Sun Life Assurance Company of Canada v. U.S. Bank National Association, 693 F. App'x 838

Sun Life issued a $5 million life insurance policy (the Policy) on Phyllis Malkin in 2006; U.S. Bank later owned the Policy after purchasing it from Coventry.
Larry Bryan’s brokerage, Simba, solicited elderly clients and worked with funders (like Coventry) who evaluated applicants and often controlled trusts listed as policy owners; Malkin did not pay premiums herself.
In 2008 the Malkin Trust sold the Policy to Coventry for $255,000; Coventry then sold the Policy to U.S. Bank, which paid premiums from 2008 until Malkin’s death in 2014.
Sun Life refused to pay benefits in 2014 and sued, alleging the Policy was a STOLI (stranger-originated life insurance) wagering contract void ab initio for lack of insurable interest.
The district court applied Delaware law, held the Policy lacked an insurable interest and was void ab initio, and ordered Sun Life to return premiums paid; it limited the refund to premiums paid after U.S. Bank acquired the Policy and denied prejudgment interest.
On appeal, the court affirmed the void-for-lack-of-insurable-interest holding but reversed the denial of prejudgment interest, holding interest accrues from the dates of the wrongful premium payments.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Policy was void ab initio for lack of insurable interest (STOLI)	Sun Life: Policy was a STOLI wagering contract with no insurable interest at inception, so void	U.S. Bank: Policy valid as owned and funded by purchaser; not void ab initio	Court: Delaware law — Policy lacked insurable interest at inception and was void ab initio (affirmed)
Which law governs resolution of claims	Sun Life: Delaware law applies	U.S. Bank: Opposed application of Delaware (different choice might favor insured)	Court: Delaware law governs (affirmed)
Whether U.S. Bank is entitled to return of premiums it paid	U.S. Bank: Yes, premiums paid on a void policy must be refunded	Sun Life: Either no refund or limited refund; contested which premiums refundable	Court: U.S. Bank entitled to return of premiums paid after it acquired the Policy (affirmed as to scope)
Whether prejudgment interest is payable on refunded premiums	Sun Life: No prejudgment interest warranted	U.S. Bank: Prejudgment interest required to compensate time value of money	Court: Reversed district court; under Delaware law prejudgment interest is mandatory and accrues from date of each wrongful payment (remanded to calculate amount)

Sciarretta v. Lincoln Nat. Life Ins. Co., 778 F.3d 1205 (11th Cir. 2015) (describing STOLI transactions and factual scheme)
Citadel Holding Corp. v. Roven, 603 A.2d 818 (Del. 1992) (prejudgment interest awarded as a matter of right and computed from date payment is due)
Metro. Mut. Fire Ins. Co. v. Carmen Holding Co., 220 A.2d 778 (Del. 1966) (general rule: interest starts when payment should have been made; accrual rules)
Valeant Pharm. Int’l v. Jerney, 921 A.2d 732 (Del. Ch. 2007) (prejudgment interest awarded from date of wrongful payment)

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.