Posted by (American Life Insurance Guide June News) In early June 6, the Supreme Court of New Jersey ruled that "Life Insurance (STOLI) held by strangers" violated public policy from the very moment of the policy (Ab Initio) Is invalid since.
What is STOLI Life Insurance Policy?
STOLI is the acronym for Stranger-Originated Life Insurance, and is usually translated as "Life Insurance Held by Strangers".To buy a copy legallyLife insurance policy, The purchaser and the insured must have insurable interest. STOLI is a way of insuring that bypasses this insurable association requirement.
STOLI agreements are usually illegal.A typical agreement is to insure an elderly person, use false and exaggerated financial data to buy a large insurance policy that does not match, and a third party pays the premium.
Case origin
In April 2007, Canada's Sun Life Insurance Company received a US$4 million insurance policy application from Nancy Bergman.The sole holder and beneficiary of the policy is the Nancy Bergman Irrevocable Trust.Bergman is the trustee of this trust, and her grandson Nachman is the trustee of this trust.
This trust has four additional members.They are all investors, and they don't know Bergman.Investors paid most (but not all) of the premiums by injecting capital into the trust.The earliest trust agreement stated that the insurance claims would be paid to the Bergman family.
Bergman is a retired middle school teacher.The application report shows that her income is more than 60 U.S. dollars, and her net asset value is more than 900 million.But in fact, she lives on a pension of about $3000 per month, and her estate value calculated later is between 10 and 25.
The policy was issued in 2007 with an irrefutable clause, unless the premium cannot be paid, otherwise Sun Life Insurance Company is prohibited from defending the policy two years after the policy is in force.
Five weeks after the insurance policy became effective, Bergman resigned from his trust position and appointed four investors as joint trustees for inheritance.The terms of the trust have been revised, and most of the policy claims will be paid to investors.And they also have the right to sell this insurance policy.
Two years later, the trust sold the entire policy to a family life insurance policy clearing company for $70, and the investors received almost all of the money.After several subsequent iterations, Wells Fargo Bank obtained this insurance policy in 2011 and claimed to continue to pay $1,928,727 in premiums and related expenses.
In 2014, Bergman died at the age of 89.Wells Fargo went to settle the death compensation. Sun Life Insurance Company investigated the claim and refused to pay, and sued in federal court, seeking court support to determine that the policy was invalid from the beginning.
The focus of the case is:
- Does an insurance policy that does not have insurable interest income from strangers violate New Jersey policy?If this is the case, will the policy be invalid from the beginning?
- If the policy is invalid at the beginning, can policy purchasers who do not know later get back the premiums they paid?
Final ruling
In June 2019, the Supreme Court of New Jersey finally ruled this case, ruling that this policy violated New Jersey’s public laws and policies, and this policy was invalid from the beginning.At the same time, the court also pointed out that one party can also request a refund of the premium paid to the policy in light of the actual situation.
appendix
01. Source of case report: Sun Life Assurance Co. of Canada v. Wells Fargo Bank, NA, No. A-49 (NJ June 4, 2019).
