Court Opinion

ID: 2970520
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:15:17.480579+00
Date Added: 2024-06-11T11:36:13.463935
License: Public Domain

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
    8QLWHG1DWjO,QV&RY                       1R                       3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

      667)LWQHVV&RUS                                                        (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU
                                                                                           )LOH 1DPH DS

  EHFDPHFRPPRQSUDFWLFHWKHLQVXUDQFHLQGXVWU\PLJKW
  H[WUDFW FRHUFLYH DUUDQJHPHQWV IURP WKHLU LQVXUHGV              81,7('67$7(6&28572)$33($/6
  GHVWUR\LQJ WKH FRQFHSW RI OLDELOLW\ DQG OLWLJDWLRQ
  LQVXUDQFH                                                                             )257+(6,;7+&,5&8,7
                                                                                            BBBBBBBBBBBBBBBBB
6KRVKRQH)LUVW%DQN3GDWTXRWLQJ$PHULFD6WDWHV
,QV &R Y 5LGFR ,QF 5LGGOHV sHZHOU\ ,QF DQG .HQ %
%HUJHU &LY 1R &9' ':\R HPSKDVLV
DGGHG$VWKHDERYHTXRWHGHPRQVWUDWHVWKHUHVXOWUHDFKHG            81,7(' 1$7,21$/                  ;
E\WKHPDMRULW\RSLQLRQnDUHVXOWWKDWLVQRWUHTXLUHGXQGHU             ,1685$1&( &203$1<                
2KLRODZnRSHQVWKHGRRUWREDGSROLF\DQGIXWXUHFRHUFLYH                         3ODLQWLII$SSHOODQW 
SUDFWLFHVE\LQVXUDQFHFRPSDQLHV,G                                                                    1R
                                                                                                          
   2IFRXUVH2KLRFRXUWVGRHQIRUFHUHVHUYDWLRQVRIULJKWV                      Y                       !
                                                                                                          
DQGWKLVLVQRWWRVXJJHVWRWKHUZLVH6HHHJ7XUQHU                                             
1(GDW+RZHYHUWKHSRLQWKHUHLVVLPSO\WKDWWKH              667 ),71(66 &25325$7,21          
LQVXUHUFDQQRWSXUVXHUHFRXSPHQWRIULJKWVZKHQWKHLQVXUHG                      'HIHQGDQW$SSHOOHH 
GLGQRWSUHVHUYHWKHULJKWWRGRVRLQWKHXQGHUO\LQJLQVXUDQFH                                           
FRQWUDFW,QIDFWWKHLQVXUHULQWKHLQVWDQWFDVHZDVVRXQVXUH                                        1
RILWVOHJDOULJKWVDQGREOLJDWLRQVWKDWLWVRXJKWFODULILFDWLRQRI
LWVGXWLHVE\ILOLQJDGHFODUDWRU\MXGJPHQWDFWLRQ                          $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
                                                                            IRUWKH6RXWKHUQ'LVWULFWRI2KLRDW&LQFLQQDWL
  %HFDXVHWKHXQGHUO\LQJLQVXUDQFHFRQWUDFWLQYROYHGLQWKLV               1Rn+HUPDQs:HEHU'LVWULFWsXGJH
FDVHGLGQRWSURYLGHIRUUHFRXSPHQWRIDWWRUQH\IHHVDQGQR
LPSOLHGLQIDFW FRQWUDFW ZDV IRUPHG E\ ZD\ RI 8QLWHG                                 $UJXHG0DUFK
1DWLRQDOjV XQLODWHUDO UHVHUYDWLRQ RI ULJKWV OHWWHU 8QLWHG
1DWLRQDOLVQRWHQWLWOHGWRUHFRXSWKHFRVWVLWSDLGLQGHIHQGLQJ                   'HFLGHGDQG)LOHG1RYHPEHU
667  0RUHRYHU VWURQJ SROLF\ FRQVLGHUDWLRQV VXSSRUW RXU
UHIXVLQJ WR H[SDQG 2KLR LQVXUDQFH ODZ WR ILQG ULJKWV WR           %HIRUH%$7&+(/'(5DQG&/$<&LUFXLWsXGJHV
UHFRXSPHQWRIDWWRUQH\IHHVZKHUHVXFKULJKWVDWDPLQLPXP                            &$55'LVWULFWsXGJH
GR QRW HYHQ H[LVW LQ WKH LQVXUDQFH FRQWUDFW  %HFDXVH WKH
PDMRULW\ UHDFKHV WKH FRQWUDU\ FRQFOXVLRQ , UHVSHFWIXOO\
GLVVHQW

                                                                           
                                                                            7KH +RQRUDEOH sDPHV * &DUU 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU WKH
                                                                       1RUWKHUQ 'LVWULFW RI 2KLR VLWWLQJ E\ GHVLJQDWLRQ

                                                                                                          
     8QLWHG1DWjO,QV&RY                     1R      1R                          8QLWHG1DWjO,QV&RY        
      667)LWQHVV&RUS                                                                                       667)LWQHVV&RUS

                    BBBBBBBBBBBBBBBBB                               1DWLRQDOKDGDGXW\WRSD\WKRVHIHHVLQWKHILUVWSODFH&I
                                                                    0DWDJRUGD&RXQW\6:GDWKROGLQJWKDWWKHUHZDV
                         &2816(/                                    QR PHHWLQJ RI WKH PLQGV WR HVWDEOLVK DQ LPSOLHGLQIDFW
                                                                    FRQWUDFW ZKHUH WKH LQVXUHG KDG FRQVLVWHQWO\ FRQWHVWHG WKH
$5*8('sDPHV&KULVWLDQ1LHOVHQ1,(/6(1+$/(<	                  LQVXUHUjV SRVLWLRQ UHJDUGLQJ FRYHUDJH DQG LQVLVWHG WKDW WKH
$%%277 6DQ )UDQFLVFR &DOLIRUQLD IRU $SSHOODQW              LQVXUHUSD\XQGHUWKHSROLF\
/DZUHQFH5(OOHPDQ',16025(	6+2+/&LQFLQQDWL
2KLRIRU$SSHOOHH21%5,()sDPHV&KULVWLDQ1LHOVHQ               8QLWHG 1DWLRQDO FOHDUO\ KDG RWKHU RSWLRQV DYDLODEOH WR LW
1,(/6(1+$/(<	$%%2776DQ)UDQFLVFR&DOLIRUQLD                 ZKHQ667UHTXHVWHGWKDW8QLWHG1DWLRQDOSD\LWVDWWRUQH\IHHV
IRU $SSHOODQW  *HUDOG : 6LPPRQV 7+203621 +,1(            LI 8QLWHG 1DWLRQDO EHOLHYHG WKDW LW KDG QR GXW\ WR GHIHQG
&LQFLQQDWL2KLRIRU$SSHOOHH                                     DJDLQVW WKH SDWHQW DFWLRQ  )RU H[DPSOH 8QLWHG 1DWLRQDO
                                                                    VLPSO\FRXOGKDYHUHIXVHGWRGHIHQG667+RZHYHULQLWV
   &$55'sGHOLYHUHGWKHRSLQLRQRIWKHFRXUWLQZKLFK        HIIRUWV WR SURWHFW LWVHOI IURP D SRWHQWLDO EUHDFK RI FRQWUDFW
%$7&+(/'(5sMRLQHG&/$<sSSGHOLYHUHG            FODLPLWFKRVHQRWWRGRVR8QLWHG1DWLRQDOVKRXOGQRWQRZ
DVHSDUDWHGLVVHQWLQJRSLQLRQ                                      EHDOORZHGWRIRUFHDGXW\RQWR667WKDWWKHSDUWLHVGLGQRW
                                                                    EDUJDLQIRULQWKHXQGHUO\LQJLQVXUDQFHFRQWUDFW$VRQHFRXUW
                    BBBBBBBBBBBBBBBBB                               ZUHVWOLQJZLWKWKLVLVVXHDSWO\H[SODLQHG
                        23,1,21                                       7KHTXHVWLRQDVWRZKHWKHUWKHUHLVDGXW\WRGHIHQGDQ
                    BBBBBBBBBBBBBBBBB                                 LQVXUHGLVDGLIILFXOWRQHEXWEHFDXVHWKDWLVWKHEXVLQHVV
                                                                      RIDQLQVXUDQFHFDUULHULWLVWKHLQVXUDQFHFDUULHUjVGXW\
  s$0(6 * &$55 'LVWULFW sXGJH 3ODLQWLIIDSSHOODQW             WRPDNHWKDWGHFLVLRQ,IDQLQVXUDQFHFDUULHUEHOLHYHVWKDW
8QLWHG 1DWLRQDO ,QVXUDQFH &RPSDQ\ m8QLWHG 1DWLRQDOl            QR FRYHUDJH H[LVWV WKHQ LW VKRXOG GHQ\ LWV LQVXUHG D
DSSHDOV WKH GHQLDO RI LWV PRWLRQ EURXJKW SXUVXDQW WR      GHIHQVHDWWKHEHJLQQLQJLQVWHDGRIGHIHQGLQJDQGODWHU
86&   IRU GHIHQVH FRVWV SDLG WR LWV LQVXUHG        DWWHPSWLQJ WR UHFRXS IURP LWV LQVXUHG WKH FRVWV RI
GHIHQGDQWDSSHOOHH667)LWQHVV&RUSRUDWLRQm667l)RUWKH           GHIHQGLQJ WKH XQGHUO\LQJ DFWLRQ :KHUH WKH LQVXUDQFH
IROORZLQJUHDVRQVZH5(9(56(WKHMXGJPHQWRIWKHGLVWULFW            FDUULHU LV XQFHUWDLQ RYHU LQVXUDQFH FRYHUDJH IRU WKH
FRXUWDQG5(0$1'IRUIXUWKHUSURFHHGLQJVLQDFFRUGDQFH                XQGHUO\LQJFODLPWKHSURSHUFRXUVHLVIRUWKHLQVXUDQFH
ZLWKWKLVGHFLVLRQ                                                   FDUULHU WR WHQGHU D GHIHQVH DQG VHHN D GHFODUDWRU\
                      %$&.*5281'                                      MXGJPHQWDVWRFRYHUDJHXQGHUWKHSROLF\+RZHYHUWR
                                                                      DOORZ WKH LQVXUHU WR IRUFH WKH LQVXUHG LQWR FKRRVLQJ
  667SXUFKDVHGOLDELOLW\LQVXUDQFHIURP8QLWHG1DWLRQDO             EHWZHHQVHHNLQJDGHIHQVHXQGHUWKHSROLF\DQGUXQWKH
ZKLFKDJUHHGWRSURYLGHGHIHQVHFRVWVDQGLQGHPQLI\667IRU           SRWHQWLDO ULVN RI KDYLQJ WR SD\ IRU WKLV GHIHQVH LI LW LV
DQ\OLDELOLW\s$DWo:KHQ667ZDVVXHGIRUSDWHQW            VXEVHTXHQWO\GHWHUPLQHGWKDWQRGXW\WRGHIHQGH[LVWHG
DQG WUDGHPDUN LQIULQJHPHQW 8QLWHG 1DWLRQDO SDLG 667jV          RUJLYLQJXSDOOPHULWRULRXVFODLPVWKDWDGXW\WRGHIHQG
GHIHQVH FRVWV 3ULRU WR SURYLGLQJ GHIHQVH FRVWV 8QLWHG        H[LVWV SODFHV WKH LQVXUHG LQ WKH SRVLWLRQ RI PDNLQJ D
1DWLRQDOSURYLGHGDOHWWHUWR667VWDWLQJm8QLWHG1DWLRQDO           +REVRQjVFKRLFH)XUWKHUPRUHHQGRUVLQJVXFKFRQGXFW
UHVHUYHVWKHULJKWWRUHFRXSIURP667DQ\GHIHQVHFRVWVDQG           LV WDQWDPRXQW WR DOORZLQJ WKH LQVXUHU WR H[WUDFW D
IHHVWREHSDLGVXEMHFWWRWKLVUHVHUYDWLRQOHWWHURQWKHEDVLV       XQLODWHUDODPHQGPHQWWRWKHLQVXUDQFHFRQWUDFW,IWKLV
    8QLWHG1DWjO,QV&RY                       1R       1R                       8QLWHG1DWjO,QV&RY       
      667)LWQHVV&RUS                                                                                       667)LWQHVV&RUS

