Wells Fargo Bank, N.A. v. Pruco Life Insurance Company
200 So. 3d 1202
Fla.2016Background
- Two consolidated appeals concern three life-insurance policies issued through stranger-originated life insurance (STOLI) schemes, where an investor arranges for an insured (often elderly) to obtain a policy and then plans to acquire it after the two-year incontestability period.
- The Berger policy: issued to insure Arlene Berger (beneficiary listed as her husband), procured through a STOLI scheme involving fraudulent financial statements, third-party premium financing, an irrevocable trust, and later sale to Wells Fargo; insurer Pruco sued ~4 years after issuance to void the policy for lack of insurable interest.
- The Guild policies: two $5 million policies on Rosalind Guild (beneficiary initially her daughter and a trust), procured via a STOLI scheme with false financials and third-party premium payments; ownership was later changed and policies sold; Pruco sued ~7 years after issuance to void them for lack of insurable interest.
- Lower courts split: the district court in Berger held policies void ab initio for lack of insurable interest and allowed suit despite the two-year incontestability period; the district court in Guild held Pruco’s claim barred by the two-year incontestability statute.
- The Eleventh Circuit certified two Florida-law questions to the Florida Supreme Court about (1) whether a lack of insurable interest can be asserted after the two-year incontestability period and (2) whether the insurable-interest statute requires the procuring individual to have acted in good faith.
- Florida Supreme Court declined to create a STOLI exception to the two-year incontestability statute, resolving that policies that facially name a beneficiary with an insurable interest at inception become incontestable after two years even if obtained through a STOLI scheme.
Issues
| Issue | Plaintiff's Argument (Pruco) | Defendant's Argument (Wells Fargo / U.S. Bank) | Held |
|---|---|---|---|
| Whether lack of insurable interest can be litigated after the 2‑year incontestability period | STOLI policies were void ab initio for no insurable interest; statute’s purpose permits belated challenge | §627.455 bars challenges after two years; facially valid policies should be protected | Held: No. If a policy names a beneficiary with an insurable interest at inception, §627.455 bars challenges after two years even for STOLI schemes |
| Whether §627.404 requires the procuring individual to have acted in good faith | Pruco: procuring party must have genuine insurable interest and act in good faith; otherwise policy void | Defendants: statute requires only that an insurable interest exist at issuance; no separate good-faith procurement element | Held: Court decided on plain-language basis that §627.404 requires an insurable interest at inception but did not adopt a separate good-faith procurement requirement (question left to future case) |
Key Cases Cited
- Thayer v. State, 335 So.2d 815 (Fla. 1976) (statutory interpretation looks to plain language)
- Citizens Prop. Ins. Corp. v. Perdido Sun Condo. Ass'n, 164 So.3d 663 (Fla. 2015) (where legislature lists exceptions, courts may not imply others)
- Pruco Life Ins. Co. v. Wells Fargo Bank, N.A., 780 F.3d 1327 (11th Cir. 2015) (certified questions regarding STOLI and contestability)
- PHL Variable Ins. Co. v. Bank of Utah, 780 F.3d 863 (8th Cir. 2015) (facially valid policies collected premiums and became incontestable; treating retroactive nullification as a fiction)
- Prudential Ins. Co. of Am. v. Prescott, 176 So. 875 (Fla. 1937) (incontestability clause functions like a statute of limitations)
- Paul Revere Life Ins. Co. v. Damus, Ecker, Rosenthal & Marshall, M.D., 864 So.2d 442 (Fla. 3d DCA 2003) (incontestability means policy stands unaffected by defenses that it was invalid at inception)