Many of us heard about STOLI, or stranger initiated life insurance lawsuits. In essence, stranger-originated life insurance is the one in which a life insurance policy is originated primarily or solely for the purpose of resale. Many lawsuits have been filed due to the clash of the insurable interest requirement and the evolving secondary life insurance market.
Between 2005 and 2010, more than 150 lawsuits were filed. Many of them were filed by policyholders or family members of the insureds but many were filed by insurance companies. Most complaints filed by insurers alleged a policy was the product of a stranger-originated life insurance transaction and sought to rescind the policy to avoid paying the death benefit. The insurers claimed that because the ultimate policyholder did not have an insurable interest in the life of the insured at the time the policy was issued, the policy was void or voidable from the beginning.
Every case has alleged fraud by the policyholder or insured, or both, in addition to claiming that a policy is void for lack of insurable interest.
These lawsuits also examine the effects of the states' incontestability laws, and whether the party or parties challenging a policy based on absence of insurable interest have legal standing, the role of premium financing, the obligation of an insurer to return premiums paid for a rescinded policy and questions of conflicts of law.
For more information or if your claim has been denied due to material misrepresentation on the application, contact our top life insurance lawyers. We are life insurance attorneys who focus their work on recovering life insurance benefits on behalf of beneficiaries. Contact us now for help.