DFFHSWDQFHl%HUMLDQY2KLR%HOO7HO&R1(G         WKDWQRGXW\WRGHIHQGQRZH[LVWVRUKDVH[LVWHGZLWKUHJDUG
  2KLR  VHH DOVR 0DWDJRUGD &RXQW\             WRWKHWHQGHUHGVXLWls$DW
6:GDWmDVDJHQHUDOUXOHµVLOHQFHDQGLQDFWLRQZLOO
QRWEHFRQVWUXHGDVDQDVVHQWWRDQRIIHUjlTXRWLQJ          8QLWHG1DWLRQDOSDLGWR667jVFRXQVHOLQWKH
:LOOLVWRQ RQ &RQWUDFWV   WK HG   0RUHRYHU     SDWHQW DQG WUDGHPDUN LQIULQJHPHQW VXLW 667 DFFHSWHG
ZKLOHWKHUHDUHH[FHSWLRQVWRWKLVJHQHUDOUXOHVWURQJSROLF\         SD\PHQW RI LWV GHIHQVH FRVWV ZLWKRXW REMHFWLQJ WR 8QLWHG
FRQVLGHUDWLRQV PLOLWDWH DJDLQVW DOORZLQJ DQ LQVXUHU WR           1DWLRQDOjVUHVHUYDWLRQRIULJKWV
XQLODWHUDOO\GHFODUHWKDWLWFDQUHFRXSWKHFRVWVRIGHIHQGLQJ
DQ LQVXUHG ZKHUH LW LV ODWHU GHWHUPLQHG WKDW WKH XQGHUO\LQJ     8QLWHG1DWLRQDOWKHUHDIWHUVXHG667VHHNLQJDGHFODUDWRU\
LQVXUDQFHSROLF\GLGQRWFRYHUWKHFODLPVDVVHUWHGDJDLQVW           MXGJPHQW WKDW 8QLWHG 1DWLRQDO RZHG QR GXW\ WR GHIHQG RU
WKHLQVXUHG$VWKH7KLUG&LUFXLWKDVH[SODLQHG                      LQGHPQLI\ 667 LQ WKH XQGHUO\LQJ LQIULQJHPHQW DFWLRQ 7KH
                                                                       GLVWULFWFRXUWJUDQWHGGHFODUDWRU\MXGJPHQWLQIDYRURI8QLWHG
  $UXOHSHUPLWWLQJVXFKUHFRYHU\ZRXOGEHLQFRQVLVWHQW                1DWLRQDODQGWKH6L[WK&LUFXLWDIILUPHG
  ZLWKWKHOHJDOSULQFLSOHVWKDWLQGXFHDQLQVXUHUjVRIIHUWR
  GHIHQG XQGHU UHVHUYDWLRQ RI ULJKWV )DFHG ZLWK                    8QLWHG1DWLRQDOPRYHGXQGHU86&IRUFRVWV
  XQFHUWDLQW\DVWRLWVGXW\WRLQGHPQLI\DQLQVXUHURIIHUV           SDLG XQGHU UHVHUYDWLRQ  DQG SUHMXGJPHQW
  DGHIHQVHXQGHUUHVHUYDWLRQRIULJKWVWRDYRLGWKHULVNV             LQWHUHVW  7KH GLVWULFW FRXUW GHQLHG WKLV PRWLRQ
  WKDWDQLQHSWRUODFNDGDLVLFDOGHIHQVHRIWKHXQGHUO\LQJ             ILQGLQJ WKDW 8QLWHG 1DWLRQDO ZDV D YROXQWHHU ZKHQ LW SDLG
  DFWLRQPD\H[SRVHLWWRLILWWXUQVRXWWKHUHLVDGXW\WR           667jVGHIHQVHFRVWVDQGWKHUHIRUHFRXOGQRWUHFRYHUWKRVH
  LQGHPQLI\  $W WKH VDPH WLPH WKH LQVXUHU ZLVKHV WR         FRVWVs$DW
  SUHVHUYHLWVULJKWWRFRQWHVWWKHGXW\WRLQGHPQLI\LIWKH
  GHIHQVHLVXQVXFFHVVIXO7KXVVXFKDQRIIHULVPDGHDW                               67$1'$5'2)5(9,(:
  OHDVW DV PXFK IRU WKH LQVXUHUjV RZQ EHQHILW DV IRU WKH
  LQVXUHGjV,IWKHLQVXUHUFRXOGUHFRYHUGHIHQVHFRVWVWKH              %HFDXVH WKH GLVWULFW FRXUW GHFLGHG TXHVWLRQV RI ODZ ZH
  LQVXUHGZRXOGEHUHTXLUHGWRSD\IRUWKHLQVXUHUjVDFWLRQ            UHYLHZLWVMXGJPHQWGHQRYR8QLWHG6WDWHVY$O=XEDLG\
  LQSURWHFWLQJLWVHOIDJDLQVWWKHHVWRSSHOWRGHQ\FRYHUDJH           )GWK&LUm:HUHYLHZTXHVWLRQVRIODZ
  WKDWZRXOGEHLPSOLHGLILWXQGHUWRRNWKHGHIHQVHZLWKRXW            DQGVWDWXWRU\LQWHUSUHWDWLRQGHQRYRlFLWLQJ1L[RQY.HQW
  UHVHUYDWLRQ                                                        &R)GWK&LUHQEDQF0XPIRUG
                                                                       Y=LHED)GWK&LUVHHDOVR3UR(FR
7HUUD 1RYD ,QV &R /WG Y  %DU ,QF  )G    ,QFY%RDUGRI&RPPjUVRIsD\&RXQW\,QGLDQD)G
G&LUFLWDWLRQVRPLWWHG                             WK&LU,QUHYLHZLQJDGLVWULFWFRXUWjVGHQLDO
                                                                       RIUHOLHILQDFDVHEURXJKWSXUVXDQWWR86&WKH
   )XUWKHU DOWKRXJK 667 DFFHSWHG WKH IXQGV LQ WKH LQVWDQW     FRXUWVWDWHGm>:@LWKWKHGLVWULFWFRXUWGHFLGLQJWKHFDVHRQ
FDVHLWDOVRYLJRURXVO\GHIHQGHGLWVSRVLWLRQLQWKHGLVWULFW         SXUHTXHVWLRQVRIODZDQGLQOLJKWRIRXUFLUFXLWjVGHFLVLRQWR
FRXUWDQGLQWKLV&RXUWWKDW8QLWHG1DWLRQDOLQGHHGKDGDGXW\         JXDUGMHDORXVO\WKHGLVFUHWLRQDIIRUGHGXQGHUWKH'HFODUDWRU\
WRSD\667jVOHJDOIHHV8QLWHG1DWLRQDOFDQQRWFODLPWKDW            sXGJPHQW$FWZHZLOOUHYLHZWKHGLVWULFWFRXUWjVGHQLDORI
WKHUHWUXO\ZDVDPHHWLQJRIWKHPLQGVRQWKHLVVXHRIZKHWKHU         3UR(FRjVPRWLRQGHQRYRl
667LQWHQGHGWRUHLPEXUVH8QLWHG1DWLRQDOIRUSD\LQJ667jV
DWWRUQH\ IHHV ZKHQ 667 YLJRURXVO\ FRQWHQGHG WKDW 8QLWHG
      8QLWHG1DWjO,QV&RY                      1R     1R                        8QLWHG1DWjO,QV&RY      
       667)LWQHVV&RUS                                                                                     667)LWQHVV&RUS

