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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. I just wanted to point out that Congressman Jim Sensenbrenner, Senator Feinstein, former Senate majority leader Bill Frist, and former attorney general John Ashcroft are responsible for this rubbish. We need to keep a eye on these corrupt, arrogant, and incompetent fools.

  2. Well I guess our politicians have decided to give these idiot federal prosecutors unlimited power. Now if I guy bounces a fifty-dollar check, the U.S. attorney can intentionally wait for twenty-five years or so and have the check swabbed for DNA and file charges. These power hungry federal prosecutors now have unlimited power to mess with people. we can thank Wisconsin's Jim Sensenbrenner and Diane Feinstein, John Achcroft and Bill Frist for this one. Way to go, idiots.

  3. I wonder if the USSR had electronic voting machines that changed the ballot after it was cast? Oh well, at least we have a free media serving as vicious watchdog and exposing all of the rot in the system! (Insert rimshot)

  4. Jose, you are assuming those in power do not wish to be totalitarian. My experience has convinced me otherwise. Constitutionalists are nearly as rare as hens teeth among the powerbrokers "managing" us for The Glorious State. Oh, and your point is dead on, el correcta mundo. Keep the Founders’ (1791 & 1851) vision alive, my friend, even if most all others, and especially the ruling junta, chase only power and money (i.e. mammon)

  5. Hypocrisy in high places, absolute immunity handed out like Halloween treats (it is the stuff of which tyranny is made) and the belief that government agents are above the constitutions and cannot be held responsible for mere citizen is killing, perhaps has killed, The Republic. And yet those same power drunk statists just reel on down the hallway toward bureaucratic fascism.

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