Narrative Opinion Summary
In this case, Sun Life Assurance Company of Canada sought to declare a life insurance policy on Erwin Collins void, asserting it was a 'stranger originated life insurance' (STOLI) policy, contravening Tennessee's public policy. The court found the policy void as a wagering contract lacking an insurable interest, denying Conestoga Trust Services, LLC, the sixth assignee, the death benefits. However, the court ordered Sun Life to refund premiums to Conestoga, who was deemed not responsible for the initial fraud. Conestoga's motions to amend pleadings to include a bad faith claim and a return of premiums were granted, while Sun Life's opposition was overruled. The court also denied Sun Life's motion to strike Conestoga’s notice of supplemental authority. It was determined that Sun Life reasonably contested the policy, voiding the potential bad faith claim. In summary, the court upheld Tennessee's prohibition of STOLI policies and underscored the necessity of an insurable interest for life insurance contracts, ruling in favor of refunding premiums to prevent unjust enrichment, but affirming the policy's void status ab initio.
Legal Issues Addressed
Assignment of Void Contractssubscribe to see similar legal issues
Application: The court held that an assignment cannot confer greater rights than those held by the assignor if the original contract is void.
Reasoning: If the policy is deemed a wagering contract from the start, subsequent assignees cannot gain any rights beyond those of the original party to the contract.
Bad Faith Claims in Insurance Disputessubscribe to see similar legal issues
Application: The court dismissed Conestoga's bad faith claim, ruling that Sun Life had a reasonable basis to challenge the policy's validity.
Reasoning: Regarding Conestoga's bad faith claim, the court found it unviable because the policy was void as an illegal wagering contract, and Sun Life had a reasonable basis to challenge its validity due to a lack of insurable interest at inception.
Insurable Interest Requirement under Tennessee Lawsubscribe to see similar legal issues
Application: The policy was declared void because it was procured without an insurable interest and was considered a wagering contract.
Reasoning: Sun Life contended that the policy was part of an illegal wager on Collins' life, alleging that the Collins Trust was a sham intended to create a false insurable interest.
Return of Premiums in Invalidated Insurance Policiessubscribe to see similar legal issues
Application: The court required Sun Life to refund premiums paid by Conestoga as it was not responsible for the fraud, avoiding unjust enrichment.
Reasoning: The court granted Conestoga's motion to recover premiums paid after acquiring the policy on April 30, 2013, stating that if no risk attaches to the policy, the premiums must be returned.
Void Ab Initio Due to Stranger-Originated Life Insurancesubscribe to see similar legal issues
Application: The court ruled that the life insurance policy was a STOLI scheme and thus void ab initio, denying the death benefit to the assignee.
Reasoning: The court ruled the policy indeed constitutes a STOLI scheme, affirming it is void and denying the death benefit to Conestoga, but requiring Sun Life to refund the premiums to avoid an unjust enrichment.