U.S. Bank National Association vs. Pacific Life Insurance Company

The Court is persuaded by Defendant’s argument that Delaware law is applicable here. The undisputed facts show that this insurance policy was procured by a trust formed under Delaware law with a trustee based in Delaware and formed under Delaware law. (SSUMF 1-15.)

Defendant has convincingly shown that Delaware has a strong interest in having its law with regard to insurable interests apply to insurance policies issued within its jurisdiction. (See, e.g. 18 DEcl. C. §§2701, subd. (2) [unless the policy is “not issued for delivery” in Delaware nor “delivered” in Delaware, Delaware’s Insurable Interest provisions apply]; and 2704, subd. (g) [providing that “’[t]he existence of an insurable interest ... shall be governed by this section without regard to an insured’s state of residency or location.”]; see also PHL Variable Insurance Co. v.

Price Dawe 2006 Insurance Trust (2011) 28 A.3d 1059, 1067-1068 [“if a life insurance policy lacks an insurable interest at inception, it is void ab initio because it violates Delaware’s clear public policy against wagering.”].) Furthermore, the primary questions of law in this case involve the creation of the subject life insurance policy, and its creation involved a trust and sub-trust created under Delaware Law, a Delaware based Trustee, and issuance and delivery of an insurance policy in Delaware.

Plaintiff asserts that California has an interest in seeing its own Insurance law be applied to determine whether the policy is void ab initio. Plaintiff’s primary argument relies upon pointing out Defendant’s ties to California. This is not persuasive, as the location of the insurance company issuing the policy is immaterial to the issuance and delivery of the subject policy. Furthermore, since California has, subsequent to the origination of the insurance policy at issue here, adopted Ins. Code §10110.1, which prohibits stranger originated life insurance schemes, California has an even more diminished interest in seeing its prior laws be used to validate such a scheme.

Plaintiff also asserts that Florida law should be applied here, based upon the residency of Mrs. Weiser, the individual whose life was insured under this policy. Plaintiff offers no persuasive argument or authority that the residency of an insured establishes a strong interest of the state of domicile in having its insurance regulations

apply to such a policy. Defendant argues that Florida insurance statutes recognize a lack of interest in regulation of insurance policies “not issued for delivery” or “delivered” in Florida. (See Fla. Stat §627.401, subd. (2).) Moreover, Florida, like California, has also adopted anti-STOLI provisions in its insurance laws. (See Fla. Stat. §§ 626.99291, 626.99289, 626.9911, subd. (9).)

As to the third factor, impairment of government interest, Defendant has shown that both California and Florida’s interests would not be impaired by applying Delaware law to this dispute. Namely, both California and Florida have, after the subject policy was created, adopted rules indicating a clear policy against finding insurable interests in STOLI based life insurance policies. (See Ins. Code §10110.1 and Fla. Stat. §§ 626.99291, 626.99289, 626.9911, subd. (9).) Delaware, on the other hand, would stand to have its long standing prohibition on STOLI life insurance policies undermined by application of Florida or California law in this case.

This is an especially egregious impairment of Delaware’s interest in regulating insurance policies issued and delivered in the State of Delaware because there is no genuine dispute here that the policy in question was applied for in Delaware by a Delaware trust.

Accordingly, the Court shall apply Delaware law regarding whether a STOLI-procured life insurance policy is subject to attack as void ab initio after the expiration of the policy’s incontestability period.

Issues 1-4:

Defendant moves for summary adjudication of Issues 1-4 on the ground that the subject life insurance policy is void ab initio because the undisputed facts show there is no insurable interest due to the policy premiums being initially paid for through a nonrecourse loan.

“Under Delaware common law, if a life insurance policy lacks an insurable interest at inception, it is void ab initio because it violates Delaware’s clear public policy against wagering.” (PHL Variable Insurance Co. v. Price Dawe 2006 Insurance Trust (2011) 28 A.3d 1059, 1067-1068 (“Pirce Dawe”).) Moreover, “an insurer can challenge the enforceability of a life insurance contract after the incontestability period where a lack of insurable interest voids the contract.” (Id. at 1068.) In Price Dawe, the Delaware Supreme Court addressed the question of whether there is an insurable interest where a policy nominally procured by the insured is acquired with the intent to immediately transfer it to a stranger

who would not have an insurable interest in the insured life. Price Dawe held that “[p]ayment of the premiums by the insured, as opposed to someone with no insurable interest in the insured’s life, provides strong evidence that the transaction is bona fide ... Life insurance policies, however, do not come into effect without premiums, so an insured cannot ‘procure or effect’ a policy without actually paying the premiums ... Therefore, if a third party funds the premium payments by providing the insured the financial means to purchase the policy then the insured does not procure or affect the policy ... The relevant inquiry is who procured the policy and whether or not that person meets the insurable interest requirements.” (Id. at 1076.)

In Lavastone Capital LLC v. Estate of Berland (2021) 266 A.3d 964, 971-973 (“Berland”)the Delaware Supreme Court addresses this exact question and holds that there are “two considerations when evaluating whether a policy lacks an insurable interest: (1) whether the insured or the trustee of the insured’s trust obtained the policy in good faith and for a lawful insurance purpose, and not as cover for a wagering contract; and (2) the source of the funding for the premiums.”

Berland applies this analysis to a situation “where (i) the source of the funding is a nonrecourse loan and not any assets of the insured and (ii) the insured’s intent was to transfer ownership after the end of the contestability period...”

