Opinion ID: 197524
Heading Depth: 4
Heading Rank: 2

Heading: Keyman Life Insurance Policy

Text: 25 Mathias proposed to testify that the keyman insurance policy Anson owned on the life of a former director was worth $1.2 million. The valuation was derived from a Fleet document assessing Fleet's collateral position, in which the $1.2 million figure reflected the net proceeds payable to the beneficiary (i.e., Fleet) at the death of the insured. 6 26 The district court correctly concluded that the Mathias appraisal was patently inflated. As previously noted, the only material consideration, for present purposes, was the policy's value at the time Fleet foreclosed in October 1993, when the insured had a life expectancy of seven years and the cash value was only $62,000. At the very most, therefore, an arm's-length purchaser would have paid an amount equal to $1.2 million, discounted to present value. 27 Indeed, pressed by the district court, Mathias conceded that he had not calculated present value, but then estimated it at somewhere in the vicinity of $800,000. Mathias likewise conceded that he had not taken into account the annual premium ($75,000) costs for maintaining the policy seven more years, totaling $525,000. Thus, Mathias effectively conceded that the policy might fetch only $275,000, some $925,000 below the proffered valuation. Absent any suggestion that accepted accounting principles would countenance such deficiencies, the district court acted well within its discretion in excluding the Mathias valuation. 28 As there has been no demonstration that the appraisal rest[ed] on a reliable [methodological] foundation, Bogosian, 104 F.3d at 477, 479, with respect to the net operating losses and the keyman insurance policy, the most optimistic valuation to which Mathias supportably might have testified was $10,271,500, see supra Section II.A.2--$356,500 less than the total Anson indebtedness to Fleet--even assuming all other property values ascribed by Mathias were reasonably reliable, such as intangible assets (e.g., goodwill, trade reputation, going-concern value, etc.) totaling $1,998,500, see Rev. Rul. 68-609, 1968-2 C.B. 327; the $2,648,000 valuation given Anson's inventory; and the $2,941,000 real estate valuation. 29