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COA: Bank didn't breach duties as trustee

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Although tempted to analyze with "the benefit of hindsight" a suit filed by beneficiaries of a trust against a bank that served as the trustee, the Indiana Court of Appeals affirmed summary judgment in favor of the bank after finding the bank acted in good faith.

The beneficiaries of a trust set up by their father, Chanell and Micaela Cochran, filed the suit In re: Matter of the Trust of Stuart Cochran Irrevocable Trust v. KeyBank, N.A., No. 71A04-0806-CV-3847, alleging KeyBank, as trustee, had breached its obligations and violated the prudent investor rule.

Stuart Cochran set up the trust in 1987 with his then-minor daughters as beneficiaries and received assistance from insurance advisor Art Roberson. KeyBank became successor trustee in 1999, just after Roberson had recommended the trust be replaced with two variable universal life policies. Stuart agreed to change his policy to a safer John Hancock one in 2003 with a fixed payout of around $2.5 million after his variable universal life policies continued to lose money in the stock market following Sept. 11, 2001. The previous policy was originally valued around $8 million before losses.

Stuart died unexpectedly shortly after the new policy was confirmed, leaving his daughters with only the $2 million in life insurance funds instead of the larger amount they could have had from the previous variable universal life policies. The daughters filed suit and the trial court ruled in favor of the bank.

On appeal, the Court of Appeals reviewed the case under the Indiana Prudent Investor Act, which cautions that compliance with the act's rules should be made in light of the facts and circumstances at the time a trustee made a decision or action, not by hindsight. Now it is known that the stock market would rebound and the variable universal life policies would have been worth more than the John Hancock policy, wrote Chief Judge John Baker, and the appellate court can understand why the daughters wish that KeyBank had made a different decision. However, KeyBank acted in good faith in making the switch and had an independent outside insurance consultant review all the policies before making the decision.

The Court of Appeals also affirmed that under the Prudent Investor Act, KeyBank didn't improperly delegate certain decision-making functions to Roberson and Stuart, the bank didn't violate the PIA by disregarding the insurance consultant's recommendations regarding the variable universal life policies, and that the bank didn't violate the PIA for failing to investigate alternatives for other life insurance policies.

While the appellate court found KeyBank's decision-making process and communication with Stuart's daughters wasn't perfect, the trial court didn't err in finding it was sufficient.

"Although it is tempting to analyze these cases with the benefit of hindsight, we are not permitted to do so, nor should we. KeyBank chose between two viable, prudent options, and given the facts and circumstances it was faced with at that time, we do not find that its actions were imprudent, a breach of any relevant duties, or a cause of any damages to the (daughters)," wrote the chief judge.

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  1. What a fine article, thank you! I can testify firsthand and by detailed legal reports (at end of this note) as to the dire consequences of rejecting this truth from the fine article above: "The inclusion and expansion of this right [to jury] in Indiana’s Constitution is a clear reflection of our state’s intention to emphasize the importance of every Hoosier’s right to make their case in front of a jury of their peers." Over $20? Every Hoosier? Well then how about when your very vocation is on the line? How about instead of a jury of peers, one faces a bevy of political appointees, mini-czars, who care less about due process of the law than the real czars did? Instead of trial by jury, trial by ideological ordeal run by Orwellian agents? Well that is built into more than a few administrative law committees of the Ind S.Ct., and it is now being weaponized, as is revealed in articles posted at this ezine, to root out post moderns heresies like refusal to stand and pledge allegiance to all things politically correct. My career was burned at the stake for not so saluting, but I think I was just one of the early logs. Due, at least in part, to the removal of the jury from bar admission and bar discipline cases, many more fires will soon be lit. Perhaps one awaits you, dear heretic? Oh, at that Ind. article 12 plank about a remedy at law for every damage done ... ah, well, the founders evidently meant only for those damages done not by the government itself, rabid statists that they were. (Yes, that was sarcasm.) My written reports available here: Denied petition for cert (this time around): http://tinyurl.com/zdmawmw Denied petition for cert (from the 2009 denial and five year banishment): http://tinyurl.com/zcypybh Related, not written by me: Amicus brief: http://tinyurl.com/hvh7qgp

  2. Justice has finally been served. So glad that Dr. Ley can finally sleep peacefully at night knowing the truth has finally come to the surface.

  3. While this right is guaranteed by our Constitution, it has in recent years been hampered by insurance companies, i.e.; the practice of the plaintiff's own insurance company intervening in an action and filing a lien against any proceeds paid to their insured. In essence, causing an additional financial hurdle for a plaintiff to overcome at trial in terms of overall award. In a very real sense an injured party in exercise of their right to trial by jury may be the only party in a cause that would end up with zero compensation.

  4. Why in the world would someone need a person to correct a transcript when a realtime court reporter could provide them with a transcript (rough draft) immediately?

  5. This article proved very enlightening. Right ahead of sitting the LSAT for the first time, I felt a sense of relief that a score of 141 was admitted to an Indiana Law School and did well under unique circumstances. While my GPA is currently 3.91 I fear standardized testing and hope that I too will get a good enough grade for acceptance here at home. Thanks so much for this informative post.

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