Lincoln National Life Insurance v. Joseph Schlanger 2006 Insurance Trust, 28 A.3d 436

Lincoln issued a $6 million life insurance policy on Joseph Schlanger to the Schlanger Trust, containing an incontestability clause of two years.
Schlanger died in 2009, more than two years after the policy’s issue date, and Lincoln later filed this action seeking to challenge the policy.
Lincoln alleged the policy was a STOLI-like scheme with no insurable interest and that the Trust structured a multi-layer arrangement to speculate on Schlanger’s life.
The United States District Court denied dismissal and certified the certified questions to the Delaware Supreme Court on insurable interest and incontestability.
The core question is whether an insurer can contest the policy’s validity based on lack of insurable interest after the two-year contestability period under 18 Del. C. § 2908.
Delaware law treats insurable-interest violations as void ab initio, with the incontestability clause not binding if no valid contract ever existed.

Issue	Plaintiff's Argument	Defendant's Argument	Held
May an insurer contest validity after the contestability period based on lack of insurable interest?	Lincoln argues contestability does not bar challenges to insurable interest once conspiracy-free; lack of insurable interest voids contract.	Schlanger argues the incontestability provision bars any post-period challenges to policy validity.	Yes; policy lacking insurable interest is void ab initio and not protected by incontestability.

Beard v. Am. Agency Life Ins. Co., 314 Md. 235, 550 A.2d 677 (Md. 1988) (void ab initio if insurable interest missing; incontestability not controlling)
Wood v. New York Life Ins. Co., 255 Ga. 300, 336 S.E.2d 806 (Ga. 1985) (insurable interest voids policy at inception)
Commonwealth Life Ins. Co. v. George, 248 Ala. 649, 28 So.2d 910 (Ala. 1947) (insurable interest and public policy concerns)
Henderson v. Life Ins. Co. of Va., 176 S.C. 100, 179 S.E. 680 (S.C. 1935) (public policy voids wagering-like arrangements)
Ludwinska v. John Hancock Mut. Life Ins. Co., 317 Pa. 577, 178 A. 28 (Pa. 1935) (insurable-interest defects render contract void ab initio)
Home Life Ins. Co. v. Masterson, 180 Ark. 170, 21 S.W.2d 414 (Ark. 1929) (void ab initio when no insurable interest)
Bromley's Adm'r v. Washington Life Ins. Co., 92 S.W.2d 17 (Mo. 1906) (public policy voids wagering contracts)
Oglesby, 695 A.2d 1146 (Del. 1997) (distinguishes misrepresentation fraud from insurable-interest fraud; incontestability limits)
Caruso, 538 N.Y.S.2d 217, 535 N.E.2d 270 (N.Y. 1989) (New York view on incontestability and insurable interest)