FORM 10-Q/A
Amendment No. 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1996 Commission File Number 1-8052
TORCHMARK CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 63-0780404
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
2001 3rd Avenue South, Birmingham, Alabama 35233
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (205) 325-4200
NONE
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports re-
quired to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No____
Indicate the number of shares outstanding for each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT APRIL 30, 1996
Common Stock, $1.00 Par Value 71,749,365
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Part II - Other Information
Item 1. Legal Proceedings
This item is amended to update litigation disclosure.
Torchmark and its subsidiaries continue to be named parties to
pending or threatened legal proceedings. These lawsuits involve
tax matters, alleged breaches of contract, torts, including bad
faith and fraud claims based on alleged wrongful or fraudulent acts
of agents of Torchmark's subsidiaries, employment discrimination,
and miscellaneous other causes of action. Many of these lawsuits
involve claims for punitive damages in state courts of Alabama, a
jurisdiction particularly recognized for its large punitive damage
verdicts. A number of such actions involving Liberty also name
Torchmark as a defendant. As a practical matter, a jury's
discretion regarding the amount of a punitive damage award is not
limited by any clear, objective criteria under Alabama law. As of
March 31, 1996, Liberty was a party to approximately 259 active
lawsuits (including 31 employment related cases and excluding
interpleaders and stayed cases), more than 233 of which were
Alabama proceedings in which punitive damages were sought. Liberty
faces trial settings in these cases on an on-going basis.
Torchmark previously reported the entry of an Order and Final
Judgment by the Circuit Court of Barbour County, Alabama in
Robertson v. Liberty National Life Insurance Company, (Case No. CV-
92-021) approving a cancer policy class action settlement involving
legal and equitable relief valued at a total of $55 million. The
cost of this settlement increases over time as Liberty is
prohibited from increasing premium rates on this block of business
for one year from the final binding affirmance by the Alabama
Supreme Court. This aspect of the settlement is expected to cost
Torchmark an additional $2.5 million before tax in each quarter
going forward until one year after the final binding affirmance by
the Alabama Supreme Court.
In July 1994, certain intervenors in the Robertson litigation
filed a notice of appeal of the Order and Final Judgment approving
class certification and the settlement with the Supreme Court of
Alabama. Oral argument on the appeal was held July 7, 1995 and on
December 22, 1995, the Supreme Court unanimously affirmed the
Robertson class action settlement. On February 16, 1996, the
Alabama Supreme Court issued a notice overruling the petition for
a rehearing in Robertson filed by certain intervenors. A petition
for writ of certiorari to the Supreme Court of the United States
has been filed by certain intervenors.
Liberty has recently been served with 5 individual cancer
policy lapse-issue lawsuits, filed in the Circuit Court of George
County, Mississippi. The Company believes these cases should
remain stayed pending the resolution of the petition for writ of
certiorari in Robertson. There are 77 similar individual cases in
all jurisdictions which have been previously stayed as a result of
the pendency of the class action.
On March 17, 1994, litigation was filed against Liberty,
certain officers and present and former directors of Torchmark and
KPMG Peat Marwick LLP, independent public accountants of Torchmark
and its subsidiaries, in the Circuit Court of Marion County,
Alabama (Miles v. Liberty National Life Insurance Company, Civil
Action No. CV-94-67). The lawsuit asserted that it was brought on
behalf of a class comprised of the shareholders of Torchmark. The
complaint alleged a failure to timely and adequately report
allegedly material contingent liabilities arising out of insurance
policy litigation involving Liberty. Compensatory and punitive
damages in a unspecified amount were sought.
In April 1994, the complaint in Miles was amended to add an
additional shareholder plaintiff and to name Torchmark as a
defendant. The Miles case was dismissed upon the joint motion of
all parties in September 1995. A second similar action (Oakley v.
Torchmark Corporation, Case No. CV-94-47), filed on August 16, 1994
in the Circuit Court of Bibb County, Alabama, was dismissed by the
plaintiff without prejudice. A third such action was filed on
December 30, 1994, in the United States District Court for the
Southern District of Alabama. This action, which seeks punitive
damages, was subsequently transferred to the United States District
Court for the Northern District of Alabama (Dismukes v. Torchmark
Corporation, Case No. CV-94-1006-P-M). On April 11, 1996 the Court
entered an order granting partial summary judgment on behalf of
defendants. Claims for damages based on Section 10b-5 of the
Securities Exchange Act of 1934, on state securities laws and for
common law fraud remain pending in the case.
A purported class action was filed on August 8, 1995, against
Liberty in the Circuit Court of Jefferson County, Alabama on behalf
of Liberty cancer policyholders eligible for Medicare who submitted
claims during the approximately two month period from September to
November 1993 (Adkins v. Liberty National Life Insurance Company,
Case No. CV-95-05634). For a two month period beginning in
September 1993, in reliance on federal law concerning the amount
health care providers could collect from Medicare eligible
individuals, Liberty limited the payment of benefits to such
individuals to the amounts collectible under federal law. In
November 1993, Liberty discontinued this practice and recalculated
and repaid all claims in full as it had prior to September 1993
together with interest. The claims made in Adkins are identical
to the individual claims in Allen v. Liberty National Life
Insurance Company, (Case No. CV-94-3634), the remitted verdict of
which is currently being appealed to the Alabama Supreme Court by
Liberty. More than 400 (and perhaps as many as 1,000) individuals
appear to fit the proposed claim definition in Adkins. Punitive
damages for mental anguish appear to be sought on behalf of the
class. A class certification hearing is set for June 7, 1996. The
Company intends to oppose class certification and to vigorously
defend the case.
