Pruco Life Insurance Company v. Wells Fargo Bank, N.A.
780 F.3d 1327
| 11th Cir. | 2015Background
- Two consolidated appeals from Eleventh Circuit: Pruco (insurer) sought to invalidate three STOLI policies (one Berger policy, two Guild policies) years after issuance claiming no insurable interest at inception under Fla. Stat. § 627.404.
- Each policy contained a statutorily mandated incontestability clause (Fla. Stat. § 627.455) making policies incontestable after being in force for two years; Pruco waited >2 years (Berger ~4 years; Guild ~7 years) to challenge.
- Facts show classic STOLI scheme: brokers induced insureds (elderly) to accept “free” policies, submitted fraudulent financials, premiums financed/paid by third parties, and ownership/trust assignments intended for eventual sale to investors.
- Two district courts reached opposite results: the Berger court held policies void ab initio (no insurable interest) so incontestability never applied; the Guild court held incontestability barred Pruco’s late challenge (policy voidable, not void).
- Eleventh Circuit found no controlling Florida Supreme Court precedent resolving whether lack of insurable interest renders a policy void ab initio for purposes of the two-year incontestability rule and whether § 627.404 implies a good-faith procurement requirement, so it certified questions to the Florida Supreme Court.
Issues
| Issue | Pruco's Argument | Wells Fargo / U.S. Bank's Argument | Held |
|---|---|---|---|
| Can an insurer challenge a policy as void ab initio for lack of insurable interest after the two-year incontestability period? | Policies lacking any insurable interest are void ab initio under § 627.404, so incontestability never becomes effective and does not bar late challenges. | Incontestability (§ 627.455) bars belated insurer challenges regardless of basis; such policies are voidable, not void ab initio. | Eleventh Circuit certified this dispositive question to the Florida Supreme Court. |
| If insurer may challenge after two years, does § 627.404 require that the procuring individual have procured the policy in good faith? | § 627.404 requires an insurable interest at inception; Pruco contends sham procurement (intent to assign to investor, third-party premium payments) can defeat asserted insurable interest. | Present owners argue § 627.404 only requires an insurable interest at inception and Florida law permits assignment; no implied good-faith procurement element should be read into the statute. | Eleventh Circuit certified whether § 627.404 contains an implied good-faith procurement requirement to the Florida Supreme Court. |
Key Cases Cited
- W. Reserve Life Assur. Co. of Ohio v. ADM Assocs., LLC, 737 F.3d 135 (1st Cir.) (majority view: policies lacking insurable interest are void ab initio)
- PHL Variable Ins. Co. v. Price Dawe 2006 Ins. Trust ex rel. Christiana Bank & Trust Co., 28 A.3d 1059 (Del. 2011) (Delaware Supreme Court: collected authorities holding no-insurable-interest policies void)
- New England Mut. Life Ins. Co. v. Caruso, 535 N.E.2d 270 (N.Y. 1989) (New York treats certain defects as rendering policy voidable, supporting minority view)
- Bogacki v. Great-West Life Assur. Co., 234 N.W. 865 (Mich. 1931) (Michigan precedent treating incontestability strictly; supports minority view)
- Allstate Life Ins. Co. v. Miller, 424 F.3d 1113 (11th Cir.) (Florida decisions have applied incontestability to bar late insurer contests for fraud-based claims)
- Equitable Life Assur. Soc. of U.S. v. Poe, 143 F.3d 1013 (6th Cir.) (discussion of state approaches to incontestability and void vs. voidable characterization)