PHL Variable Ins. Co. v. Price Dawe 2006 Ins. Trust, et al.

In two similar cases, Lincoln National Life Insurance Co. v. Joseph Schlanger Trust (Schlanger) and PHL Variable Insurance Co. v. Price Dawe 2006 Insurance Trust (Dawe), an insurer sought a judicial declaration that a life insurance policy was void as an illegal contract wagering human life that accordingly lacked an insurable interest. The district court denied both motions to dismiss and certified three questions to the Supreme Court of Delaware concerning the incontestability provision under 18 Del. C. 2908 and the insurable interest requirement under 18 Del. C. 2704. The certified question, shared by both Dawe and Schlanger, concerned whether an insurer could claim that a life insurance policy never came into existence, on the basis of a lack of insurable interest, where the challenge occurred after the insurance contract's mandatory contestability period expired. The court answered in the affirmative and held that a life insurance policy lacking an insurable interest was void as against public policy and thus never came into force, making the incontestability provision inapplicable. The second certified question concerned whether the statutory insurable interest requirement was violated where the insured procured a life insurance policy with the intent to immediately transfer the benefit to an individual or entity lacking an insurable interest. The court answered in the negative, so long as the insured procured or effected the policy and the policy was not a mere cover for a wager. The third certified question concerned whether the relevant statutory provisions conferred upon a trustee an insurable interest in the life of the individual insured who established the trust if the insured intended to transfer the beneficial interest in the trust to a third-party investor with no insurable interest. The court answered in the affirmative, as long as the individual insured actually established the trust. If, however, the insured did not create and fund the trust then the relationship contemplated under section 2704(c)(5) was not satisfied. View "PHL Variable Ins. Co. v. Price Dawe 2006 Ins. Trust, et al." on Justia Law