                          ',6&866,21                                 UHVHUYDWLRQ RI ULJKWV OHWWHU IRUPHG D QHZ FRQWUDFW  7KH
                                                                     PDMRULW\RSLQLRQ HPEUDFHV8QLWHG1DWLRQDOjVXQSHUVXDVLYH
               ,,QVXUHUjV5LJKWWR5HFRXSPHQW                      DUJXPHQWWKDWDQHQWLUHO\QHZFRQWUDFWZDVHQWHUHGLQWREDVHG
                                                                     XSRQ QRWKLQJ PRUH WKDQ WKH UHVHUYDWLRQ RI ULJKWV OHWWHU
  8QLWHG1DWLRQDOFRQWHQGVWKDWEHFDXVHLWKDGQRGXW\WR           XQLODWHUDOO\ JHQHUDWHG E\ 8QLWHG 1DWLRQDO  6SHFLILFDOO\
GHIHQG 667 LQ WKH XQGHUO\LQJ LQIULQJHPHQW DFWLRQ DQG LW      8QLWHG 1DWLRQDO FRQWHQGV WKDW WKH OHWWHU FRQVWLWXWHG DQ
UHVHUYHGLWVULJKWWRUHFRXSGHIHQVHFRVWVLWLVHQWLWOHGUHFRYHU   LPSOLHGLQIDFW DJUHHPHQW VHSDUDWH DQG DSDUW IURP WKH
WKRVHFRVWV8QLWHG1DWLRQDOIXUWKHUDUJXHVWKDW667DFFHSWHG        XQGHUO\LQJFRQWUDFW+RZHYHUVHWWOHGODZDQGFOHDUSROLF\
WKHWHUPVRILWVUHVHUYDWLRQRIULJKWVOHWWHUZKHQLWDFFHSWHG       FRQVLGHUDWLRQVZDUUDQWWKDWWKLVDUJXPHQWEHUHMHFWHG
GHIHQVHFRVWVZLWKRXWREMHFWLQJWRWKHUHVHUYDWLRQRIULJKWV
WKHUHE\JLYLQJULVHWRDQLPSOLHGFRQWUDFWIRUUHLPEXUVHPHQW          m$ FRQWUDFW PD\ HLWKHU EH H[SUHVV RU LPSOLHGLQIDFWl
7KHUHEHLQJQR2KLRGHFLVLRQVRQWKLVLVVXH8QLWHG1DWLRQDO         &DPSDQHOOD Y &RPPHUFH ([FK %DQN  1(G 
XUJHVXVWRORRNDWRSLQLRQVIURPRWKHUMXULVGLFWLRQVDOORZLQJ       2KLR&W$SSFLWDWLRQRPLWWHG7KHGLIIHUHQFH
LQVXUHUVWRUHVHUYHDULJKWWRUHFRXSPHQWDQG2KLRFDVHVRQ          EHWZHHQ WKH WZR LV WKH IRUP RI SURRI XVHG WR VKRZ WKHLU
LPSOLHGFRQWUDFWV                                                   H[LVWHQFH([SUHVVFRQWUDFWVDUHSURYHGE\ZD\RImH[SUHVV
                                                                     ZULWWHQDQGRUDOVWDWHPHQWVlPDQLIHVWLQJRIIHUDQGDFFHSWDQFH
  667FRQWHQGVWKDWEHFDXVHLWQHYHUH[SUHVVO\DFFHSWHGWKH         RI DQ DJUHHPHQW DQG D PHHWLQJ RI WKH PLQGV EHWZHHQ RU
UHVHUYDWLRQ RI ULJKWV WKH UHVHUYDWLRQ LV LQHIIHFWLYH 667    DPRQJ WKH SDUWLHV  ,G  2Q WKH RWKHU KDQG m>D@ FRQWUDFW
DUJXHVm$QLQVXUHUjVRIIHUWRGHIHQGLVPDGHSULPDULO\IRULWV      LPSOLHG LQ IDFW PD\ EH SURYHG E\ VKRZLQJ WKDW WKH
RZQ EHQHILW DQG WKH LQVXUHG VKRXOG QRW EH IRUFHG WR        FLUFXPVWDQFHVVXUURXQGLQJWKHSDUWLHVjWUDQVDFWLRQVPDNHLW
UHLPEXUVHFRVWVWKDWWKHLQVXUHUH[SHQGVIRULWVRZQEHQHILWl       UHDVRQDEO\ FHUWDLQ WKDW DQ DJUHHPHQW ZDV LQWHQGHGl  6HH
$SSHOOHHjV)LQDO%UDW                                           /XFDV Y &RVWDQWLQL  1(G   2KLR 
                                                                     FLWDWLRQRPLWWHGVHHDOVR&DPSDQHOOD1(GDW
  7KHGLVWULFWFRXUWGLGQRWDGGUHVVWKLVDUJXPHQWEHFDXVHLW        m,Q LPSOLHGLQIDFW FRQWUDFWV WKH SDUWLHVj PHHWLQJ RI WKH
GHFLGHG8QLWHG1DWLRQDOjVPRWLRQVROHO\RQWKHEDVLV          PLQGVLVVKRZQE\WKHVXUURXQGLQJFLUFXPVWDQFHVLQFOXGLQJ
WKDW8QLWHG1DWLRQDOZDVDmYROXQWHHUlZKHQLWGHIHQGHGWKH          WKHSDUWLHVjFRQGXFWDQGGHFODUDWLRQVPDNLQJLWUHDVRQDEO\
XQGHUO\LQJSDWHQWVXLW                                              LQIHUDEOH WKDW WKH SDUWLHV LQWHQGHG WR FUHDWH ELQGLQJ DQG
                                                                     FHUWDLQREOLJDWLRQVl
   %HFDXVHWKH2KLR6XSUHPH&RXUWKDVQRWGHWHUPLQHGWKH
LVVXHEHIRUHXVZH                                                     8QLWHG1DWLRQDOFRQWHQGVDQGWKHPDMRULW\RSLQLRQDJUHHV
                                                                     WKDWWKHFLUFXPVWDQFHVVXUURXQGLQJWKHXQLODWHUDOUHVHUYDWLRQ
    PXVW DVFHUWDLQ IURP DOO DYDLODEOH GDWD LQFOXGLQJ WKH     RIULJKWVOHWWHUGHPRQVWUDWHWKDWWKHSDUWLHVLQWHQGHGWRHQWHU
    GHFLVLRQDOODZRIWKHVWDWHjVORZHUFRXUWVUHVWDWHPHQWVRI      LQWR D ELQGLQJ DJUHHPHQW  6SHFLILFDOO\ 8QLWHG 1DWLRQDO
    ODZODZUHYLHZFRPPHQWDULHVDQGGHFLVLRQVIURPRWKHU           FRQWHQGVWKDWDIWHULWVHQWWKHUHVHUYDWLRQRIULJKWVOHWWHUWR
    MXULVGLFWLRQV RQ WKH mPDMRULW\l UXOH ZKDW WKH VWDWHjV    667WKHODWWHUGLGQRWREMHFWWRWKHWHUPVH[SOLFDWHGLQWKH
    KLJKHVWFRXUWZRXOGGHFLGHLIIDFHGZLWKWKHLVVXH             OHWWHUDQGDFFHSWHG8QLWHG1DWLRQDOjVSD\PHQWRIWKHGHIHQVH
*UDQWKDP	0DQQ,QFY$PHULFDQ6DIHW\3URGV,QF           FRVWV  8QLWHG 1DWLRQDO WKHUHIRUH DWWHPSWV WR XVH 667jV
)GWK&LUFLWDWLRQVRPLWWHG                  VLOHQFHWRELQGLW+RZHYHUmLQWKHXVXDOVLWXDWLRQDQRIIHURU
                                                                     FDQQRW FDXVH WKH VLOHQFH RI WKH RIIHUHH WR FRQVWLWXWH DQ
       8QLWHG1DWjO,QV&RY                          1R        1R                        8QLWHG1DWjO,QV&RY       
         667)LWQHVV&RUS                                                                                            667)LWQHVV&RUS

   8QLWHG1DWLRQDOFRQWHQGVKRZHYHU WKDWWKLVQRYHOULJKW                  ,QDFFRUGDQFHZLWKWKLVGLUHFWLYHZHH[DPLQHGHFLVLRQVDQG
GHULYHV IURP LWV XQLODWHUDO UHVHUYDWLRQ RI ULJKWV OHWWHU             UDWLRQDOHV IURP RWKHU MXULVGLFWLRQV WKDW KDYH GHFLGHG WKLV
'HVSLWHWKHPDMRULW\jVFKDUDFWHUL]DWLRQWKDWFRXUWVXQLYHUVDOO\               VSHFLILFLVVXHJHQHUDO2KLRODZDQGSROLF\FRQVLGHUDWLRQVIRU
DOORZUHFRXSPHQWRIGHIHQVHFRVWVLQUHVSRQVHWRUHVHUYDWLRQ                  JXLGDQFHLQGHWHUPLQLQJKRZWKH2KLR6XSUHPH&RXUWZRXOG
RIULJKWVOHWWHUVXQGHUFLUFXPVWDQFHVVLPLODUWRWKRVHSUHVHQW                OLNHO\GHFLGHWKLVLVVXH
LQ WKH LQVWDQW FDVH LQ DFWXDOLW\ m>W@KHUH LV D GLIIHUHQFH RI
RSLQLRQ DV WR ZKHWKHU DQ LQVXUHU PD\ UHVHUYH WKH ULJKW WR                      $'HFLVLRQVIURP2WKHUsXULVGLFWLRQV
UHLPEXUVHPHQWRIGHIHQVHFRVWV>ZLWKDXQLODWHUDOUHVHUYDWLRQ
RIULJKWVOHWWHU@8QGHURQHYLHZDQLQVXUHUKDVQRULJKWWR                  8QLWHG1DWLRQDOFRQWHQGVWKLVFRXUWVKRXOGDQGWKH2KLR
SD\PHQWIRUVXFKFRVWVXQGHUDSROLF\DQGWKHFUHDWLRQ RI                   6XSUHPH &RXUW ZRXOG IROORZ GHFLVLRQV IURP RWKHU
VXFK D ULJKW >E\ ZD\ RI D  XQLODWHUDO UHVHUYDWLRQ RI ULJKWV        MXULVGLFWLRQV WKDW DOORZ DQ LQVXUHU WR UHFRYHU GHIHQVH FRVWV
OHWWHU@DPRXQW>V@WRDSURWDQWRVXSHUVHVVLRQRIWKHSROLF\             ZKHQWKHLQVXUHUKDGQRGXW\WRGHIHQG
ZLWKRXWVHSDUDWHDJUHHPHQWDQGVHSDUDWHFRQVLGHUDWLRQl
*HRUJHs&RXFKRQ,QVXUDQFHDWGHG                     ,Q&RORQ\,QVXUDQFH&RY*	(7LUHV	6HUYLFH,QF
IRRWQRWHDQGFLWDWLRQVRPLWWHG                                      6R G  )OD &W $SS  WKH FRXUW GHFLGHG
                                                                              ZKHWKHU DQ LQVXUHU FRXOG EH UHLPEXUVHG IRU GHIHQVH FRVWV
   )XUWKHURQHRIWKHPRVWUHFHQWFDVHVGLVFXVVLQJWKLVLVVXH                ZKHQ WKH LQVXUHU GLG QRW KDYH D GXW\ WR GHIHQG $IWHU
KDVH[SUHVVO\KHOGWKDWmDXQLODWHUDOUHVHUYDWLRQRIULJKWVOHWWHU            UHYLHZLQJFDVHVIURPRWKHUMXULVGLFWLRQVWKHFRXUWGHWHUPLQHG
FDQQRWFUHDWHULJKWVQRWFRQWDLQHGLQWKHLQVXUDQFHSROLF\l                  WKDWWKHLQVXUHUZDVHQWLWOHGWRUHLPEXUVHPHQWRIWKRVHFRVWV
7H[DV$VVjQRI&RXQWLHV&RXQW\*RYjW5LVN0JPW3RROY                       ,GDW7KHFRXUWVWDWHGm+DYLQJDFFHSWHG&RORQ\jVRIIHU
0DWDJRUGD&RXQW\6:G7H[FLWLQJ                      RI D GHIHQVH ZLWK D UHVHUYDWLRQ RI WKH ULJKW WR VHHN
6KRVKRQH)LUVW%DQNY3DF(PSOR\HUV,QV&R3G                   UHLPEXUVHPHQW*	(RXJKWLQIDLUQHVVPDNH&RORQ\ZKROH
 :\R  UHMHFWLQJ WKH QRWLRQ WKDW WKH LQVXUHU             QRZ WKDW LW KDV EHHQ MXGLFLDOO\ GHWHUPLQHG WKDW QR GXW\ WR
FRXOG EDVH D ULJKW WR UHFRYHU GHIHQVH FRVWV RQ D OHWWHU DQG        GHIHQG HYHU H[LVWHGl ,G 7KH FRXUW DOVR ORRNHG WR EDVLF
VWDWLQJ mZH ZLOO QRW SHUPLW WKH FRQWUDFW WR EH DPHQGHG RU           FRQWUDFW ODZ DQG VWDWHG m$ SDUW\ FDQQRW DFFHSW WHQGHUHG
DOWHUHGE\DUHVHUYDWLRQRIULJKWVOHWWHUl$V667SRLQWVRXW             SHUIRUPDQFHZKLOHXQLODWHUDOO\DOWHULQJWKHPDWHULDOWHUPVRQ
LWQHYHUDVVHQWHGWRDQ\DWWHPSWRQ8QLWHG1DWLRQDOjVSDUWWR                 ZKLFKLWLVRIIHUHGl,GFLWLQJ5(67$7(0(17 6(&21' 2)
DPHQGLWVLQVXUDQFHSROLF\ZKLFKDVH[SODLQHGDERYHGLG                    &2175$&76    7KH FRXUW IRXQG WKDW ZKHQ WKH
QRWJUDQW8QLWHG1DWLRQDOWKHULJKWRIUHFRXSPHQWLWVHHNVWR                 LQVXUHGDFFHSWHGLWVGHIHQVHLWDOVRDFFHSWHGWKHWHUPVRIWKH
H[HUFLVH                                                                    RIIHULQFOXGLQJDSRWHQWLDOIRUUHLPEXUVHPHQW,G

