Pruco Life Insurance Company v. Wells Fargo Bank, N.A.
846 F.3d 1188
11th Cir.2017Background
- Two consolidated appeals involved STOLI (Stranger-Originated Life Insurance) policies that the insurer (Pruco) sought to invalidate years after issuance.
- Pruco argued the policies were void ab initio because the purchaser lacked the insurable interest required by Fla. Stat. § 627.404 at policy inception.
- Policy owners (Wells Fargo, U.S. Bank) relied on Fla. Stat. § 627.455, which makes policies incontestable after two years in force; Pruco did not contest within that period.
- The Eleventh Circuit certified two questions to the Florida Supreme Court about (1) whether lack of insurable interest can be raised after the two-year contestability period and (2) whether § 627.404 requires the purchaser to procure the policy in good faith.
- The Florida Supreme Court held that STOLI policies like these have the requisite insurable interest at inception and therefore become incontestable after two years; it answered the certified question negatively (no post-two-year challenge for STOLI creation).
- Following that guidance, the Eleventh Circuit affirmed judgment for U.S. Bank (Guild policy) and reversed judgment for Pruco as to the Berger policy, remanding for further proceedings consistent with the opinion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a party may challenge a life-insurance policy as void ab initio for lack of insurable interest after the two-year contestability period | Pruco: No insurable interest for STOLI; thus policy void ab initio and challenge not time-barred | Policy owners: Policies became incontestable after two years under § 627.455; insurer waived late challenge | No — FL Supreme Court held STOLI policies have the required insurable interest at inception and become incontestable after two years; post-two-year challenge for STOLI creation is barred |
| Whether § 627.404 requires the person procuring the insurance to have acted in good faith when procuring the policy | Pruco: Insurable-interest inquiry should include a good-faith procurement requirement | Policy owners: Statute does not require purchaser good faith to establish insurable interest at inception | Effectively no — Florida Supreme Court treated the statutory insurable-interest requirement as satisfied for STOLI without imposing a separate good-faith procurement requirement |
Key Cases Cited
- Pruco Life Ins. Co. v. Wells Fargo Bank, N.A., 780 F.3d 1327 (11th Cir. 2015) (Eleventh Circuit certified questions to Florida Supreme Court regarding STOLI, insurable interest, and contestability)
- Wells Fargo Bank, N.A. v. Pruco Life Ins. Co., 200 So.3d 1202 (Fla. 2016) (Florida Supreme Court held STOLI policies have insurable interest at inception and become incontestable after two years)