Freeman Investments, L.P. v. Pacific Life Insurance Company

The Securities Litigation Uniform Standards Act of 1998 (SLUSA) precludes state law class actions that allege misrepresentation or fraudulent omission in connection with the purchase or sale of covered securities. In this ease we answer the question on everyone’s lips: Does SLUSA displace class actions alleging breach of a variable universal life insurance contract?

I. BACKGROUND

Plaintiffs purchased variable universal life insurance policies from defendant Pa-cifie Life Insurance Company. Variable universal insurance differs in important ways from term life insurance, which protects against risk of death for a finite period and provides no continuing benefit once that time expires. See American Council of Life Insurers, Life Insurance Fact Book 64 (2011). Variable universal insurance lasts for the duration of the policyholder’s life and allows him to share in the gains (or losses) generated by the investment of premiums. A policyholder may borrow against the accumulated value of his variable universal policy, or cash out the accumulated value by surrendering the policy while he’s alive.

Pacific guarantees its customers a minimum insurance benefit, and policyholders…