  8QLWHG1DWLRQDOFRQWHQGVKRZHYHUWKDWLWGRHVQRWVHHNWR                   ,Q*ULQQHOO0XWXDO5HLQVXUDQFH&RY6KLHUN)6XSS
DPHQGWKHLQVXUDQFHFRQWUDFWEXWUDWKHUWKDWWKHXQLODWHUDO                  6',OOWKHFRXUWORRNHGWRRWKHUMXULVGLFWLRQVIRU
                                                                              JXLGDQFH LQ GHFLGLQJ ZKHWKHU DQ LQVXUHU ZDV HQWLWOHG WR
                                                                              UHLPEXUVHPHQWIRUGHIHQVHFRVWV7KHFRXUWVWDWHGWKDWWREH
                                                                             HQWLWOHG WR UHLPEXUVHPHQW DQ LQVXUHU PXVW  VSHFLILFDOO\
      7KH UHVHUYDWLRQ RI ULJKWV OHWWHU VWDWHG LQ SHUWLQHQW SDUW m8QLWHG
1DWLRQDO UHVHUYHV WKH ULJKW WR UHFRXS IURP 667 )LWQHVV DQ\ GHIHQVH FRVWV
                                                                              UHVHUYHWKHULJKWWRVHHNUHLPEXUVHPHQWIURPLWVLQVXUHGDQG
DQG IHHV WR EH SDLG VXEMHFW WR WKLV UHVHUYDWLRQ OHWWHU RQ WKH EDVLV WKDW QR
                                                                              SURYLGHWKHLQVXUHGZLWKDGHTXDWHQRWLFHRIWKLVSRWHQWLDO
GXW\ WR GHIHQG QRZ H[LVWV RU KDV H[LVWHG ZLWK UHJDUG WR WKH WHQGHUHG          UHLPEXUVHPHQW,GDW7KHFRXUWKHOG
>SDWHQW@ VXLWl s$ DW 
      8QLWHG1DWjO,QV&RY                        1R    1R                       8QLWHG1DWjO,QV&RY      
       667)LWQHVV&RUS                                                                                     667)LWQHVV&RUS

    6KLHUN DFFHSWHG WKH EHQHILW RI *ULQQHOOjV GHIHQVH          LQVXUHG VXHG FODLPLQJ WKDW WKH LQVXUHU ZDV SUHFOXGHG IURP
    )XUWKHU6KLHUNZDVIXOO\DSSULVHGWKDW*ULQQHOOUHVHUYHG         ZLWKGUDZLQJ D GHIHQVH XQGHU WKH GRFWULQHV RI ZDLYHU DQG
    LWVULJKWWRVHHNUHLPEXUVHPHQWLQWKHHYHQWWKDWLWZDV          HVWRSSHO,G7KHLQWHUPHGLDWHDSSHDOVFRXUWVWDWHGWKDWWKH
    ODWHUGHWHUPLQHGWKDWLWKDGQRGXW\WRGHIHQGKLP$VD          JHQHUDO  UXOH LV WKDW ZDLYHU DQG HVWRSSHO FDQQRW FUHDWH
    UHVXOWDOWKRXJKLWDSSHDUVWKDWWKH,OOLQRLVFRXUWVKDYHQRW     FRYHUDJH XQGHU D FRQWUDFW ZKHUH QRQH H[LVWHG  ,G  7KXV
    \HW KDG DQ RSSRUWXQLW\ WR DGGUHVV WKH SUHFLVH LVVXH RI   LQDVPXFKDVWKHLQVXUDQFHFRQWUDFWQHYHUFRYHUHGWKHFODLPV
    UHLPEXUVHPHQW WKH &RXUW SUHGLFWV WKDW LI WKH ,OOLQRLV     EURXJKWDJDLQVWWKHLQVXUHGLQWKHILUVWSODFHWKHVHHTXLWDEOH
    6XSUHPH &RXUW ZHUH IDFHG ZLWK WKLV SUHFLVH LVVXH LW      GRFWULQHVFRXOGQRWEHXVHGWRH[SDQGFRYHUDJHZKHUHQRQH
    ZRXOGDXWKRUL]HWKHUHOLHIVRXJKWE\*ULQQHOODQGRUGHU           H[LVWHG,G+RZHYHUWKHFRXUWUHFRJQL]HGWKDWWKHUHH[LVWV
    UHLPEXUVHPHQWRIWKHFRVWVRIGHIHQVH                            DQH[FHSWLRQWRWKLVJHQHUDOUXOH7KDWLVZKHUHDQLQVXUHU
                                                                      ZLWKRXW UHVHUYLQJ LWV ULJKWV XQGHU WKH SROLF\ SURYLGHV D
,GFLWDWLRQVRPLWWHG                                              GHIHQVHIRUVXFKDSHULRGDVWRSUHMXGLFHWKHLQVXUHGLIWKH
                                                                      GHIHQVH LV ZLWKGUDZQ RU ZKHUH WKH LQVXUHU RU LWV DJHQW
  ,Q5HVXUH,QFY&KHPLFDO'LVWULEXWRUV,QF)6XSS        PLVUHSUHVHQWV WKH H[WHQW RI WKH FRYHUDJH WKH LQVXUHG KDV
0'/DWKHLQVXUHUVRXJKWUHLPEXUVHPHQWRI              SXUFKDVHGWKHQWKHLQVXUHUPD\EHHVWRSSHGIURPGHQ\LQJ
GHIHQVH FRVWV IROORZLQJ D UHVHUYDWLRQ RI LWV ULJKW WR         FRYHUDJH,GDW
UHLPEXUVHPHQW 7KH FRXUW GHWHUPLQHG WKDW WKH LQVXUHG ZDV
HQWLWOHGWRUHLPEXUVHPHQWVWDWLQJ                                      ,Q WKH LQVWDQW FDVH 8QLWHG 1DWLRQDO FRQWHQGV WKDW LWV
                                                                      UHVHUYDWLRQRIULJKWVOHWWHUDOORZHGLWWRGRPXFKPRUHWKDQWR
    5HVXUHWLPHO\UHVHUYHGLWVULJKWVXQGHUWKHSROLF\7KDW          ZLWKGUDZIURPGHIHQGLQJ667)LWQHVV&RUSRUDWLRQm667l
    UHVHUYDWLRQ VSHFLILFDOO\ UHIHUUHG WR WKH SRVVLELOLW\ WKDW   RUWRGHQ\FRYHUDJHLQWKHSDWHQWDFWLRQDVVHUWHGDJDLQVW667
    5HVXUHPLJKWVHHNUHLPEXUVHPHQWIRUDQ\DQGDOOFRVWVRI          RQFHWKHGLVWULFWFRXUWDQGODWHUWKLV&RXUWGHWHUPLQHGWKDW
    GHIHQVH7KHUHLVQRWKLQJLQWKHUHFRUGWRVXJJHVW&',            VXFK FODLPV ZHUH QRW FRYHUHG XQGHU WKH SROLF\  8QLWHG
    REMHFWHG WR WKH UHVHUYDWLRQ $FFRUGLQJO\ 5HVXUH LV         1DWLRQDODOVRFODLPVWKDWLWKDVWKHULJKWWREHUHLPEXUVHGIRU
    HQWLWOHGWRUHLPEXUVHPHQWIRUDOOFRVWVRIGHIHQVH               WKH IXQGV LW H[SHQGHG GHIHQGLQJ 667 LQ WKH SDWHQW DFWLRQ
                                                                      +RZHYHU 8QLWHG 1DWLRQDO DGPLWV WKDW WKH XQGHUO\LQJ
,GDW                                                           LQVXUDQFHFRQWUDFWWKDW8QLWHG1DWLRQDOHQWHUHGLQWRZLWK667
                                                                      FRQWDLQV QR SURYLVLRQ DOORZLQJ LW WR UHFRXS DWWRUQH\ IHHV
   ,Q.QDSSY&RPPRQZHDOWK/DQG7LWOH,QVXUDQFH&R             ZKHUH8QLWHG1DWLRQDOHOHFWVWRDFFHSWWKHWHQGHURIDGHIHQVH
)6XSS'0LQQWKHLQVXUHULQDUHVHUYDWLRQ          DQGWKHQODWHUGLVFRYHUVWKDWLWKDGQRGXW\WRGRVR7KXVWKH
RIULJKWVOHWWHUVWDWHGLWZRXOGSD\GHIHQVHFRVWVLQDODQGWLWOH   ULJKW8QLWHG1DWLRQDOVHHNVWRDVVHUWLQWKLVFDVHWKHULJKWWR
GLVSXWHDQGUHVHUYHGWKHULJKWWRVHHNDWWRUQH\VjIHHVDQGFRVWV      UHLPEXUVHPHQWXQGHUWKHDSSOLFDEOHSROLF\RILQVXUDQFHLVQRW
ODWHU7KHFRXUWIRXQGWKDWDQLQVXUHUKDGDULJKWWRUHFRYHU         DULJKWWRZKLFKLWLVHQWLWOHGEDVHGRQQRQFRYHUDJHXQGHUWKH
GHIHQVHFRVWV,GDWm>:@KHUHDQLQVXUHUKDVSURSHUO\          SROLF\0RWRULVWV0XW1(GDW
PHWLWVGXW\DQGVXEVHTXHQWO\VXFFHVVIXOO\FKDOOHQJHVSROLF\
FRYHUDJHLWVKRXOGEHHQWLWOHGWRWKHIXOOEHQHILWRIVXFKD
FKDOOHQJHDQGEHUHLPEXUVHGIRUWKHEHQHILWVLWEHVWRZHGLQ
JRRGIDLWKWRLWVLQVXUHGl7KHFRXUWVWDWHGWKDWDQLQVXUHU
PXVW FOHDUO\ LQGLFDWH D UHVHUYDWLRQ RI LWV ULJKW WR VHHN
UHLPEXUVHPHQW ,G 7KH FRXUW FRQFOXGHG m8QGHU WKHVH
    8QLWHG1DWjO,QV&RY                         1R        1R                        8QLWHG1DWjO,QV&RY          
      667)LWQHVV&RUS                                                                                           667)LWQHVV&RUS

