Menu

Expect Focus Life, Annuity, and Retirement Solutions, April 2020

New Jersey Springs Into Action: New Bill to Ban STOLI Policies

Life, Annuity, and Retirement Litigation   |   Life, Annuity, and Retirement Solutions   |   Financial Services Regulatory   |   April 13, 2020
Download   
Share Page

We previously reported in detail on New Jersey’s recent case law addressing the validity of stranger-originated life insurance (STOLI) policies in the June 2019 and December 2019 issues of Expect Focus – Life, Annuity, and Retirement Solutions. Briefly, in Sun Life Assurance Company of Canada v. Wells Fargo Bank, N.A., the courts concluded that a life insurance policy taken out with an investor trust as the policyholder violated New Jersey’s statutory requirement of an insurable interest on the part of the policyholder.

In reaction to the Sun Life case, the New Jersey Assembly recently passed A.B. 1236 in a 78–0 vote, which prohibits STOLI policies that benefit a third-party investor who does not have an insurable interest in the life of the insured when the policy is issued.

The bill bars anyone from engaging in any act, practice, or arrangement that constitutes a STOLI arrangement and renders any such agreement void and unenforceable. The proposed legislation authorizes civil actions by any person damaged by a violation and provides an express exemption to New Jersey’s two-year contestability statute so that insurers could contest the validity of these policies beyond the two-year contestability period. The legislation also imposes a civil penalty of up to $10,000 per violation. The commissioner of banking and insurance is authorized under the proposed legislation to seek injunctive relief for any violation, issue cease-and-desist orders, and order restitution to persons damaged by STOLI violations. The bill has been sent to the New Jersey Senate, which introduced the legislation as S.B. 1914.

 


©2020 Carlton Fields, P.A. Carlton Fields practices law in California through Carlton Fields, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.

Subscribe to Publications

Disclaimer

The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.