An IPF affiliate acquired the policy on December 7, 2010 when the Irrevocable Trust defaulted on its IPF loan and tendered the policy to satisfy the debt. Years later, Wilmington Trust acquired the policy.

Mr. Matz died on September 22, 2017 and Wilmington Trust provided proof of his death to LBL.

Less than a month later, Wilmington Trust sued LBL, seeking Mr. Matz's death benefits. Wilmington Trust moved for summary judgment.

The LBL Policy

The LBL policy stated that:

[LBL] will not contest this policy after it has been in force during the lifetime of the insured for two years from the issue date.

The district court ruled that the policy was valid under applicable Florida law and granted Wilmington Trust's motion – in part.

In its decision, the court found that there was a valid “insurable interest” at the time the policy was issued. It reasoned that, under Florida Statutes Section 627.404(2)(b)(5), a trust may have an insurable interest if the insured is the grantor of the trust and the life insurance proceeds are primarily for the benefit of trust beneficiaries having an insurable interest in the life of the insured. The rule was satisfied, the district court said, because Ms. Matz had an insurable interest in her husband's life and she was the ultimate beneficiary of the Initial Trust.

The district court then observed that Florida's incontestability statute prevented challenges to the validity of insurance contracts after two years even where an insurable interest was created as the result of a stranger-originated life insurance (or “STOLI”) scheme.

Because the LBL policy took effect in 2007 and LBL did not challenge the validity of the policy within the statutorily provided two-year period, it could “not do so now.”

Accordingly, the district court concluded, the parties had entered into a valid and enforceable contract that obligated LBL to pay death benefits to Wilmington Trust.

The case is Wilmington Trust, N.A. v. Lincoln Benefit Life Co., No. 17-23669-Civ-COOKE/GOODMAN (S.D. Fla. Sep. 20, 2018). Attorneys involved include: For Wilmington Trust, N.A., as Securities Intermediary, Plaintiff: Jesus E. Cuza, LEAD ATTORNEY, Holland & Knight LLP, Miami, FL; Monica Vila, LEAD ATTORNEY, Holland & Knight, Miami, FL; Philip E. Rothschild, Holland & Knight, Fort Lauderdale, FL. For Lincoln Benefit Life Company, Defendant: Douglas Malcolm McIntosh, Michael Francis Barzyk, McIntosh Sawran & Cartaya, P.A., Fort Lauderdale, FL; Jason P. Gosselin, PRO HAC VICE, Drinker Briddle & Reath, LLp, Philadelphia, PA; Katherine L. Villanueva, PRO HAC VICE, Drinker, Biddle & Reath, LLP, Philadelphia, PA. For Lincoln Benefit Life Company, Lincoln Benefit Life Company, Counter Claimants: Douglas Malcolm McIntosh, Michael Francis Barzyk, McIntosh Sawran & Cartaya, P.A., Fort Lauderdale, FL; Jason P. Gosselin, PRO HAC VICE, Drinker Briddle & Reath, LLp, Philadelphia, PA; Katherine L. Villanueva, PRO HAC VICE, Drinker, Biddle & Reath, LLP, Philadelphia, PA. For Wilmington Trust, N.A., as Securities Intermediary, Wilmington Trust, N.A., as Securities Intermediary, Counter Defendants: Jesus E. Cuza, LEAD ATTORNEY, Holland & Knight LLP, Miami, FL; Monica Vila, LEAD ATTORNEY, Holland & Knight, Miami, FL; Philip E. Rothschild, Holland & Knight, Fort Lauderdale, FL.

FC&S Legal Comment

The district court's conclusion that LBL had to pay death benefits under the policy to Wilmington Trust did not end the case. LBL alleged that Wilmington Trust had been unjustly enriched “by the STOLI scheme” and sought monetary damages from Wilmington Trust in a counterclaim for unjust enrichment; the district court specifically did not grant summary judgment to Wilmington Trust on that counterclaim.

Regarding LBL's counterclaim, it should be noted that, recently, the U.S. Court of Appeals for the Eleventh Circuit has explicitly opined that incontestability clauses did not bar an insurer's fraud-based claim seeking a remedy other than a voiding of the policy. Sun Life Assurance Co. of Canada v. Imperial Premium Fin., LLC, No. 17-10189 (11th Cir. Sept. 18, 2018) (finding that “a lawsuit seeking damages without asking to rescind a life insurance policy cannot reasonably be construed as contesting the policy” and vacating a dismissal where “a life insurer sues alleging that it was fraudulently induced to enter a life insurance contract but does not seek any relief that would call into question the continuing viability of the policy”).