Aei Life LLC v. Lincoln Benefit Life Co.
892 F.3d 126
2d Cir.2018Background
- In 2008 Lincoln issued a life policy insuring Gabriela Fischer based on an application that materially overstated her wealth; payments were made by a stranger, indicating a STOLI scheme.
- The Fischer Trust was named beneficiary and paid premiums (from a New York bank account); the policy was later sold to AEI Life LLC, an innocent purchaser.
- Lincoln discovered the fraud in 2013 and sought to void the policy; AEI sued in the Eastern District of New York seeking a declaratory judgment that the policy was incontestable.
- The policy contains a provision titled "Conformity with State Law" stating the certificate is "subject to the laws of the state where the application was signed." Lincoln argued this made New Jersey law applicable; AEI argued New York law governs.
- The district court found the policy was negotiated, signed, and performed in New York, treated the conformity clause as invalid for fraud, applied New York's center-of-gravity test, and held the policy incontestable; the Second Circuit affirmed.
Issues
| Issue | AEI's Argument (Plaintiff) | Lincoln's Argument (Defendant) | Held |
|---|---|---|---|
| Whether the policy clause is a choice-of-law clause | Clause is not a choice-of-law; it's a conformity clause and does not fix governing law | Clause unambiguously selects law of the state where application was signed (New Jersey) | Clause is a conformity clause, not a choice-of-law clause; it does not determine applicable law |
| Which state law governs (choice-of-law) | New York governs because contract was negotiated, signed, and performed in NY (center of gravity) | New Jersey should govern based on purported place of signing and submission to NJ regulator | New York law governs under the center-of-gravity analysis; factual findings supporting NY contacts affirmed |
| Whether New York incontestability is displaced by public policy (STOLI/wager) so policy is void ab initio | Incontestability applies; NY law treats wagering/STOLI issues as making policies voidable, not void ab initio, so insurer barred after two years | Policy is a wager/void ab initio (STOLI) so incontestability statute inapplicable | Court rejects public-policy void-ab-initio argument; follows New York precedent that such policies are voidable and barred after contestability period |
| Whether lack of insured's consent or forgery voids policy or trust and permits post-contestability challenge | AEI: consent/forgery challenge barred by NY incontestability; trust was valid and notarized (presumption of authenticity) | Lincoln: Fischer never consented / signatures forged; trust invalid, so policy unenforceable | Held against Lincoln: lack of consent and forgery claims are barred by NY incontestability doctrine; notarization presumption and weak expert evidence defeat forgery claim |
Key Cases Cited
- New England Mutual Life Ins. Co. v. Caruso, 73 N.Y.2d 74 (N.Y. 1989) (life policies lacking insurable interest are voidable, not void ab initio; incontestability bars late challenges)
- New England Mutual Life Ins. Co. v. Doe, 93 N.Y.2d 122 (N.Y. 1999) (distinguishing disability-insurance incontestability analysis; does not create a life-insurance fraud exception)
- Advani Enterprises, Inc. v. Underwriters at Lloyds, 140 F.3d 157 (2d Cir. 1998) (interpretation of "subject to" language in contract clauses)
- Forest Park Pictures v. Universal Television Network, Inc., 683 F.3d 424 (2d Cir. 2012) (New York forum courts apply center-of-gravity choice-of-law analysis)
- Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (U.S. 1941) (federal courts sitting in diversity apply forum state's choice-of-law rules)