Berland observes that the use of a non-recourse loan to finance the procurement of a life insurance policy “is a recognized and permissible tool” where it is “used to facilitate procurement of a policy for a legitimate insurance purpose, such as estate planning”, but non-recourse financing “might also be evidence of an impermissible STOLI scheme, especially where the use of a nonrecourse loan means that a third party, and not the insured, bears the entire financial responsibility for obtaining the policy.” (Id. at 972.)

The Berland court concludes that “use of a nonrecourse loan to fund the premium therefore is not dispositive, but should be viewed in the context of the entire transaction and in conjunction with consideration of whether the insured intended, when obtaining the policy, “to purchase the policy for lawful insurance purposes, and not as a cover for a [wagering] contract.” (Id.)

Here, Defendant attempts to meet its initial burden on summary adjudication of issues 1-4 by providing evidence indicating that

Weiser did not have any obligation to pay for the procurement of the subject life insurance policy, but rather, the procurement was funded through a non-recourse loan. (see SSUMF Nos. 19-34.) Specifically, Defendant attempts to meet its burden by showing that the insurance policy was procured using a loan, that Weiser did not have any obligation to pay any premiums or loan payments out of pocket, and that the only collateral securing the loan was the policy procured using the loan proceeds. While this evidentiary showing may be “strong evidence” that there is no insurable interest and the policy is void ab initio, Defendant’s separate statement entirely fails to address whether Weiser had a bona fide reason to procure this policy through financing for a lawful insurance purpose.

Accordingly, this showing is not sufficient for the court to find, as a matter of law, that the purpose of using this method of financing to procure the insurance policy was “as cover for a wagering contract.” Even if this showing were to be considered sufficient, Plaintiff has met its minimal burden to establish a triable issue of fact as to Weiser’s good faith basis to obtain this policy for a lawful insurance purpose by identifying evidence that Weiser sought to procure the policy to address financial liquidity issues in the course of her estate planning for her multi-million dollar estate. (See, e.g.

Plaintiff’s Additional Material Facts No. 72.)

Summary adjudication of the issue of whether the policy is void ab initio is not warranted because the court would be required to weigh evidence and make a determination as to whether Weiser had a bona fide estate planning reason to structure the procurement of this policy in this way. Accordingly, the motion is DENIED as to Issues 1-4, as each of these issues turn upon the determination that the subject policy is void ab initio under Delaware law for lack of an insurable interest.

Issue 5:

Plaintiff’s fourth cause of action is for unjust enrichment. Plaintiff alleges that even if the subject policy were void ab initio, Plaintiff is entitled to a refund of the premiums paid on the policy because it would be a miscarriage of justice to permit Defendant to retain the premiums while also contesting the validity of the policy at its inception.

Under Delaware law, courts are to employ “a fault-based analysis ... to determine whether premiums should be returned.” (Geronta Funding v. Brighthouse Life Insurance Company (2022) 284 A.3d 47, 71-72. (“Brighthouse”).) The Delaware Supreme Court

provided its reasoning for adopting a fault-based approach to determining whether premiums should be refunded. The reason a fault-based analysis is required is because in order to effectuate the public policy against procuring and trading in insurance policies that are void for a lack of insurable interest, there must be a balanced approach that “discourages insurance companies from hiding the invalidity of a policy for as long as possible in order to continue collecting premiums” while also not “encourag[ing] investors to continue purchasing life insurance policies without investigation into whether those policies are unenforceable policies due to lack of insurable interest [because] [u]nder the worst-case scenario, the investor receives return of the premiums ... [and] the investor loses nothing in the gamble.” (Id. at 72.)

Ultimately, a fault-based approach “incentivizes each player along the chain of these insurance policies to behave in good faith.” (Id.)

Here, both parties have submitted dozens of exhibits to attempt to establish the relative fault of the other party by showing when the other party known or should have known about the potential insurable interest issues with the subject policy. (See SSUMF Nos. 36-57; Plaintiff’s SAUMF Nos. 95-174.) Even if the Parties’ respective factual showings concerning the relative fault of the other party were uncontested, applying a fault-based analysis to determine whether, in the event the policy is found to be void ab initio, a premium refund is warranted cannot be summarily adjudicated. Accordingly, the motion is DENIED as to this issue.

Plaintiff’s Motion for Summary Judgment and/or Adjudication

Plaintiff U.S. Bank, NA’s Motion for Summary Judgment is DENIED.

Plaintiff U.S. Bank, NA’s Motion for Summary Adjudication is DENIED.

As discussed above, the question of whether the subject insurance policy is void ab initio requires resolution of disputed questions of material fact. Accordingly, the same disputed questions of material fact preclude summary adjudication or any of the eight issues identified in Plaintiff’s Motion.

Motions to Seal

The Motions to Seal various exhibits submitted in connection with the Parties’ Motions for Summary Judgment are CONTINUED to

8/27/26 at 1:30 p.m. in this department.

The Motion to Seal currently set for hearing on 7/23/26 is CONTINUED to 8/27/26 at 1:30 p.m. in this department.

No later than 7/16/26, all Parties and third-party movants involved in these motions to seal shall meet and confer and submit to the court a statement regarding their willingness to stipulate to the appointment of a referee for the purposes of assessing the confidentiality designations and requests to file records under seal.

The clerk shall provide notice of these rulings.