WKH DOOHJDWLRQV VWDWH D FODLP ZKLFK PD\ DUJXDEO\ RU               FLUFXPVWDQFHVWKH&RXUWILQGVLWDSSURSULDWHWRGHWHUPLQHWKDW
SRWHQWLDOO\IDOOZLWKLQSROLF\FRYHUDJHWKHLQVXUHUPXVWDVD           .QDSSjVVLOHQFHLQUHVSRQVHWR&RPPRQZHDOWKjVUHVHUYDWLRQV
UXOHDFFHSWWKHGHIHQVHl                                               RI ULJKWV OHWWHU DQG VXEVHTXHQW DFFHSWDQFH RI WKH GHIHQVH
                                                                          SURYLGHG E\ &RPPRQZHDOWK FRQVWLWXWHV DQ LPSOLHG
   ,IDQLQVXUHUUHIXVHVWRGHIHQGWKHLQVXUHGDQGDFRXUWODWHU         DJUHHPHQWWRWKHUHVHUYDWLRQRIULJKWVl,G
GHWHUPLQHVWKDWWKHFODLPVDVVHUWHGDJDLQVWWKHLQVXUHGZHUH
LQIDFWFRYHUHGXQGHUWKHLQVXUDQFHFRQWUDFWWKHLQVXUHGPD\                ,Q )LUVW )HGHUDO 6DYLQJV 	 /RDQ $VVRFLDWLRQ RI )DUJR
VXHWKHLQVXUHUIRUEUHDFKRIFRQWUDFW6HH&HQWHQQLDO,QV&R          1RUWK'DNRWDY7UDQVDPHULFD7LWOH,QVXUDQFH&R)
Y/LEHUW\0XW,QV&R1(G2KLRm,W            6XSS'&RORFLWDWLRQVRPLWWHGWKHFRXUW
LV VHWWOHG ODZ LQ WKLV VWDWH WKDW DQ LQVXUHU RZHV D GXW\ WR   VWDWHGm$QLQVXUDQFHFRPSDQ\PD\DOVRUHVHUYHLWVULJKWWR
H[HUFLVHJRRGIDLWKLQGHIHQGLQJDQGVHWWOLQJFODLPVDJDLQVW              GHQ\LWVGXW\WRGHIHQGDQGODWHUUHFRYHUIRUDQ\DWWRUQH\IHHV
WKHLQVXUHGDQGWKDWDEUHDFKRIWKDWGXW\ZLOOJLYHULVHWRD            SDLGl7KHFRXUWGHWHUPLQHGWKDWEHFDXVHWKHLQVXUHGGLGQRW
FDXVHRIDFWLRQE\WKHLQVXUHGlHPSKDVLVDGGHG,QWKH               REMHFWWRWKHLQVXUHUjVUHVHUYDWLRQRIULJKWVWKHLQVXUHUZDV
LQVWDQWFDVH8QLWHG1DWLRQDO,QVXUDQFH&RPSDQ\m8QLWHG                  HQWLWOHGWRUHLPEXUVHPHQW,G
1DWLRQDOl DSSDUHQWO\ KDG VRPH FRQFHUQV DERXW ZKHWKHU
FRYHUDJHH[LVWHGXQGHUWKHLQVXUDQFHFRQWUDFWLQDVPXFKDVLW                $ IHZ FDVHV KRZHYHU KDYH QRW DOORZHG UHFRXSPHQW RI
DJUHHGmLQWKHDEXQGDQFHRIFDXWLRQlWRGHIHQG667LQWKH                 GHIHQVHFRVWV6HH7HUUD1RYD,QV&RY%DU,QF
XQGHUO\LQJSDWHQWDFWLRQDVVHUWHGDJDLQVW667E\DWKLUGSDUW\           )GG&LU,QUH+DQVHO%5%DQNU
s$DW                                                            6'7H[6KRVKRQH)LUVW%DQNY3DFLILF(PSOR\HUV
                                                                          ,QV &R  3G  :\R  7KHVH FDVHV KRZHYHU
   :KHUH WKHUH LV GRXEW DERXW ZKHWKHU WKH SROLF\ FRYHUV           UHMHFWGHPDQGVIRUUHFRXSPHQWRQWKHEDVLVRIGHIHFWVLQWKH
FODLPVDVVHUWHGDJDLQVWDQLQVXUHGLWLVLQWKHLQVXUHUjVLQWHUHVW       UHVHUYDWLRQRIULJKWVUDWKHUWKDQRQWKHEDVLVWKDWUHFRXSPHQW
WRPRXQWDGHIHQVHIRUWKHLQVXUHGVXEMHFWWRDUHVHUYDWLRQRI           GHSHQGVRQDQH[SUHVVDJUHHPHQWE\WKHLQVXUHG
ULJKWV&LW\RI:LOORXJKE\+LOOV1(GDWQVHH
DOVR0RWRULVWV0XW,QV&RY7UDLQRU1(G                ,Q7HUUD1RYD)GDWDQGIRUH[DPSOHWKH
2KLRH[SODLQLQJWKDWDmXQLODWHUDOUHVHUYDWLRQRIULJKWV          LQVXUHUDSSRLQWHGFRXQVHOIRULWVLQVXUHGVXEMHFWWRDJHQHUDO
LVQRWLFHJLYHQE\WKHLQVXUHUWKDWLWZLOOGHIHQGWKHVXLWEXW          UHVHUYDWLRQRIULJKWVOHWWHU7KHFRXUWIRXQGWKHLQVXUHUZDV
UHVHUYHV DOO ULJKWV LW KDV EDVHG RQ QRQFRYHUDJH XQGHU WKH        QRWHQWLWOHGWRUHLPEXUVHPHQWIRUGHIHQVHFRVWVEHFDXVHRIWKH
SROLF\lHPSKDVLVDGGHG2WKHUZLVHDOWKRXJKDFRXUWPLJKW             JHQHUDOQDWXUHRIWKHUHVHUYDWLRQRIULJKWV,G,Q+DQVHO
ODWHUGHWHUPLQHWKDWWKHXQGHUO\LQJLQVXUDQFHFRQWUDFWGRHVQRW           %5DWWKHFRXUWVWDWHG
FRYHU D SDUWLFXODU FODLP ZKHUH WKH LQVXUHU XQGHUWDNHV WKH
GHIHQVHZLWKRXWUHVHUYLQJLWVULJKWVWRGHQ\HLWKHUFRYHUDJHRU             1RZKHUHGRHVHLWKHUOHWWHUPHQWLRQWKDW5HSXEOLFH[SHFWV
D GXW\ WR GHIHQG WKH LQVXUHG PD\ EH HVWRSSHG IURP ODWHU          WKHLQVXUHGVWRUHLPEXUVHLWIRUWKHFRVWVRIGHIHQVHRIWKH
GRLQJVR7XUQHU/LTXLGDWLQJ&RY6W3DXO6XUSOXV/LQHV                 VWDWH WRUW VXLW VKRXOG LW EH IRXQG WR KDYH QR GXW\ WR
,QV &R  1(G   2KLR &W $SS   ,Q          GHIHQGWKHLQVXUHGV(YHQDVVXPLQJ5HSXEOLFFRXOG
7XUQHU IRU LQVWDQFH DQ LQVXUHU GHIHQGHG DQ LQVXUHG LQ DQ         KDYHFUHDWHGWKLVULJKWWKURXJKDVXEVHTXHQWDJUHHPHQW
DFWLRQDQGWKHQDFRXSOHRIPRQWKVODWHULQIRUPHGWKHLQVXUHG               ZLWKWKHLQVXUHGVWKHVHOHWWHUVIDLOWRSXWWKHUHDGHURQ
WKDWLWZRXOGVRRQVWRSSURYLGLQJDGHIHQVH,GDW7KH              QRWLFHWKDWVXFKDULJKWLVFODLPHG
LQVXUHUGLGQRWUHVHUYHLWVULJKWVWRZLWKGUDZWKHGHIHQVH7KH
     8QLWHG1DWjO,QV&RY                      1R       1R                        8QLWHG1DWjO,QV&RY      
      667)LWQHVV&RUS                                                                                       667)LWQHVV&RUS

7KH FRXUW IRXQG WKDW EHFDXVH WKH LQVXUHU GLG QRW SURYLGH                            BBBBBBBBBBBBB
WLPHO\QRWLFHRIWKHUHVHUYDWLRQWKHLQVXUHUZDVQRWHQWLWOHG
WRUHLPEXUVHPHQW,G,Q6KRVKRQH)LUVW%DQN3GDW                                    ',66(17
WKHFRXUWVWDWHGmZHKROGWKDWWKHDOORFDWLRQDQGUHFRYHU\RI                                BBBBBBBBBBBBB
WKHFRVWVDWWULEXWDEOHWRWKHGHIHQVHRIFODLPVWKDWZHUHQRW
FRYHUHG E\ WKH SROLF\ RI LQVXUDQFH LV QRW SHUPLWWHG XQGHU      &/$<&LUFXLWsXGJHGLVVHQWLQJ'HVSLWHWKHODFNRIDQ\
:\RPLQJODZVRORQJDVRQHRUPRUHRIWKHFODLPVDOOHJHGLV           FRQWUROOLQJSUHFHGHQWIURPWKH2KLRFRXUWVRQWKLVPDWWHUWKH
FRYHUHGE\WKHLQVXUDQFHSROLF\l                                     PDMRULW\ RSLQLRQ HVVHQWLDOO\ KROGV WKDW DQ LQVXUHU FDQ
                                                                      XQLODWHUDOO\DOWHUWKHWHUPVRIDQH[LVWLQJFRQWUDFWDQGIRUFHDQ
   &RXUWVLQRWKHUMXULVGLFWLRQVWKXVFRQVLVWHQWO\KDYHKHOGWKDW     LQVXUHGWRUHLPEXUVHWKHLQVXUHUIRUDWWRUQH\IHHVDQGFRVWVE\
DQLQVXUHULVHQWLWOHGWRUHLPEXUVHPHQWIRUGHIHQVHFRVWVZKHQ        ZD\RIDXQLODWHUDOUHVHUYDWLRQRIULJKWVOHWWHU%HFDXVHWKH
WKHLQVXUHUGLGQRWKDYHDGXW\WRGHIHQGDQ\RIWKHDVVHUWHG         ODZDQGSXEOLFSROLF\FRQVLGHUDWLRQVVWURQJO\PLOLWDWHDJDLQVW
FODLPVZKHUHWKHLQVXUHUWLPHO\DQGH[SOLFLWO\UHVHUYHVLWV       UHDFKLQJVXFKDKROGLQJ,UHVSHFWIXOO\GLVVHQW
ULJKW WR UHFRXS WKH FRVWV DQG  SURYLGHV VSHFLILF DQG
DGHTXDWH QRWLFH RI WKH SRVVLELOLW\ RI UHLPEXUVHPHQW 7KH          7KLVFDVHUHTXLUHVWKDWZHGHWHUPLQHZKHWKHUDQLQVXUHUWKDW
JHQHUDOUXOHWKXVDSSHDUVWREHWKDWLIWKHVHFRQGLWLRQVDUH         GHFLGHV LQ JRRG IDLWK WR GHIHQG DQ LQVXUHG DJDLQVW FODLPV
PHW D UHVHUYDWLRQ RI ULJKWV LV HQIRUFHDEOH HYHQ DEVHQW DQ   ZKLFKWKHLQVXUHULVXQFHUWDLQDUHFRYHUHGXQGHUWKHLQVXUDQFH
H[SUHVVDJUHHPHQWE\WKHLQVXUHG                                     SROLF\PD\XQLODWHUDOO\DOWHUWKHWHUPVRIWKHLQVXUDQFHSROLF\
                                                                      WRUHFRXSGHIHQVHFRVWVZKHQDFRXUWODWHUPDNHVDQDIWHUWKH
                    %2KLR&RQWUDFW/DZ                              IDFW GHWHUPLQDWLRQ WKDW WKH SROLF\ GLG QRW FRYHU WKH FODLPV
                                                                      DJDLQVWWKHLQVXUHG$VH[SODLQHGEHORZWKHDQVZHUWRWKLV
  8QLWHG1DWLRQDODUJXHVWKDW667jVDFFHSWDQFHRIGHIHQVH            TXHVWLRQ XQHTXLYRFDOO\ LV WKDW DQ LQVXUHU VKRXOG QRW EH
FRVWVZLWK8QLWHG1DWLRQDOjVUHVHUYDWLRQRIULJKWVFUHDWHGDQ       DOORZHGWRGRVR
LPSOLHGFRQWUDFWDJUHHLQJWRWKHUHVHUYDWLRQ
                                                                         ,Q 2KLR DQ LQVXUHU KDV D GXW\ WR GHIHQG DQ LQVXUHG
  ,Q2KLRmLWLVZHOOHVWDEOLVKHGWKDWWKHUHDUHWKUHHFODVVHV       ZKHQHYHU D FRPSODLQW ILOHG DJDLQVW WKH LQVXUHG FRQWDLQV
RIVLPSOHFRQWUDFWVH[SUHVVLPSOLHGLQIDFWDQGLPSOLHGLQ         DOOHJDWLRQV WKDW DUH H[SUHVVO\ FRYHUHG E\ WKH SROLF\ RU DUH
ODZl /HJURV Y 7DUU  2KLR 6W G    FLWLQJ   HYHQ DUJXDEO\ RU SRWHQWLDOO\ FRYHUHG  &LW\ RI :LOORXJKE\
+XPPHOY+XPPHO2KLR6W5LFHY               +LOOV Y &LQFLQQDWL ,QV &R  1(G   2KLR
:KHHOLQJ'ROODU6DY	7UXVW&R2KLR6W             :KHUH WKH DOOHJDWLRQV LQ WKH FRPSODLQW LQ WKH
$Q H[SUHVV FRQWUDFW RFFXUV ZKHQ WKH SDUWLHVj DVVHQW WR D     XQGHUO\LQJVXLWDJDLQVWWKHLQVXUHGmDUHYDJXHDPELJXRXVRU
FRQWUDFWjVWHUPVLVH[SUHVVHGWKURXJKDQRIIHUDQGDFFHSWDQFH        LQFRPSOHWHVRWKDWWKHµSRWHQWLDOIRUFRYHUDJHjH[LVWVDGXW\
,G TXRWLQJ +XPPHO  2KLR 6W DW  $ FRQWUDFW        WRGHIHQGE\WKHLQVXUHUH[LVWVl0RQVOHUY&LQFLQQDWL&DV
LPSOLHG LQ IDFW RFFXUV ZKHQ D PHHWLQJ RI WKH PLQGV LV       &R1(G2KLR&W$SSFLWDWLRQ
GHPRQVWUDWHG E\ VXUURXQGLQJ FLUFXPVWDQFHV DOORZLQJ D            RPLWWHG VHH DOVR *UDQJH 0XW &DV &R Y 5RVNR 
IDFWILQGHU WR LQIHU WKH H[LVWHQFH RI D FRQWUDFW E\ WDFLW     1(G2KLR&W$SSm(YHQZKHUHWKH
XQGHUVWDQGLQJ,GTXRWLQJ+XPPHO2KLR6WDWVHH         GXW\WRGHIHQGLVXQFOHDUIURPWKHFRPSODLQWEURXJKWDJDLQVW
DOVR/XFDVY&RVWDQWLQL2KLR$SSG             WKHLQVXUHGRUZKHUHWKHUHH[LVWVVRPHGRXEWDERXWZKHWKHU
m$FRQWUDFWLPSOLHGLQIDFWPD\EHSURYHGE\VKRZLQJWKDW            WKHWKHRU\RIUHFRYHU\IDOOVZLWKLQWKHVFRSHRIWKHSROLF\LI
   8QLWHG1DWjO,QV&RY                     1R      1R                          8QLWHG1DWjO,QV&RY         
     667)LWQHVV&RUS                                                                                       667)LWQHVV&RUS

