The U.S. Eleventh Circuit Court of Appeals certified 2 questions under Florida law to the Florida Supreme Court relating to 3 STOLI life insurance policies. The Florida Supreme Court rephrased (and conflated) the 2 questions and stated the issue to be, “Can a party challenge the validity of a life insurance policy after the two-year contestability period established by section 627.455 because of its creation through a STOLI scheme?” Held – NO! The Florida Supreme Court pointed out that STOLI policies are not prohibited by Florida law (presumably because Florida has not adopted anti-STOLI legislation as many other states have). The laws of most states provide that if there is no insurable interest in the life of the insured at the inception of the policy, the policy is void ab initio as an illegal wagering contract, and the life insurance company that issued the policy may challenge the validity of the policy at any time, even after the expiration of its 2-year contestability period. Most notably, this decision, although representing a minority view under a head-count of all states, now places Florida generally in the same camp as California and New York on the STOLI / insurable interest issue and the ability of the life insurance company to challenge the payment of the death benefits under a life insurance policy based on a policyholder’s intent, existent at the time of insurance application, to sell a policy after its issuance. The decision, Wells Fargo Bank, N.A. vs Pruco Life Insurance Company, Supreme Court of Florida, decided September 22, 2016, can be found here.
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