![]() In support of its ruling that human life wagers are illegal, the court relied on New Jersey’s insurable interest statute, as well as its general constitutional, statutory, and public policy prohibitions against wagering. ![]() The first certified question was, “Does a life insurance policy that is procured with the intent to benefit persons without an insurable interest in the life of the insured violate the public policy of New Jersey, and if so, is that policy void ab initio?” The state Supreme Court answered “both parts of the first certified question in the affirmative.” The court noted that governments have expressed concerns about human life wagering for more than 500 years even the Venetian Senate of 1419 “outlawed wagers on the Pope’s life and nullified speculative bets about ‘how long the reigning pope would live.’” In addition to the parties’ briefs, the New Jersey Department of Banking and Insurance and two life settlement industry organizations filed amicus briefs on the certified questions. Court of Appeals for the Third Circuit certified two questions to the New Jersey Supreme Court. District Court for the District of New Jersey ruled that (i) the policy was a void ab initio wagering policy under New Jersey (ii) no death benefit was payable and (iii) premiums paid by the subsequent policy owner, which acquired the policy on the secondary market and was not involved in the origination of the policy, were to be refunded. The $5 million policy at issue, insuring the life of Nancy Bergman, was applied for and initially owned by a trust set up in the insured’s name with the insured’s grandson as trustee and beneficiary of the trust, and with the premiums funded by stranger investors. The unanimous court ruled that STOLI transactions run afoul of New Jersey’s insurable interest statute - and they violate New Jersey’s Constitution, anti-gambling statutes, and public policy against wagering. ![]() The New Jersey Supreme Court recently condemned stranger-originated life insurance (STOLI) transactions as void ab initio human life wagers in a case that the life insurance and life settlement industries watched closely. ![]()
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