New Jersey Supreme Court Voids Stranger-Originated Life Policies
June 17, 2019 by Steven A. Meyerowitz
This story is reprinted with permission from the Insurance Coverage Law Center, the industry’s only comprehensive digital resource designed for insurance coverage law professionals. Visit the website to subscribe.
The Supreme Court of New Jersey has ruled that stranger-originated life insurance (STOLI) policies are against public policy and are void ab initio. The court also ruled in the June 4 decision that a party to a STOLI policy may be entitled to a refund of premium payments depending on factors including its participation in and knowledge of the original illicit scheme.
The Case
As the court explained, in April 2007, Sun Life Assurance Company of Canada received an application for a $5 million insurance policy on the life of Nancy Bergman. The application listed the Nancy Bergman Irrevocable Trust dated 4/6/2007 as the sole owner and beneficiary of the policy. Bergman signed the application as the grantor of the trust, and her grandson, Nachman Bergman, signed as trustee.
The trust had four additional members. All of them were investors, and all were strangers to Bergman. The investors deposited money into the trust account to pay most if not all of the policy’s premiums. The original trust agreement provided that any proceeds of the policy would be paid to Bergman.
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