ZKHUHQRQHZRXOGRWKHUZLVHH[LVWl7KLVSROLF\ZRXOGQRW         WKHFLUFXPVWDQFHVVXUURXQGLQJWKHSDUWLHVjWUDQVDFWLRQVPDNH
EH SURPRWHG E\ KROGLQJ 8QLWHG 1DWLRQDO DV D YROXQWHHU     LWUHDVRQDEO\FHUWDLQWKDWDQDJUHHPHQWZDVLQWHQGHGlFLWLQJ
KRZHYHUEHFDXVH8QLWHG1DWLRQDOGLGQRWIRUFHGHIHQVHFRVWV       &ROXPEXV+RFNLQJ9DOOH\	7ROHGR5\&RY*DIIQH\
RQ667n667UHTXHVWHGWKHGHIHQVHFRVWV+DYLQJUHFHLYHG            2KLR6W$FRQWUDFWLPSOLHGLQODZRFFXUVZKHQ
ZKDWLWZDQWHG667SURSHUO\FDQEHUHTXLUHGWRSD\IRUZKDW       WKHUH LV QR PHHWLQJ RI WKH PLQGV DQG WKH ODZ FUHDWHV DQ
LWWKHUHE\JDLQHG                                                 REOLJDWLRQRQDSHUVRQZKRUHFHLYHGDEHQHILWDQGZRXOGEH
                                                                   XQMXVWO\HQULFKHGE\WKHEHQHILW,GTXRWLQJ+XPPHO
   7KHGLVWULFWFRXUWWKHUHIRUHHUUHGLQILQGLQJ8QLWHG1DWLRQDO   2KLR6WDW
TXDOLILHG DV D YROXQWHHU EHFDXVH 667 UHTXHVWHG 8QLWHG
1DWLRQDOjV SD\PHQW 8QLWHG 1DWLRQDO DVVHUWHG D FODLP LQ        8QLWHG1DWLRQDOGRHVQRWFRQWHQGWKDWWKLVFDVHLQYROYHVD
FRQWUDFWDQGQRWLQHTXLW\DQG8QLWHG1DWLRQDOUHVHUYHGLWV       FRQWUDFW LPSOLHG DW ODZ RU DQ H[SUHVV FRQWUDFW 8QLWHG
ULJKWWRUHFRXSPHQW                                               1DWLRQDODUJXHVUDWKHUWKHSDUWLHVKDGDFRQWUDFWLPSOLHGLQ
                                                                   IDFW$SSHOODQWjV)LQDO5HSO\%UDWQm%HFDXVH8QLWHG
                      &21&/86,21                                   1DWLRQDO VHHNV UHFRXSPHQW RQO\ XQGHU DQ LPSOLHGLQIDFW
                                                                   FRQWUDFW667jVIRRWQRWHFODLPLQJWKDWµ8QLWHG1DWLRQDOjV
  )RUWKHIRUHJRLQJUHDVRQVZH5(9(56(WKHMXGJPHQWRI            DWWHPSW WR REWDLQ HTXLWDEOH UHOLHI PXVW EH UHMHFWHG   j LV
WKHGLVWULFWFRXUWDQG5(0$1'IRUIXUWKHUSURFHHGLQJVLQ           LUUHOHYDQWlDOWHUDWLRQLQRULJLQDO
DFFRUGDQFHZLWKWKLVGHFLVLRQ
                                                                      ,PSOLHG LQ IDFW FRQWUDFWV XVXDOO\ RFFXU ZKHQ D SDUW\
                                                                   SURYLGHV DQRWKHU SDUW\ ZLWK VHUYLFHV RU PDWHULDOV XQGHU
                                                                   FLUFXPVWDQFHV ZKHUH D SD\PHQW W\SLFDOO\ LV PDGH IRU WKH
                                                                   VHUYLFHVRUPDWHULDOV/XFDV2KLR$SSGDWm7KH
                                                                   ODZLVVDLGWRµLPSO\jDQREOLJDWLRQRQWKHSDUWRIDSHUVRQ
                                                                   ZKREHQHILWVIURPWKHVHUYLFHVRUPDWHULDOVUHFHLYHGWRSD\
                                                                   IRUWKHVHUYLFHVRUPDWHULDOVlFLWLQJ$VKOH\Y+HQDKDQ
                                                                   2KLR6W(YDQVY5L]]R1R
                                                                   2KLR$SS/(;,6DW
:/DW
$XJ
                                                                   m7RSURYHWKHH[LVWHQFHRIDQLPSOLHGFRQWUDFW
                                                                   VHUYLFHV PXVW EH UHQGHUHG ZRUN SHUIRUPHG RU PDWHULDOV
                                                                   IXUQLVKHGE\RQHSDUW\WRDQRWKHUXQGHUVXFKFLUFXPVWDQFHV
                                                                   WKDW WKH UHFHLYLQJ SDUW\ NQHZ RU VKRXOG KDYH NQRZQ WKDW
                                                                   VXFK VHUYLFHV ZHUH UHQGHUHG ZLWK WKH H[SHFWDWLRQ RI EHLQJ
                                                                   SDLGRQWKHEDVLVRIWKHLUUHDVRQDEOHZRUWKlFLWLQJ7HUH[
                                                                   &RUSY*ULP:HOGLQJ&R2KLR$SSG
                                                                     7RHVWDEOLVKWKHH[LVWHQFHRIDQLPSOLHGLQIDFWFRQWUDFW
                                                                   mWKHSODLQWLIIPXVWSURYHWKDWWKHGHIHQGDQWHLWKHUUHTXHVWHG
                                                                   RUDVVHQWHGWRVXFKFRQGXFWXQGHUFRQGLWLRQVSUHFOXGLQJDQ
                                                                   LQIHUHQFH WKDW WKH SODLQWLII DFWHG JUDWXLWRXVO\l ,G FLWLQJ
    8QLWHG1DWjO,QV&RY                      1R       1R                        8QLWHG1DWjO,QV&RY      
      667)LWQHVV&RUS                                                                                       667)LWQHVV&RUS

