Sciaretta v. Lincoln National Life Insurance
899 F. Supp. 2d 1318
S.D. Fla.2012Background
- Plaintiff as trustee of the Barton Cotton Irrevocable Trust sues Lincoln to recover death benefits on a $5 million policy.
- Lincoln counters that the policy was void ab initio for lack of insurable interest and asserts fraud, negligent misrepresentation, and civil conspiracy against Plaintiff and former trustee Muchnick.
- Cotton and Muchnick allegedly executed a STOLI scheme in 2008 to obtain the policy, with Wealthmodes arranging and cosmetic ownership via a trust.
- Policy issued June 6, 2008 to the Trust; initial premiums and financing arrangements (including Imperial premium financing) are disclosed.
- Era with Wealthmodes granted exclusive rights and an Exclusive Rights Fee paid to Cotton; premiums later financed and paid by various entities.
- Cotton died October 2010; claim submitted October 29, 2010; Lincoln has not paid the death benefit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether policy lacked insurable interest at inception | Sciaretta contends insurable interest existed at inception. | Lincoln argues lack of insurable interest, requires good faith. | Genuine factual issue as to bad faith/intent remains |
| Whether continued insurability provision is valid under incontestability | Provision conflicts with incontestability statute; not a valid condition precedent. | Provision is a valid condition precedent; insurability tied to health/state as applied. | Continued insurability clause not dispositive; issue remains factual |
| Whether Lincoln may retain premiums paid | Retention of premiums should be evaluated after insurable-interest issue. | Argues entitlement to premiums if policy void ab initio. | Still a genuine issue of material fact |
| Whether fraud/negligent misrepresentation claims are barred by incontestability | Counts barred by incontestability statute. | Claims may proceed; independent tort actions possible. | Not barred; tort claims survive in part; summary judgment denied |
| Whether Muchnick is liable and whether conspiracy/fraud claims survive | Muchnick participated in misrepresentations and the STOLI scheme. | Asserts lack of personal liability and lack of conspiracy proof. | Genuine issues of material fact remain; partial denial of Muchnick's motion |
Key Cases Cited
- Mathews v. Metropolitan Life Ins. Co., 89 So.2d 641 (Fla.1956) (continued insurability may reflect health at application delivery)
- Griffin v. American General Life and Acc. Ins. Co., 752 So.2d 621 (Fla. 2d DCA 1999) (validity of continued insurability provisions as conditions precedent)
- Life Ins. Co. of North America v. Cichowlas, 659 So.2d 1333 (Fla. 4th DCA 1995) (continued insurability provisions and insurability at time of delivery)
- Gulf Life Ins. Co. v. Green, 80 So.2d 321 (Fla.1955) (policy not to take effect unless insured in sound health)
- Walk v. Lamar, 202 So.2d 617 (Fla.3d DCA 1967) (policy effectiveness tied to health and delivery conditions)
- Jones v. Bankers Sec. Life Ins. Soc. Kane, 885 F.2d 820 (11th Cir.1989) (separate tort action not barred when challenging validity of contract)
- Centurion Air Cargo, Inc. v. United Parcel Service Co., 420 F.3d 1146 (11th Cir.2005) (implied covenant of good faith in contracts; application to insurance context)
- Jeffery v. Sarasota White Sox, Inc., 64 F.3d 590 (11th Cir.1995) (summary judgment standard; genuine issues of material fact)
- Mize v. Jefferson City Bd. of Educ., 93 F.3d 739 (11th Cir.1996) (standard for genuine issues of material fact)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S.1986) (one-sided evidence; summary judgment proper where no genuine dispute)