The dispute centers on a stranger-oriented life insurance (STOLI) scheme orchestrated by non-party Coventry and AIG in the early 2000s. Coventry recruited Florida insurance agent David Kossak to identify seniors with excess insurability who did not need additional coverage. Kossak approached Irene Sloat, who agreed to allow a policy to be taken out on her life in exchange for a profit, with no intention of using it for estate planning.
Coventry created Delaware statutory trusts to apply for the policy, which was issued by Union Central, Ameritas’s predecessor. The premiums were funded by a non-recourse loan from LaSalle Bank, meaning Sloat and her family never paid premiums or bore personal liability. After the two-year contestability period lapsed, the policy was sold to Coventry and then to AIG, exactly as planned from the outset.
In 2017, FCI, an investment fund owned by Apollo Global Management, purchased the policy as part of a larger portfolio from AIG. FCI conducted due diligence and was aware of litigation challenging similar Coventry-originated policies. FCI assigned the policy the highest legal risk tier and applied a pricing discount to account for the possibility that a court would find the policy unenforceable for lack of insurable interest.
When Sloat died in 2022, Ameritas investigated the claim and determined the policy was likely STOLI. Ameritas sued U.S. Bank, which held the policy as a securities intermediary for FCI, seeking a declaratory judgment that the policy was void. U.S. Bank counterclaimed, arguing it was entitled to a refund of the premiums paid.
Judge Jennifer L. Hall held that Delaware law applied because the policy was issued to a Delaware trust and delivered in Delaware. Under Delaware law, a policy procured by a third party who funds the premiums without the insured’s genuine interest is void ab initio. The court found no reasonable fact finder could conclude the policy had an insurable interest at inception.
Regarding restitution, the court applied the Restatement (Second) of Contracts. It held that FCI would not suffer a disproportionate forfeiture because it knowingly gambled on the policy’s enforceability and priced that risk into its purchase. The court also found that Ameritas was not more at fault than FCI, as FCI had extensive knowledge of the STOLI scheme and the associated legal risks.
The court granted Ameritas’s motion for summary judgment and denied U.S. Bank’s motion. Ameritas is entitled to retain the death benefit and the premiums paid over the life of the policy. U.S. Bank’s counterclaims for breach of contract, fraud, and promissory estoppel also failed as a matter of law.