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Life insurance industry approves of Delaware high court ruling

09/28/11

The life insurance and life settlement industries are praising a recent ruling by the Delaware Supreme Court regarding life settlement transactions with $15 million in combined insurance policies.

PHL Variable Insurance and Lincoln National Life Insurance pursued a ruling that stated any life insurance policy is void and considered an illegal contract wagering on human life that lacks an insurable interest. The federal district court denied motions to dismiss.

"The court said it is not necessary to infer intent; you can look to the facts of the transactions to determine whether the policy was taken out in good faith," said Michael Lovendusky, vice president and associate general counsel for the American Council of Life Insurers. "If a stranger is paying for the policy, if the insured has no 'skin in the game,' that is a clear indication that the policy was not acquired in good faith."

Delaware's isn't the only court that maintained that intent is irrelevant in determining insurable interest. The New York Court of Appeals ruled similarly in a case last year that involved the purchase of an insurance policy for one person, which was then transferred to others without an insurable interest in that person's life.
 

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