Hidden Defect - Non-Guaranteed Elements - Walker v LSW

DOC 815 TRANSCRIPT for proceedings held on 2/14/2011 - 41p

  • (p11) - Brosnahan: I would like to move on to the non-guaranteed  elements unless the Court has any questions.
  • THE COURT: No.
  • MR. BROSNAHAN: There are two aspects in which we contend that the illustrations were deceptive with regard to the non-guaranteed elements.
    • Both of these theories relate to what we consider to be hidden defects in the structure of these policies.
    • Now, first, with regard to the volatility issue, we allege that these policies suffer from a material risk that is not disclosed because large fees are deducted from the policy in both good times and bad,...

(35-36) - Non-Guaranteed Element = Hidden Defect, Promises

Moving on to the non-guaranteed elements, the argument that we heard this afternoon was an argument that to my ear was not particularly well-sketched out in the opposition.

It doesn't exist in the Complaint.

It's the hidden defect argument.

It's that there is an inherent weakness in how these qualities are engineered such that the effect of costs with a spiraling down S&P would have a consequence that is more profound than what's apparent on the illustration. 

Without a specific allegation, I can't very effectively argue that that's true or not true.

  • It's not alleged, but none of it deals with the legal proposition, and, that is, when you have the non-guaranteed elements and the guaranteed, if the insurance companies falls short on the guaranteed, they have a very good lawsuit, but if they insurance company falls short on the non-guaranteed, they don't have a very good lawsuit because it never was a promise.

2011 0214 - DOC 815 - TRANSCRIPT for proceedings - Oral Arguments 

(p11)

MR. BROSNAHAN: There are two aspects in which we contend that the illustrations were deceptive with regard to the non-guaranteed elements.

  • Both of these theories relate to what we consider to be hidden defects in the structure of these policies.

(p39-40)

Counsel is correct that the words "hidden defects" are not in the Complaint, but we clearly have alleged the factual elements of these defects.

  • I was just jotting done some of the paragraphs. I would point to paragraphs 30 to 25 32, 34, 66(b), which would be among the paragraphs where we have alleged this.

2011 0214 - DOC 815 - TRANSCRIPT for proceedings - Oral Arguments