terms of a written guarantee or warranty; (2) misrepresenting the premium-financed life insurance policy by overstating its market value and liquidity; and ...


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