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Author: Katherine Scanlon

‘One More Chapter In The Epic Salvage Of Two Viatical Operations Rife With Fraud’

‘One More Chapter In The Epic Salvage Of Two Viatical Operations Rife With Fraud’

The opinion of the United States District Court for the Northern District of Ohio, in Liberte Capital Group v. Capwill, No. 5:99 CV 818 (N.D. Ohio Jan. 4, 2011), is one of the more recent opinions in that long-running litigation. The court provides this initial summary near the start of the opinion: This case is yet one more chapter in the epic salvage of two viatical operations rife with fraud.  The assets of those firms have been in a receivership…

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Investors Sue Life Insurance Companies Over STOLI

Investors Sue Life Insurance Companies Over STOLI

In recent years, life insurance companies have undertaken steps to curb or prevent stranger-originated life insurance ("STOLI"). Such steps have included efforts to influence state regulation of STOLI, as well as litigation aimed at rescinding policies purchased by persons without an insurable interest.  The litigation has brought to light typical secondary market defenses, including that the insurers should be bound by the fraudulent acts of its agents, notwithstanding the fact that the agents, in collusion with the secondary market purchasers,…

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Under The New York Structured Settlement Protection Act, New Requirements Become Effective With The New Year

Under The New York Structured Settlement Protection Act, New Requirements Become Effective With The New Year

Starting tomorrow, the New York Structured Settlement Protection Act's revised provisions will be effective. One new provision will require a factoring company to bring the matter to the court's attention by an order to show cause.  SeeN.Y. Gen. Oblig. Law § 5/1705(b).  Another new requirement is that the factoring company's petition to the reviewing court must include "a statement setting forth whether there have been any previous transfers or applications for transfer of the structured settlement payment rights and giving details…

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Structured Settlement Protection Act Does Not Apply If There Is No Structured Settlement, Says Court

Structured Settlement Protection Act Does Not Apply If There Is No Structured Settlement, Says Court

O'Brien v. Argo Partners, Inc., — F.Supp.2d —- (E.D.N.Y. Aug. 23, 2010), involved a dispute over settlement proceeds. Argo – "a New York investment firm that derives a majority of its business from purchasing the claims of creditors of distressed companies," according to the court – entered into an agreement whereby O'Brien assigned rights to recover settlement proceeds from an insurance company that was in liquidation. Eventually, O'Brien sued, challenging the validity of the assignment.    The district court upheld the assignment…

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Insurance Company Properly Alleged Lack of Insurable Interest, Court Says

Insurance Company Properly Alleged Lack of Insurable Interest, Court Says

In American General Life Ins. v. Goldstein, Civ. No. 09-369-SLR, 2010 WL 3833955 (D. Del. Sept. 30, 2010) (available here), a federal district court denied a motion to dismiss an insurance company's claims that an insurance policy should be declared void because it was procured via a stranger-originated life insurance (STOLI) transaction. Among other things, the court determined that the insurance company, American General Life Insurance Company, sufficiently pled facts to state a claim that the insurance policy was void ab initio for lack of…

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Conferences Address Secondary Market Issues

Conferences Address Secondary Market Issues

Last week, my colleague Pete Vodola attended the 2010 educational conference of the National Structured Settlements Trade Association in Las Vegas, Nevada.  Pete was one of the speakers on a panel that addressed legal developments relating to structured settlements.  His panel's presentation materials included a portion that compared how courts have looked at judicial orders in secondary market transactions. Pete also took part in a panel presentation at the 2010 conference of the National Association of Settlement Purchasers, which also took place…

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Court Says Insurer Did Not Need to Allege Fraud to Seek Rescission of Alleged Stranger Originated Life Insurance Policy

Court Says Insurer Did Not Need to Allege Fraud to Seek Rescission of Alleged Stranger Originated Life Insurance Policy

An insurance company did not need to alleged fraud when it sought rescission of a life insurance policy that the insurer alleged lacked an insurable interest and should be declared void, an Illinois federal court ruled recently. In PHL Variable Ins. Co. v. Robert Gelb Irrevocable Trust, No. 10 C 957 (N.D. Ill. Oct. 27, 2010), the court denied a motion to dismiss by the Trust, although it did grant the Trust's request to strike PHL's request to retain premiums…

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Heaping Pelion Upon Ossa, in the World of STOLI

Heaping Pelion Upon Ossa, in the World of STOLI

A federal court has declined to exercise discretionary supplemental jurisdiction over a STOLI lawsuit, now that the claims based in federal statutes have been dismissed.  That is the decision in Kuhn v. Misiak, No. 10 C 3505, 2010 WL 4337822 (N.D.Ill. Oct. 26, 2010).  A decision declining supplemental federal jurisdiction can often be straightforward and offer little noteworthy for those concerned about the merits of the case.  In Kuhn, however, the court made some comments that may be of interest. …

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A Day Late and the Perils of Electronic Filing–Minnesota Federal Court Rules Insurer’s STOLI Misrepresentation Claim Barred by Inconstestability Clause

A Day Late and the Perils of Electronic Filing–Minnesota Federal Court Rules Insurer’s STOLI Misrepresentation Claim Barred by Inconstestability Clause

The court in PHL Variable v. U.S. Bank National Association, No. 10-1197, 2010 WL 3926310 (D.Minn. Oct. 4, 2010), recently dismissed with prejudice an insurer’s misrepresentation claim action involving alleged an stranger-originated life insurance transaction, finding that the insurer, PHL, filed its action only one day late:  There is no dispute that the Policy issued on April 7, 2008, and hence there is also no dispute that Minnesota’s two-year contestability period expired on April 7, 2010.  PHL argues that it…

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UPDATE: Court Allows STOLI Claims to Go to Trial: “Life Insurance Policies Are Different”; “Incontestability Clause is Not Sacrosanct”

UPDATE: Court Allows STOLI Claims to Go to Trial: “Life Insurance Policies Are Different”; “Incontestability Clause is Not Sacrosanct”

  Without an incontestability clause that allows fraud-based challenges beyond the two year period, construing the statutory requirement as an absolute ban on fraud-based challenges risks encouraging fraud.  Put another way, if bad actors can disguise their fraud for two years, their hands are washed clean by the Legislative requirement of section 3203, and they are free to collect on their ill-gotten gains.   Settlement Funding v. AXA Equitable Life Insurance Co., No. 06-cv-5743, 2010 WL 3825735 (S.D.N.Y. Sep. 30,…

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