Sarah J. Delaney, a partner in Goldberg Segalla’s Global Insurance Services Practice Group, provided analysis for a Law360 article examining a recent ruling by the Eighth Circuit that the insurable interest requirement for a life insurance policy is met under Minnesota law when a person buys insurance on his own life. The case, PHL Variable Insurance Co. v. Bank of Utah, curtails carriers’ ability to challenge the validity of those policies, even those that are allegedly unlawful stranger-owned life insurance (STOLI) agreements, according to those interviewed by Law360.
Sarah pointed out the ruling shows that insurers “need to be very diligent” in challenging policies within the two-year period. She said the ruling is significant in that it “goes against what the Minnesota Legislature has said — that STOLI arrangements are not acceptable and not legal. … This is another case that holds tight to the common law even when legislative winds are going the other way.”
Sarah also noted she expects that the ruling will be cited in other cases because “it does closely follow the common law, which contrasts with the new rules that will be applied to STOLI policies.”