Ohio National Life Assurance v. Steven Egbert, 803 F.3d 904

Defendants (agents, a lawyer, and investors) recruited elderly insureds to apply for Ohio National life policies, then created irrevocable trusts naming those insureds as nominal owners while defendants controlled the policies and financed premiums.
Defendants intended to and did transfer beneficial interests to investor buyers (STOLI scheme), concealing third-party financing and misrepresenting insureds’ circumstances to increase investor value.
Ohio National had a contractual prohibition against premium-financing schemes with unrelated third parties and contends it would not have issued policies had it known the true arrangements.
District court granted summary judgment for Ohio National, finding fraud, breach of contract, and civil conspiracy, awarded premiums and litigation expenses (~$726,000), but ordered return of $91,000 in premiums to investor Egbert.
Defendants appealed denial of vacatur; Ohio National appealed the return of Egbert’s premiums. Seventh Circuit affirmed the district court in all respects.

Issue	Plaintiff's Argument (Ohio National)	Defendant's Argument	Held
Whether district court’s summary judgment violated Local Rule 56.2	No prejudice; defendants ultimately submitted evidence and summary judgment was proper	Lack of Rule 56.2 notice prejudiced pro se defendants	Affirmed: no prejudice, summary judgment proper
Whether policies procured via STOLI are void/constitute actionable wrongdoing	Schemes procured contracts by persons lacking insurable interest; defendants conspired to defraud Ohio National	Transfers to investors can be lawful; plaintiffs misconstrue assignments	Affirmed: conduct violated common law/constituted conspiracy and fraud; contracts voidable
Measure of damages: recovery of premiums and litigation expenses (attorney’s fees)	May recover reasonable litigation expenses incurred to avoid future suits and premiums paid by wrongdoers	Defendants argue litigation expenses not recoverable; premiums should be returned	Affirmed: Ohio National may keep premiums paid by conspirators and recover litigation expenses to avoid future suits
Whether investor Egbert must forfeit premiums he paid to preserve a transferred policy	Egbert was an innocent purchaser unaware policy was void; unjust to forfeit his premiums	Ohio National: Egbert knew or should have known policy was void; must forfeit	Affirmed: egregious conspirators forfeit premiums, but innocent Egbert gets $91,000 returned

Timms v. Frank, 953 F.2d 281 (7th Cir.) (procedural notice under local summary judgment rule matters for pro se parties)
Bajwa v. Metropolitan Life Ins. Co., 804 N.E.2d 519 (Ill. 2004) (policy void if procured without insured's consent / insurable-interest principles)
Grigsby v. Russell, 222 U.S. 149 (U.S. 1911) (insurable interest requirement prevents wagering on a life)
Hawley v. Aetna Life Ins. Co., 125 N.E. 707 (Ill. 1919) (distinguishes valid post-issuance sales from STOLI procurement schemes)
PHL Variable Ins. Co. v. Bank of Utah, 780 F.3d 863 (8th Cir. 2015) (upholding sale-of-policy where insured originally procured policy for himself)
Guardian Mutual Life Ins. Co. v. Hogan, 80 Ill. 35 (Ill. 1875) (longstanding Illinois rule prohibiting purchase of insurance by those without interest in insured's survival)
Ritter v. Ritter, 46 N.E.2d 41 (Ill. 1943) (allowing recovery of litigation expenses when defendant's wrongful acts force plaintiff to litigate with third parties)
Seaback v. Metropolitan Life Ins. Co., 113 N.E. 862 (Ill. 1916) (premiums recoverable where no risk was assumed and payer was not at fault)
Fednav Int'l Ltd. v. Continental Ins. Co., 624 F.3d 834 (7th Cir. 2010) (damages principles for litigation expenses in tort contexts)