Wisconsin –Once a Life Insurance Policy is Issued, the Insurer cannot Invalidate the Policy for Lack of Insurable Interest

Judge Richard Posner, writing for a three judge panel for the Seventh Circuit and applying Wisconsin law, has affirmed a 2015 federal District Court decision and ruled that a STOLI policy (the original owner may not have had an insurable interest in the life of the insured), once issued by the insurer, is neither void nor voidable by the insurer for lack of insurable interest. The insurer must pay the death benefit to the named beneficiary or someone else whom a court may determine is equitably entitled to the proceeds. Here no one came forward to raise a competing claim for the death benefit proceeds, so the court determined that the death benefit proceeds must be paid to the named beneficiary. Wisconsin now falls in line with NY, MI and UT on this approach. The case is U.S. Bank NA v. Sun Life Assurance Co. of Canada, case number 16-1049, in the U.S. Court of Appeals for the Seventh Circuit.