On August 25, 1995, a purported class action was filed against
Torchmark, Globe, United American and certain officers of these
companies in the United States District Court for the Western
District of Missouri on behalf of all former agents of Globe (Smith
v. Torchmark Corporation, Case No.: 95-3304-CV-S-4). This action
alleges that the defendants breached independent agent contracts
with the plaintiffs by treating them as captive agents and engaged
in a pattern of racketeering activity wrongfully denying income and
renewal commissions to the agents, restricting insurance sales,
mandating the purchase of worthless leads, terminating agents
without cause and inducing the execution of independent agent
contracts based on misrepresentations of fact. Monetary damages in
an unspecified amount are sought. A plaintiff class was certified
by the District Court on February 26, 1996, although the
certification does not go to the merit of the allegations in the
complaint. Discovery is currently proceeding in this case. The
companies intend to vigorously defend this action.
It has been previously reported that Liberty is a party to
individual lawsuits and one purported class action (Carlton v.
Liberty National Life Insurance Company, Case No. CV-96-22) in the
State of Alabama in which allegations are made that an interest
sensitive life insurance policy would become paid-up or self-
sustaining after a specified number of years. Currently, Liberty
is a party to 81 individual interest sensitive cases, 54 of which
were filed by a single lawyer in Chambers County, Alabama.
Additionally, Torchmark has previously reported the case of Lawson
v. Liberty National Life Insurance Company, filed in the Circuit
Court of Jefferson County, Alabama (Civil Action No.: CV-96-01119),
where the plaintiffs seek class certification on behalf of persons
who were induced to exchange life insurance policies or the
existing policy's cash value was depleted. On May 15, 1996,
the Circuit Court of Jefferson County, Alabama entered an order
conditionally certifying a plaintiffs class in Lawson in order
to preserve the Court's jurisdiction over the class action question,
subject to a full evidentiary hearing on class certification at a
future date yet to be determined.
In 1978, the United States District Court for the Northern
District of Alabama entered a final judgment in Battle v. Liberty
National Life Insurance Company, et al (CV-70-H-752-S), class
action litigation involving Liberty, a class composed of all owners
of funeral homes in Alabama and a class composed of all insureds
(Alabama residents only) under burial or vault policies issued,
assumed or reinsured by Liberty. The final judgment fixed the
rights and obligations of Liberty and the funeral directors
authorized to handle Liberty burial and vault policies as well as
reforming the benefits available to the policyholders under the
policies. It remains in effect to date. A motion filed in
February 1990 to challenge the final judgement under Federal Rule
of Civil Procedure 60(b) was rejected by both the District Court in
1991 and the Eleventh Circuit Court of Appeals in 1992 and a Writ
of Certiorari was denied by the U.S. Supreme Court in 1993.
In November 1993, an attorney (purporting to represent the
funeral director class) filed a petition in the District Court
seeking "alternative relief" under the final judgment. This
petition was voluntarily withdrawn on November 8, 1995, by
petitioners. On February 23, 1996, Liberty filed a petition with
the District Court requesting that it order certain contract
funeral directors to comply with their obligations under the Final
Judgment in Battle and their funeral service contracts. A petition
was filed on April 8, 1996 on behalf of a group of funeral
directors seeking to modify the 1978 decree in Battle in light of
changed economic circumstances. Liberty opposes this petition and
will vigorously defend the validity of the Final Judgment in
Battle.
Torchmark has previously reported the filing of purported
class action litigation against the Company, its subsidiary Torch
Energy Advisors Incorporated and certain Torch Energy subsidiaries
and affiliated limited partnerships in the Circuit Court of Pickens
County, Alabama (Pearson v. Torchmark Corporation, Case No. CV-95-
140). Improper payment of royalties and overriding royalties on
coalbed methane gas produced and sold from wells in the Robinson's
Bend Coal Degasification Field is asserted in this lawsuit. On
April 11, 1996, Torchmark's motion to change venue was granted and
the case has been transferred to the Circuit Court of Tuscaloosa
County, Alabama. The Company's motion to dismiss remains pending.
Based upon information presently available, and in light of
legal and other defenses available to Torchmark and its
subsidiaries, contingent liabilities arising from the threatened
and pending litigation are not presently considered by management
to be material. It should be noted, however, that the frequency of
large punitive damage awards bearing little or no relation to
actual damages awarded by juries in jurisdictions in which
Torchmark has substantial business, particularly in Alabama,
continues to increase universally, creating the potential for
unpredictable material adverse judgments in any given punitive
damage suit.
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
TORCHMARK CORPORATION
Date: 5/17/96 /s/ William C. Barclift
___________________________________
William C. Barclift, Vice President
and General Counsel
