The MFT did not catch a break with the court assigned to its lawsuit against the Missouri State Board of Embalmers and Funeral Directors and Catholic Fraternal Life. The hearing scheduled for September 28th was continued for another four weeks, and in the meantime, the parties continue to file evidentiary discovery requests. The Association’s preneed program now faces the burden of proving that documents and information produced for its audit have been obtained by a competitor, and that such documents and information are trade secrets that the court can require to be protected.
The underlying competition in this dispute is between the two basic methods of preneed funding: trusts versus insurance. The main marketing theme currently used by preneed insurance companies is that life insurance provides a predictable return that avoids the volatility of investment markets. This has a lure for conservative funeral directors who struggle with rising cremation rates and business costs. The investment return from trusts has been stymied by low interest rates and a volatile equities market. The MFT complaint hints at these circumstances when assertions were made that the auditor was privy to the program’s investment contracts and performance. Equipped with the program’s weaknesses, the auditor then went to work for an insurance company that already marketed to the program’s funeral home clients.
But, the MFT may find it difficult to prove to a court’s satisfaction that its investment performance is a trade secret, or the type of proprietary information that must be kept confidential from the program’s own clients. All trust funded programs are sensitive to how difficult the investment markets have been. But, the funeral home is entitled to such information when making the decision about what is best for the families that want to prepay their funeral expenses.