In 1996, James Aycock thought he would soon die. He had contracted AIDS more than an decade earlier, and his medical condition had steadily worsened since.
By 1995, his worsening medical condition had qualified him for long-term disability status; and, by 1996, he went on full disability leave from his employer, Emory University's School of Medicine. At that time, Aycock did not expect to ever return to work at Emory, because doctors were telling him that he only had a few months to live.
Aycock's Life of Georgia Insurance Company Life Insurance Policy
Thus, believing that the end was near, Aycock decided to begin winding down his estate. Among his his assets was a group life insurance policy provided by Life of Georgia Insurance Company (which Aycock obtained via his employer, Emory University). The benefits of that policy were payable upon Aycock's death to whomever Aycock named as the policy's beneficiary. So, practically speaking, the kind of value of such a policy is typically understood to be future value.
However, little known to many, there is actually a market for buying and selling these policy benefits, even before a given policy's beneficial payout triggers (if you like twenty-dollar words, then you might be interested to know that this kind of transaction is called a "viatical settlement"). Aycock decided that his estate would be better served to have some cash in hand today in lieu of the policy's eventual, beneficial payout upon his death.
The October 1996 Viatical Settlement Agreement
So, in October 1996, Aycock decided to sell the future value of his Life of Georgia policy to an investor in that market. The investor was Anthony M. Livoti, Jr. (who, side note...years later, went to prison for unrelated reasons) Accordingly, court records state that...
Aycock entered into a viatical settlement in which, in exchange for $144,000, he assigned "all of [his] rights, title and interest" in his LOG policy "and all renewals thereof" to a group of investors whose trustee is Anthony M. Livoti, Jr. (hereinafter referred to as "Livoti"). Aycock also assigned "the right to change and name any other beneficiary whatsoever" and "the right to exercise all conversion rights that [Aycock] may have at any time and under any circumstances."
Thus, that October 1996 agreement pertained to any "renewal" of the Life of Georgia policy.
No doubt, Livoti's hope and expectation at that time was that his $144,000 purchase would soon yield him some larger sum of money, once Aycock died and the beneficial payout of the Life of Georgia policy triggered.
Unfortunately for Livoti, though, Aycock did not soon die. In fact, Aycock actually recovered steadily over the next four years--so much so that, by September 2000, Aycock returned to full-time work at Emory.
Now, the significance of Aycock's eventual recovery did not, at first, seem so bad for Livoti. Sure, Livoti's payday was being delayed much longer than he had anticipated. But Aycock's recovery itself did not necessarily threaten Livoti's contractual right to eventually obtain his expected yield from the deal. Livoti still expected to get paid upon Aycock's death.
As the parties would learn only later, as it turned out, Aycock's return to full-time work at Emory triggered termination of the Life of Georgia policy, which thereby extinguished the value of Livoti's investment (i.e. with the policy terminated, there would be no beneficial payout to anyone, ever). So, for Livoti's $144,000 purchase, this meant that Livoti would get nothing in return.
Livoti Sues Aycock
Understandably, Livoti was not pleased with this result. So, Livoti sued Aycock.
Now, let me back up and tease out a few more important details as to how and why Aycock's return to work triggered termination of the Life of Georgia policy, and how neither party was aware of this possibility at the time of execution of the October 1996 viatical settlement agreement.
First, it mattered that Aycock's Life of Georgia policy was a group policy administered by his employer. This meant that Emory had the right to make decisions regarding the policy on behalf of the entire group.
Second, it mattered that, "[o]nly weeks after the viatical settlement and unbeknownst to the parties, Emory changed its group life insurance carrier from LOG to Metropolitan Life Insurance Company[,]" as court records would later recount. In doing so, Emory provided a way for holders of the Life of Georgia policy to transfer their coverage to Metropolitan Life Insurance Company, with the exception of Life of Georgia policy holders who were, at the time, on disability. The result was that Life of Georgia retained its obligation to that portion of Emory's Life of Georgia policy holders who were on disability at the time of Emory replacing Life of Georgia with Metropolitan Life Insurance Company as Emory's group life insurance provider. This meant that Aycock remained a Life of Georgia policy holder at the time, due to his disability status.
Third, as court records highlight, a company called ING Medical Risk Solutions eventually took over for Life of Georgia and negotiated a settlement with Emory that affected the policy terms for disabled Life of Georgia policy holders like Aycock:
Emory eventually negotiated a settlement with ING Medical Risk Solutions, a successor in interest to LOG, which provided that LOG/ING would continue to provide coverage for the members of this group as long as they stayed on disability. Should a disabled employee return to work, their coverage by LOG/ING would either be cancelled or, at the option of the insured, be converted to an individual policy with a face amount of only $2,000.
Pursuant to those negotiated settlement terms, were a disabled policy holder to return to work, the holder's coverage under the policy would be cancelled. Thus, Aycock's September 2000 return to work cancelled his coverage under the Life of Georgia policy, and thereby dashed any chance Livoti had at the payday he sought and expected in return for his $144,000 purchase.
Fourth, since Aycock's return to work changed his status to "not on disability," he was suddenly eligible to join the majority of his Emory colleagues as holders of the replacement policy issued by Metropolitan Life Insurance Company. So, October 13, 2000, Aycock enrolled in Metropolitan Life Insurance Company group life insurance program. Because this was an entirely new policy, Aycock's understanding at the time was that his enrollment in the Metropolitan Life Insurance Company group life insurance program in no way implicated Aycock's October 1996 deal with Livoti, which pertained only to the Life of Georgia policy and "all renewals thereof[.]" Since, as Aycock reasoned, his Metropolitan Life Insurance Company policy was not a renewal of his Life of Georgia policy, his Metropolitan Life Insurance Company policy did not fall within the scope of his October 1996 deal with Livoti.
What constitutes a "renewal" under Georgia law?
Livoti's disagreement with this last point was the basis of Livoti's lawsuit against Aycock, which asked the court to decide whether Aycock's Metropolitan Life Insurance Company policy was a renewal of Aycock's Life of Georgia policy.