*DIIQH\2KLR6W6WHSSY)UHHPDQ2KLR$SS            FRPSODLQW IRU FRQWULEXWLRQ DJDLQVW GHIHQGDQWVDSSHOOHHV
Gm7RHVWDEOLVKDFRQWUDFWLPSOLHGLQIDFWD          6DIHFR,QVXUDQFH&RPSDQ\µ6DIHFRj6WDWHVPDQ,QVXUDQFH
SODLQWLIIPXVWGHPRQVWUDWHWKDWWKHFLUFXPVWDQFHVVXUURXQGLQJ         &RPSDQ\DQG6WDWH$XWRPRELOH,QVXUDQFH&RPSDQ\MRLQWO\
WKH SDUWLHVj WUDQVDFWLRQ PDNH LW UHDVRQDEO\ FHUWDLQ WKDW DQ   µ6WDWHVPDQj IRU FRVWV LQFXUUHG LQ VHWWOLQJ WZR FDVHV ILOHG
DJUHHPHQWZDVLQWHQGHGlFLWDWLRQRPLWWHG.                         DJDLQVWDQLQVXUHGl)LUHPDQjV)XQG2KLR$SSDW
                                                                      m7KLV LV DQ DFWLRQ E\ RQH LQVXUDQFH FRPSDQ\ WR FRPSHO
   %HFDXVH8QLWHG1DWLRQDOFRQWHQGVWKHSDUWLHVHQWHUHGLQWR          DQRWKHULQVXUDQFHFRPSDQ\WRFRQWULEXWHDVKDUHRIDVXPRI
DQLPSOLHGLQIDFWFRQWUDFW8QLWHG1DWLRQDOPXVWSURYHWKDW          PRQH\SDLGE\RQHLQSURSRUWLRQWRWKHUDWLRWKHLUSROLFLHV
667DFFHSWHGWKHGHIHQVHFRVWVZLWKWKHUHVHUYDWLRQRIULJKWV         EHDUWRRQHDQRWKHUl
XQGHU FRQGLWLRQV GLVDOORZLQJ DQ LQIHUHQFH WKDW 8QLWHG
1DWLRQDODFWHGJUDWXLWRXVO\/XFDV2KLR$SSGDW               8QLWHG 1DWLRQDO IXUWKHUPRUH UHVHUYHG LWV ULJKW WR
FLWLQJ*DIIQH\2KLR6Wm>7@KHSODLQWLIIPXVWSURYH        UHLPEXUVHPHQWXQOLNHWKHSODLQWLIIVLQWKHFDVHVFLWHGE\667
WKDW WKH GHIHQGDQW HLWKHU UHTXHVWHG RU DVVHQWHG WR VXFK       6HHHJ)DUP%XUHDX2KLR6WDWo,QVXUDQFH&R
FRQGXFW XQGHU FRQGLWLRQV SUHFOXGLQJ DQ LQIHUHQFH WKDW WKH      RI1$P2KLR$SSGDW$PHULVXUH2KLR$SS
SODLQWLII DFWHG JUDWXLWRXVO\l 6WDWHG GLIIHUHQWO\ 8QLWHG      GDW)LUHPDQjV)XQG2KLR$SSDW$WOHDVWRQH
1DWLRQDOPXVWVKRZWKDWWKHFLUFXPVWDQFHVVXUURXQGLQJWKH             FRXUWKDVJLYHQFRQWUROOLQJZHLJKWWRWKHLQVXUHUjVIDLOXUHWR
WUDQVDFWLRQPDNHLWUHDVRQDEO\FHUWDLQWKDWWKHSDUWLHVLQWHQGHG      UHVHUYHLWVULJKW,Q,QVXUDQFH&RRI1RUWK$PHULFD2KLR
WRDJUHHWKDW8QLWHG1DWLRQDOZRXOGUHFRXSGHIHQVHFRVWVLI           $SSGDWHPSKDVLVDGGHGWKHFRXUWVWDWHGm$WWKH
8QLWHG1DWLRQDOKDGQRGXW\WRSD\WKHFRVWV6WHSS2KLR         SRLQWDWZKLFK>SODLQWLII@DVVXPHGWKHGHIHQVHLWGLGVRDVD
$SSGDW                                                        YROXQWHHUKDYLQJIDLOHGWRUHVHUYHLWVULJKWVQRWDVDUHVXOW
                                                                      RI>GHIHQGDQWjV@ZURQJIXOUHIXVDOWRGHIHQGl,PSOLFLWLQWKLV
   8QLWHG 1DWLRQDO KDV PHW WKLV EXUGHQ 7KH HYLGHQFH           ODQJXDJHLVWKHFRXUWjVUHFRJQLWLRQWKDWLIWKHSODLQWLIIKDG
GHPRQVWUDWHVWKDW667NQHZRI8QLWHG1DWLRQDOjVUHVHUYDWLRQ           UHVHUYHG LWV ULJKWV WKH SODLQWLII ZRXOG QRW KDYH EHHQ D
RIULJKWVEHFDXVHLWUHFHLYHGDOHWWHUVWDWLQJm8QLWHG1DWLRQDO      YROXQWHHU ,Q WKLV FDVH 8QLWHG 1DWLRQDO FRXOG QRW EH D
UHVHUYHVWKHULJKWWRUHFRXSIURP667DQ\GHIHQVHFRVWVDQG           YROXQWHHU EHFDXVH LW VSHFLILFDOO\ UHVHUYHG LWV ULJKW WR
IHHVWREHSDLGVXEMHFWWRWKLVUHVHUYDWLRQOHWWHURQWKHEDVLV       UHFRXSPHQW
WKDWQRGXW\WRGHIHQGQRZH[LVWVRUKDVH[LVWHGZLWKUHJDUG
WRWKHWHQGHUHGVXLWls$DW667GLGQRWREMHFWWRWKH            2QHRIWKHSROLF\LVVXHVXQGHUO\LQJWKHYROXQWHHUGRFWULQH
UHVHUYDWLRQ DQG DFFHSWHG 8QLWHG 1DWLRQDOjV SD\PHQW RI           ZRXOGPRUHRYHUQRWEHIXUWKHUHGE\ILQGLQJ8QLWHG1DWLRQDO
GHIHQVHFRVWV6HHHJ.QDSS)6XSSDWm8QGHU         ZDVDYROXQWHHU7KHYROXQWHHUGHIHQVHSUHYHQWVVHOOHUVZLWK
WKHVH FLUFXPVWDQFHV WKH &RXUW ILQGV LW DSSURSULDWH WR         QR PDUNHW IRU WKHLU JRRGV IURP IRUFLQJ WKRVH JRRGV RQ
GHWHUPLQH WKDW .QDSSjV VLOHQFH LQ UHVSRQVH WR                   XQVXVSHFWLQJFXVWRPHUVDQGWKHQVHHNLQJUHVWLWXWLRQWKHUHE\
&RPPRQZHDOWKjVUHVHUYDWLRQVRIULJKWVOHWWHUDQGVXEVHTXHQW          FUHDWLQJDULJKWRISD\PHQWZKHUHRQHGLGQRWRWKHUZLVHH[LVW
DFFHSWDQFH RI WKH GHIHQVH SURYLGHG E\ &RPPRQZHDOWK             6HH5REHUW+sHUU\,,7KH,QVXUHUjV5LJKWWR5HLPEXUVHPHQW
FRQVWLWXWHV DQ LPSOLHG DJUHHPHQW WR WKH UHVHUYDWLRQ RI         RI'HIHQVH&RVWV$5,= / 5(9om7KH
ULJKWVl7KHUHVHUYDWLRQRIULJKWVOHWWHUVKRZVWKDW8QLWHG         SULQFLSDO UDWLRQDOH IRU GHQ\LQJ UHVWLWXWLRQ LQ WKHVH
1DWLRQDOGLGQRWDFWJUDWXLWRXVO\                                    FLUFXPVWDQFHVGHYROYHVIURPWKHFRQFHUQWKDWDSDUW\PLJKW
                                                                      IRLVW EHQHILWV XSRQ XQVXVSHFWLQJ SHRSOH XVLQJ WKH ODZ RI
                                                                      UHVWLWXWLRQWRFUHDWHDULJKWWRSD\PHQWIRUJRRGVRUVHUYLFHV
    8QLWHG1DWjO,QV&RY                      1R      1R                       8QLWHG1DWjO,QV&RY      
      667)LWQHVV&RUS                                                                                     667)LWQHVV&RUS

IURP8QLWHG1DWLRQDOE\WHQGHULQJWKHXQGHUO\LQJOLWLJDWLRQWR         667DUJXHVWKDWWKHSDUWLHVGLGQRWFUHDWHDQLPSOLHGLQIDFW
8QLWHG1DWLRQDOIRUGHIHQVHLQ'HFHPEHU6HHs$DW           FRQWUDFW EHFDXVH  8QLWHG 1DWLRQDO GLG QRW SURYLGH
 8QLWHG 1DWLRQDO FDQQRW EH D YROXQWHHU EHFDXVH 667       FRQVLGHUDWLRQWRPRGLI\WKHRULJLQDOLQVXUDQFHFRQWUDFWZLWK
DVNHG8QLWHG1DWLRQDOWRSD\WKHGHIHQVHFRVWV                     WKH UHVHUYDWLRQ RI ULJKWV  8QLWHG 1DWLRQDO FRXOG QRW
                                                                     XQLODWHUDOO\ PRGLI\ WKH RULJLQDO LQVXUDQFH FRQWUDFW DQG 
  667UHOLHVRQVHYHUDOFDVHVIRUWKHSURSRVLWLRQWKDW8QLWHG        667QHYHUDFFHSWHGWKHUHVHUYDWLRQRIULJKWVEHFDXVHVLOHQFH
1DWLRQDO ZDV D YROXQWHHU DQG WKHUHIRUH QRW HQWLWOHG WR       DQGLQDFWLRQGRQRWFRQVWLWXWHDFFHSWDQFH8QLWHG1DWLRQDOGLG
UHLPEXUVHPHQW)DUP %XUHDX  2KLR 6W  ,QVXUDQFH         QRWKRZHYHUPRGLI\WKHRULJLQDOLQVXUDQFHFRQWUDFWLQVWHDG
&RRI1$PY7UDYHOHUV,QV&R2KLR$SSG            WKH SDUWLHV HQWHUHG LQWR D QHZ DJUHHPHQW LQ ZKLFK 8QLWHG
$PHULVXUH&RVY6WDWHVPDQ,QV&R2KLR$SS           1DWLRQDO RIIHUHG GHIHQVH FRVWV VXEMHFW WR SRWHQWLDO
G)LUHPDQjV)XQG,QGHP&RY0XWXDO&DV              UHLPEXUVHPHQWDQG667DFFHSWHGWKDWRIIHUE\DFFHSWLQJWKH
&R2KLR$SS7KHVHFDVHVDUHQRWKRZHYHU           GHIHQVHFRVWV
DXWKRULW\EHFDXVHWKH\HDVLO\DUHGLVWLQJXLVKHGIURPWKLVFDVH
                                                                       8QLWHG1DWLRQDOjVFRQGXFWDOVRHQWLWOHV8QLWHG1DWLRQDOWR
   667FRUUHFWO\VWDWHVWKHUXOHHVSRXVHGLQWKHVHFDVHVWKDW        UHLPEXUVHPHQWXQGHUWKHSHUVXDVLYHGHFLVLRQVDGGUHVVLQJWKLV
mHTXLW\ZLOOQRWDLGDYROXQWHHUl)DUP%XUHDX2KLR6W         VSHFLILFLVVXHLQRWKHUMXULVGLFWLRQV8QGHUWKDWOLQHRIFDVHV
DWFLWDWLRQVRPLWWHG,QVXUDQFH&RRI1$P2KLR         DV SUHYLRXVO\ GLVFXVVHG 8QLWHG 1DWLRQDO LV HQWLWOHG WR
$SSGDWFLWDWLRQRPLWWHG$PHULVXUH2KLR$SS           UHLPEXUVHPHQWLI8QLWHG1DWLRQDOWLPHO\DQGH[SOLFLWO\
GDWFLWDWLRQRPLWWHG)LUHPDQjV)XQG2KLR$SS           UHVHUYHGLWVULJKWWRUHFRXSWKHFRVWVDQGSURYLGHGVSHFLILF
DW  FLWDWLRQ RPLWWHG 8QLWHG 1DWLRQDO KRZHYHU VHHNV       DQGDGHTXDWHQRWLFHRIWKHSRVVLELOLW\RIUHLPEXUVHPHQW
UHLPEXUVHPHQWXQGHUFRQWUDFWQRWFRQWULEXWLRQSXUVXDQWWR
SULQFLSOHVRIHTXLW\8QLWHG1DWLRQDOjVPDLQDUJXPHQWLVWKDW          8QLWHG1DWLRQDOWLPHO\DQGH[SOLFLWO\UHVHUYHGLWVULJKWWR
WKHSDUWLHVHQWHUHGLQWRDQLPSOLHGLQIDFWFRQWUDFWDQG8QLWHG      UHFRXSGHIHQVHFRVWVEHFDXVH8QLWHG1DWLRQDOQRWLILHG667RI
1DWLRQDOLVWKHUHIRUHHQWLWOHGWRUHLPEXUVHPHQWSXUVXDQWWR        WKHUHVHUYDWLRQLQDOHWWHUGDWHGsDQXDU\SULRUWR
WKDW FRQWUDFW 8QOLNH WKH SODLQWLIIV LQ 667jV FLWHG FDVHV   SD\PHQWRIWKHGHIHQVHFRVWV7KHOHWWHUH[SOLFLWO\VWDWHGWKDW
8QLWHG1DWLRQDOGRHVQRWVHHNWRUHFRYHUDVDPDWWHURIHTXLW\       8QLWHG1DWLRQDOUHVHUYHGLWVULJKWWRUHFRXSGHIHQVHFRVWVLID
DQGFRQWULEXWLRQ6HHHJ)DUP%XUHDX2KLR6WDW         FRXUWGHWHUPLQHGWKDW8QLWHG1DWLRQDOKDGQRGXW\WRSURYLGH
m>7@KHFRQWHQWLRQRIWKHSODLQWLII >ZDV@WKDWLQHTXLW\DQG        VXFKFRVWVs$DWm8QLWHG1DWLRQDOUHVHUYHVWKHULJKWWR
JRRGFRQVFLHQFHWKHGHIHQGDQWVKRXOGEHFRPSHOOHGWRSD\LWV         UHFRXSDQ\GHIHQVHFRVWVl8QLWHG1DWLRQDODOVR
SURSRUWLRQDWHVKDUHRIWKHPRQH\SDLGE\WKHSODLQWLIILQIXOO       SURYLGHG VSHFLILF DQG DGHTXDWH QRWLFH RI WKH SRVVLELOLW\ RI
VHWWOHPHQW RI WKH FODLPV DULVLQJ RXW RI WKH FROOLVLRQl    UHLPEXUVHPHQWLQWKLVOHWWHU
,QVXUDQFH&RRI1$P2KLR$SSGDWom>7@KH
VHFRQGDU\LQVXUHUSRVVHVVHVDQHTXLWDEOHULJKWWRUHFRYHUIURP         $VIXUWKHUVXSSRUWIRULWVFODLPIRUUHLPEXUVHPHQW8QLWHG
WKHSULPDU\LQVXUHUDVZHOODVDULJKWWRUHFRYHUE\ZD\RI         1DWLRQDO FRQWHQGV WKDW DOORZLQJ DQ LQVXUHU WR UHFRXS FRVWV
VXEURJDWLRQXQGHUWKHSROLF\,1$FRQWHQGVWKDWLWZDVD       ZKHQLWGLGQRWKDYHDGXW\WRGHIHQGHQVXUHVWKDWGHIHQVHV
VHFRQGDU\ LQVXUHU WR 7UDYHOHUV WKH SULPDU\ LQVXUHU DQG      ZLOOEHDIIRUGHGHYHQLQTXHVWLRQDEOHFDVHV8QLWHG1DWLRQDO
WKHUHIRUH HQWLWOHG WR UHFRYHU IURP 7UDYHOHUVl FLWDWLRQ      DUJXHVWKDWmUHVHUYDWLRQRIULJKWVOHWWHUVSURPRWHHFRQRPLF
RPLWWHG $PHULVXUH  2KLR $SS G DW  m3ODLQWLII     XVH RI VFDUFH MXGLFLDO UHVRXUFHV E\ LQFUHDVLQJ LQVXUHUVj
DSSHOODQW $PHULVXUH &RPSDQLHV µ$PHULVXUHj ILOHG D           ZLOOLQJQHVV WR GHIHQG LQ FDVHV RI TXHVWLRQDEOH FRYHUDJHl
    8QLWHG1DWjO,QV&RY                       1R       1R                        8QLWHG1DWjO,QV&RY      
      667)LWQHVV&RUS                                                                                        667)LWQHVV&RUS

