Life Settlement’s in Court

As a firm, we have not actively marketed Life Settlements. The lack of regulations within the industry and the stain of the aftermath of STOLI has given us good reasons to stay away. That doesn’t mean we don’t still keep our eye on the industry. Certainly there are some situations where a Life Settlement is the best option for a policyholder.

With that in mind we have been watching closely a Florida Supreme Court case between Prudential and a Life Settlement provider. The case was about “insurable interest” and the carrier was arguing that the new owner of the policy did not have an insureable interest and should not be able to profit from the purchase. Here is the latest result of that case:

 

Florida’s Supreme Court hands victory to life settlement market in insurable-interest case

A long-awaited Florida Supreme Court decision went against a major carrier in an insurable-interest case that pitted the life settlement and life insurance industries against each other.

The Thursday, Sept. 22, decision found that three stranger-originated life insurance policies had insurable interest because the original beneficiaries were family members.

And thus the 11-page decision concluded that the policies couldn’t be voided after two years because they had incontestability clauses.

The case, known as the Wells Fargo Bank NA et all vs. Pruco Life Insurance Co., has been closely watched.

“This is a huge, huge decision,” said Tom Sherman, an attorney with the Locke Lord LLP law firm in Atlanta.

“It said, ‘Insurance company, if you have a Stoli argument, you have two years to make it.’ They’re [insurance companies] fighting skirmishes around the country, but they’re less important now with California, Florida and Texas off the table,” he added.

New York also is on the same page, he said.

Although these states comprise a minority in number, they reflect a supermajority in size because of their large populations, Sherman said.

“This will most certainly boost the life settlement market because it will go a long way in removing the risk of an insurance company challenging a policy on insurable-interest grounds post contestability period,” he said.

To read more, request a subscription to The Life Settlements

About Jeffrey Berson

40 years in and around the industry has made Insurance a part of my DNA. I have had the pleasure of working with and for some of the greatest minds in our industry. My "Bersonal" View is an attempt to capture some of the best ideas, the best concepts and the best practices in a way that can lead to success for others. It will certainly be my point of view, so please...don't take it "Bersonal".
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