New York Court Denies Reinstatement of STOLI Policies for Lack of Standing, Finds Issue of Fact on Good Faith and Fair Dealing

The plaintiff was an investment trust that purchased life insurance contracts. It brought the instant action seeking damages for the insurer’s alleged breach of nine lapsed life insurance policies on three different individuals with a collective face value of over $80 million. It was undisputed that all nine policies were pieces of a “Stranger Originated Life Insurance” or “STOLI” transaction. Although purchasing life insurance with the intent of selling it to strangers became illegal in 2009, these transactions were legal at the time the policies in
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Seventh Circuit: No Insurable Interest, No Problem (For the Beneficiary, That Is!)

The Seventh Circuit recently affirmed a district court decision upholding payment under a life insurance policy purchased by a securities intermediary. The decision first addressed the common law’s prohibition on wagering contracts, or stranger-originated life insurance, and the traditional remedy which invalidates any such policy of insurance. However, this case was subject to Wisconsin law, whose legislature places the risk on the insurer for issuing a policy to someone without an insurable interest by refusing to invalidate such contracts. Specifically,
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