TAG | life carriers failure to pay death benefits
Comments off · Posted by Securities Lawyer in FINRA
In an InvestmentNews.com article from March 6, 2012, Darla Mercado writes that the Lincoln National Life Insurance Co. will pay $5 million in death benefits for a life insurance policy the insurer had contended was fraudulent.
The jury in the U.S. District Court for the Southern District of Florida on Friday found in favor of plaintiff Steven A. Sciarretta, a trustee of the Barton Cotton Irrevocable Trust and owner of a $5 million life insurance policy on the life of the late Mr. Cotton, in a case against Lincoln National.
Mercado writes that Mr. Sciarretta took the insurer to court last April because Lincoln would not pay the death benefit proceeds, even though Mr. Cotton had died after the two-year contestability period in which carriers can refute claims had expired. Lincoln countersued and alleged Mr. Cotton’s policy was void from the start because he had indicated falsely on the policy application that he had no intent to sell the coverage on the secondary market or to assign a beneficial interest in the policy to a trust.
Lincoln National, the insurer, claimed the policy was issued at the behest of so-called stoli promoters. Stoli, or stranger-originated life insurance, involves buyers’ purchasing life insurance coverage they don’t need for the express purpose of selling the death benefits to investors.
The InvestmentNews.com article goes on to say that the jury found the trust had indeed made false statements on the life insurance application. But the panel also stated that it believed Mr. Cotton had not intended at the moment of purchase to transfer the policy to another party with no insurable interest in his life. The jury also found that Lincoln itself was not harmed by these misrepresentations, according to the verdict.
Mercado adds that Mr. Sciarretta benefited from Florida’s insurable interest law, which contains an implicit “good faith” requirement, which requires the insurer to prove that the policy was purchased with the sole intent to sell it to a stranger who doesn’t have an insurable interest in the life of the insured person. In this situation, however, Mr. Cotton’s family members testified that he had intended for the insurance to benefit them. Because the policy was issued in good faith, the trust will end up collecting on the full $5 million.
If you or a family member have become alleged victims of life insurance fraud, contact an insurance fraud attorney for a free consultation on how to recover your investment losses. To speak with an attorney, call 888-760-6552, or visit securitieslawyer.com. Lars K. Soreide will stand up and fight for the rights of consumers.
Soreide Law Group, PLLC, representing Insurance Fraud Victims in Federal Court, State Court and before the Financial Industry Regulatory Authority (“FINRA”).
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