$SSHOODQWjV )LQDO %U DW  8QLWHG 1DWLRQDO FLWHV .QDSS      RIULJKWVWKHLQVXUHGFDQFKRRVHWRGHFOLQHWKHRIIHUSD\
ZKLFKVWDWHGm7KHFRXUWVVKRXOGEHFRQVLVWHQWLQHQFRXUDJLQJ          IRUWKHGHIHQVHDQGVHHNWRUHFRYHURQWKHSROLF\GHFOLQH
LQVXUDQFHFRPSDQLHVWRSURSHUO\PHHWWKHLUGXW\WRGHIHQGLWV          WKHRIIHUDQGILOHDGHFODUDWRU\MXGJPHQWDFWLRQRUDFFHSW
LQVXUHGDJDLQVWWKLUGSDUW\FODLPVDQGPLQLPL]HXQQHFHVVDU\            WKHRIIHUVXEMHFWWRWKHUHVHUYDWLRQRIULJKWV
FODLPVWRHQIRUFHSROLF\FRYHUDJHl.QDSS)6XSSDW
                                                                     %HFDXVH667HQWHUHGLQWRDQLPSOLHGLQIDFW FRQWUDFWE\
                                                                       DFFHSWLQJ WKH GHIHQVH FRVWV VXEMHFW WR D UHVHUYDWLRQ RI WKH
   667 HFKRLQJ WKH GLVWULFW FRXUW FRQWHQGV WKDW DQ LQVXUHU   ULJKWWRUHFRXSPHQWLIDFRXUWGHWHUPLQHGWKDW8QLWHG1DWLRQDO
EHQHILWVIURPGHIHQVHXQGHUDUHVHUYDWLRQRIULJKWVEHFDXVH            KDGQRGXW\WRGHIHQG667DQGDFRXUWIRXQG8QLWHG1DWLRQDO
WKHLQVXUHUDYRLGVDFODLPIRUEDGIDLWK$SSHOOHHjV)LQDO%U         KDG QR GXW\ WR GHIHQG 8QLWHG 1DWLRQDO LV HQWLWOHG WR
DWm8QLWHG1DWLRQDOµDYRLGHGDQ\DOOHJDWLRQRIEDGIDLWKj          UHLPEXUVHPHQWRILWVGHIHQVHFRVWVDQGSUHMXGJPHQWLQWHUHVW
DQG DYRLGHG UHVSRQVLELOLW\ WR SD\ GDPDJHV LI LW ZHUH ODWHU
GHWHUPLQHGWKDW8QLWHG1DWLRQDOKDGDQREOLJDWLRQWRGHIHQG                                 ,,9ROXQWHHU6WDWXV
WKH XQGHUO\LQJ DFWLRQl FLWLQJ s$ DW  667 IXUWKHU
FRQWHQGVWKDW8QLWHG1DWLRQDOKDGWKHEHQHILWRIFRQWUROOLQJ             &RQWUDU\WRWKHIRUHJRLQJWKHGLVWULFWFRXUWGHWHUPLQHGWKDW
WKH XQGHUO\LQJ OLWLJDWLRQ 667 TXRWHV IURP 6KRVKRQH DQG         8QLWHG1DWLRQDOZDVDYROXQWHHUDQGFRXOGQRWUHFRXSGHIHQVH
DUJXHV UHLPEXUVHPHQW ZRXOG IRUFH LQVXUHGV WR PDNH D             FRVWVXQGHU2KLRODZ
GLIILFXOWGHFLVLRQ
                                                                         8QLWHG1DWLRQDODUJXHVLWZDVQRWDYROXQWHHUEHFDXVHLW
  m+RZHYHUWRDOORZWKHLQVXUHUWRIRUFHWKHLQVXUHGLQWR             GHIHQGHG 667 DW 667jV UHTXHVW DQG UHVHUYHG LWV ULJKW WR
  FKRRVLQJ EHWZHHQ VHHNLQJ D GHIHQVH XQGHU WKH SROLF\          UHFRXSPHQW
  DQG UXQ WKH SRWHQWLDO ULVN RI KDYLQJ WR SD\ IRU WKLV
  GHIHQVHLILWLVVXEVHTXHQWO\GHWHUPLQHGWKDWQRGXW\WR               667DUJXHV8QLWHG1DWLRQDOZDVDYROXQWHHUDQGWKHUHIRUH
  GHIHQGH[LVWHGRUJLYLQJXSDOOPHULWRULRXVFODLPVWKDWD           QRWHQWLWOHGWRUHLPEXUVHPHQWEHFDXVH8QLWHG1DWLRQDOPDGH
  GXW\WRGHIHQGH[LVWVSODFHVWKHLQVXUHGLQWKHSRVLWLRQRI         DSD\PHQWRIPRQH\ZLWKNQRZOHGJHRIWKHIDFWVDQGZLWKRXW
  PDNLQJD+REVRQjVFKRLFHl                                           OHJDORUFRQWUDFWXDOREOLJDWLRQ

3GDWFLWDWLRQRPLWWHG.                                         $SDUW\LVDYROXQWHHULILQPDNLQJDSD\PHQWmKHKDVQR
                                                                       ULJKW RU LQWHUHVW RI KLV RZQ WR SURWHFW DQG DFWV ZLWKRXW
  :H DJUHH WKDW DOORZLQJ DQ LQVXUHU WR UHFRYHU XQGHU DQ       REOLJDWLRQ PRUDO RU OHJDO DQG ZLWKRXW EHLQJ UHTXHVWHG E\
LPSOLHGLQIDFWFRQWUDFWWKHRU\VRORQJDVWKHLQVXUHUWLPHO\          DQ\RQHOLDEOHRQWKHREOLJDWLRQl$HWQD&DV	6XU&RY
DQG H[SOLFLWO\ UHVHUYHG LWV ULJKW WR UHFRXS WKH FRVWV DQG     %XFNH\H8QLRQ&DV&R2KLR6Wo
SURYLGHG VSHFLILF DQG DGHTXDWH QRWLFH RI WKH SRVVLELOLW\ RI    FLWLQJ$0 s85VHHDOVR)DUP%XUHDX0XW$XWR
UHLPEXUVHPHQWSURPRWHVWKHSROLF\RIHQVXULQJGHIHQVHVDUH             ,QV &R Y %XFNH\H 8QLRQ &DV &R  2KLR 6W  
DIIRUGHG HYHQ LQ TXHVWLRQDEOH FDVHV :KHQ DQ LQVXUHU            mRQHZKRZLWKNQRZOHGJHRIWKHIDFWVDQGZLWKRXW
FRQGLWLRQV SD\PHQW RI GHIHQVH FRVWV RQ WKH FRQGLWLRQ RI        OHJDOOLDELOLW\PDNHVDSD\PHQWRIPRQH\WKHUHE\EHFRPHV
UHLPEXUVHPHQW LI WKH LQVXUHU KDG QR GXW\ WR GHIHQG WKH       DYROXQWHHUlFLWDWLRQVRPLWWHG
FRQGLWLRQEHFRPHVSDUWRIDQLPSOLHGLQIDFWFRQWUDFWZKHQ
WKHLQVXUHGDFFHSWVSD\PHQW:KHQIDFHGZLWKDUHVHUYDWLRQ               7KHYROXQWHHUGHIHQVHDSSOLHVLIWKHSD\LQJSDUW\KDVQRW
                                                                       EHHQDVNHGIRUWKHSD\PHQW667UHTXHVWHGWKHGHIHQVHFRVWV