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Supreme Court of New Jersey
January 29, 2019, Argued; June 4, 2019, Decided
A-49 September Term 2017, 080669
[*159] [**841] CHIEF JUSTICE RABNER delivered the opinion of the Court.
] In New Jersey and elsewhere, no one can procure a life insurance policy on a stranger's life and receive the benefits of the policy. Betting on a human life in that way, with the hope that the person will die soon, not only raises moral concerns but also invites foul play. For those reasons, state law allows a policy to be procured only if the benefits are payable to someone with an "insurable interest" in the person whose life is insured. N.J.S.A. 17B:24-1.1(b). The beneficiary [***14] can be the insured herself, a close relative, a person, corporation, or charity with certain financial ties to the insured, or select others. N.J.S.A. 17B:24-1.1(a).
[*160] This case arises out of certified questions of law from the United States Court of Appeals for the Third Circuit. We consider whether the swift transfer of control over a life insurance policy and its benefit, from a named beneficiary who had an insurable interest to investors who did not, satisfies New Jersey's insurable interest requirement.
Here, a group of investors paid for a life insurance policy through a trust. The insured was a stranger to them. When the policy was issued, the insured's grandson was the beneficiary. About five weeks later, the trust was amended and the strangers who invested in the policy became its beneficiaries. In short, the insurable interest requirement appeared to have been satisfied at the moment the policy was purchased, but the plan from the start was to transfer the benefits to strangers soon after the policy was issued.
The policy in question is known as a "STOLI" -- a stranger-originated life insurance policy. Because such policies can be predatory and may involve fraud, other states have adopted legislation [***15] that bars them. We now consider STOLI policies as a matter of first impression.
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
238 N.J. 157 *; 208 A.3d 839 **; 2019 N.J. LEXIS 702 ***; 2019 WL 2345444
SUN LIFE ASSURANCE COMPANY OF CANADA, PLAINTIFF-RESPONDENT, v. WELLS FARGO BANK, N.A., AS SECURITIES INTERMEDIARY, DEFENDANT-APPELLANT.
Prior History: [***1] On certification of questions of law from the United States Court of Appeals for the Third Circuit.
Sun Life Assur. Co. v. Wells Fargo Bank, N.A., 236 N.J. 581, 201 A.3d 1267, 2018 N.J. LEXIS 1623 (Mar. 6, 2018)
insurable interest, insured, policies, Settlements, life insurance policy, procured, investors, strangers, premiums, void, wager, viatical, public policy, cases, insurance policy, two year, incontestability clause, life insurance, circumstances, void ab initio, policyholder, courts, outset, Lives, premium payment, incontestability, ownership, parties, viator, death benefit
Insurance Law, Types of Insurance, Life Insurance, Insurable Interests, Insurable Interests, Employers of Insured, Incontestability Clauses, Assignments & Transfers, Settlements, Viatical Settlements, Settlements, Business & Corporate Compliance, Governments, State & Territorial Governments, Gaming & Lotteries, Contracts Law, Defenses, Public Policy Violations, Wager Contracts, Governments, Legislation, Interpretation, Regulators, State Insurance Commissioners & Departments, Rules & Regulations, Authorities & Powers, Life Insurance, Remedies, Rescission & Redhibition