KANSAS CITY LIFE INSURANCE CO - 10-Q filing on 2012-10-26

Contingent Liabilities	9 Months Ended
Sep. 30, 2012
Contingent Liabilities	*17. Contingent Liabilities* The Company is occasionally involved in litigation, both as a defendant and as a plaintiff. The life insurance industry, including the Company and its insurance subsidiaries, has been subject to an increase in litigation in recent years. Such litigation has been pursued on behalf of purported classes of insurance purchasers, often questioning the conduct of insurers in the marketing of their products. The Company and its subsidiaries are also subject to regular reviews and inspections by state and federal regulatory authorities and self-regulatory organizations. In addition, these regulatory bodies also conduct, from time to time, investigations into industry practices and into complaints from customers. A regulatory violation discovered during a review, inspection, or investigation can result in the imposition of sanctions against the Company, its subsidiaries, or its employees. The Company’s retail broker-dealer and investment advisory subsidiary is in a business that involves a substantial risk of liability. The subsidiary has been named as a defendant in several cases in recent periods. Additionally, regulatory proceedings, litigation, and FINRA arbitration actions related to registered representative activity and securities products (including mutual funds, variable annuities, and alternative investments such as real estate investment products and oil and gas investments) have continued to increase over the last few years. In addition to the above, the Company and its subsidiaries are defendants in, or subject to, other claims or legal actions related to insurance and investment products. Some of these claims and legal actions are in jurisdictions where juries are given substantial latitude in assessing damages, including punitive damages. Although no assurances can be given and no determinations can be made at this time, management believes that the ultimate liability, if any, with respect to these regulatory matters, legal actions, and other claims would not have a material effect on the Company’s business, results of operations, or financial position. In accordance with applicable accounting guidelines, the Company has established an accrued liability for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. As a litigation or regulatory matter develops, it is evaluated on an ongoing basis, often in conjunction with outside counsel, as to whether the matter presents a loss contingency that meets conditions indicating the need for accrual and/or disclosure. If and when a loss contingency related to litigation or regulatory matters is deemed to be both probable and estimable, the Company establishes an accrued liability. This accrued liability is then monitored for further developments that may affect the amount of the accrued liability.

Contingent Liabilities

9 Months Ended

Sep. 30, 2012

17. Contingent Liabilities

The Company is occasionally involved in litigation, both as a defendant and as a plaintiff. The life insurance industry, including the Company and its insurance subsidiaries, has been subject to an increase in litigation in recent years. Such litigation has been pursued on behalf of purported classes of insurance purchasers, often questioning the conduct of insurers in the marketing of their products.

The Company and its subsidiaries are also subject to regular reviews and inspections by state and federal regulatory authorities and self-regulatory organizations. In addition, these regulatory bodies also conduct, from time to time, investigations into industry practices and into complaints from customers. A regulatory violation discovered during a review, inspection, or investigation can result in the imposition of sanctions against the Company, its subsidiaries, or its employees.

The Company’s retail broker-dealer and investment advisory subsidiary is in a business that involves a substantial risk of liability. The subsidiary has been named as a defendant in several cases in recent periods. Additionally, regulatory proceedings, litigation, and FINRA arbitration actions related to registered representative activity and securities products (including mutual funds, variable annuities, and alternative investments such as real estate investment products and oil and gas investments) have continued to increase over the last few years.

In addition to the above, the Company and its subsidiaries are defendants in, or subject to, other claims or legal actions related to insurance and investment products. Some of these claims and legal actions are in jurisdictions where juries are given substantial latitude in assessing damages, including punitive damages.

Although no assurances can be given and no determinations can be made at this time, management believes that the ultimate liability, if any, with respect to these regulatory matters, legal actions, and other claims would not have a material effect on the Company’s business, results of operations, or financial position.

In accordance with applicable accounting guidelines, the Company has established an accrued liability for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. As a litigation or regulatory matter develops, it is evaluated on an ongoing basis, often in conjunction with outside counsel, as to whether the matter presents a loss contingency that meets conditions indicating the need for accrual and/or disclosure. If and when a loss contingency related to litigation or regulatory matters is deemed to be both probable and estimable, the Company establishes an accrued liability. This accrued liability is then monitored for further developments that may affect the amount of the accrued liability.