Lack of Insurable Interest Makes Life Policy Void from Inception

Read the full article at https://lnkd.in/g_zv5wCf and see the full video at https://lnkd.in/gGdwqJM4 and at https://lnkd.in/gAYXPuyQ, and at https://zalma.com/blog plus more than 4300 posts.

Lack of Insurable Interest Makes Life Policy Void from Inception

Read the full article at https://lnkd.in/g_zv5wCf and see the full video at https://lnkd.in/gGdwqJM4 and at https://lnkd.in/gAYXPuyQ, and at https://zalma.com/blog plus more than 4300 posts.

Policy Acquired as Part of a STOLI Fraud Never Existed as a Matter of Law

In Geronta Funding, a Delaware Statutory Trust v. Brighthouse Life Insurance Company, No. 380, 2021, Supreme Court of Delaware (August 25, 2022) the Supreme Court was asked to determine whether premiums paid on insurance policies declared void ab initio for lack of an insurable interest should be returned. The trial court agreed with Brighthouse and relied on the Restatement (Second) of Contracts (the “Restatement”) to determine whether Geronta was entitled to restitution.

Specifically, the court held that Geronta may obtain restitution under Section 198 of the Restatement (“Section 198”) if it could prove excusable ignorance or that it was not equally at fault.

RELEVANT FACTS AND BACKGROUND

On July 11, 2007, the fictitious Mansour Seck Irrevocable Life Insurance Trust (the “Seck Trust”) applied to MetLife Investors USA Insurance Company (Brighthouse’s predecessor) for a $5 million universal life insurance policy insuring the life of a fictitious man identified as Mansour Seck (the “Policy”).

After confirming that its procedures and guidelines were met, MetLife issued the Policy on or around July 24, 2007.

The Superior Court Failed to Consider Whether Either Party Had Inquiry Notice of the Void Nature of the Policy

Geronta’s due diligence as to the Seck Policy was extremely limited.
The Superior Court also concluded that Brighthouse was not at fault because Geronta failed to show that Brighthouse had actual knowledge of the void nature of the Policy.

The Supreme Court remanded the case for the Superior Court to reconsider its factual findings in light of this Court’s articulated test and specifically direct the court to consider whether either party had inquiry notice of the void nature of the Policy and reversed the court’s holdings regarding entitlement to premiums and remanded the case for consideration consistent with its opinion.

ZALMA OPINON

The original fraud was transferred twice to buyer yet, since Mansour Seck did not exist the policy was not real, it was a gamble and a fraud. That the criminal invested a great deal of money, sold the risk to another and profited from the crime only to have the victim sell again until Geronta found itself paying premium on a void policy.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

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Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected].

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