New York Court Denies Reinstatement of STOLI Policies for Lack of Standing, Finds Issue of Fact on Good Faith and Fair Dealing

The plaintiff was an investment trust that purchased life insurance contracts. It brought the instant action seeking damages for the insurer’s alleged breach of nine lapsed life insurance policies on three different individuals with a collective face value of over $80 million.

It was undisputed that all nine policies were pieces of a “Stranger Originated Life Insurance” or “STOLI” transaction. Although purchasing life insurance with the intent of selling it to strangers became illegal in 2009, these transactions were legal at the time the policies …

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President Trump Takes Aim at Affordable Care Act; New York Governor Responds

Within hours of taking the Presidential oath of office, President Donald J. Trump issued his first executive order and it was directed at the Patient Protection and Affordable Care Act (ACA). The executive order formalized the Trump Administration’s policy to “seek the prompt repeal of the [“ACA”].” President Trump then directed executive department heads to “waive, defer, grant exemptions from, or delay the implementation of any provision or requirement” of the [ACA] that would impose a fiscal or regulatory burden on those affected in any …

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Cease and Desist: Is This the Beginning of the End for Concierge Medicine Practices?

A small but growing trend to regulate the practice of “concierge medicine” (or “retainer medicine”) could significantly impact the healthcare and insurance industries. On October 11, 2016, the State of Washington Insurance Commissioner issued a Cease and Desist Order against a dental practice in that state, David Ford, DDS dba David Ford Dental. The order obliges the dental practice to immediately cease and desist from:

  1. Engaging in or transacting the unauthorized business of insurance or acting as an unregistered health care service contractor in the
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Seventh Circuit: No Insurable Interest, No Problem (For the Beneficiary, That Is!)

The Seventh Circuit recently affirmed a district court decision upholding payment under a life insurance policy purchased by a securities intermediary. The decision first addressed the common law’s prohibition on wagering contracts, or stranger-originated life insurance, and the traditional remedy which invalidates any such policy of insurance. However, this case was subject to Wisconsin law, whose legislature places the risk on the insurer for issuing a policy to someone without an insurable interest by refusing to invalidate such contracts. Specifically, the Wisconsin statute reads (Wis. …

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Insurance Companies Narrowing Role in ACA Exchanges

In recent months, several major health insurance companies, including Aetna, Humana, and UnitedHealth Group, have announced their intention to reduce their footprints in the ACA healthcare exchanges. Aetna recently announced that it sustained a $200 million loss in the second-quarter of 2016 and over $430 million since January 2014 with respect to individual products. As a result, it “will reduce its individual public exchange participation from 778 to 242 counties for the 2017 plan year, maintaining an on-exchange presence in Delaware, Iowa, Nebraska, and Virginia.” …

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NYDFS Issues Circular Letters Pertaining to Coverage for Women’s Health Issues

In the last four months, the New York State Department of Financial Services (NYDFS) has issued three letters relating to coverage issues associated with women’s health. First, on April 25, 2016, NYDFS issued Insurance Circular Letter No. 1 (2016) to remind insurers that federal law “requires group health plans and issuers offering group or individual health insurance coverage to provide, with no copayment, coinsurance or deductible, preventive services that have a rating of ‘A’ or ‘B’ in the current recommendations of the United States Preventive …

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Principle Based Reserving Coming January 1, 2017

In recent years, life insurance companies have expressed concern that the current approach to product reserves does not take into account the increasingly complex, non-static, nature of current life insurance products. In response to these concerns, the National Association of Insurance Commissioners (NAIC) conducted “an extensive analysis of amended Standard Valuation Laws passed by 45 states, representing nearly 80 percent of the U.S. life insurance market.” The end result happened on June 10, 2016, when the National Association of Insurance Commissioners announced that …

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A Supreme Lesson on Diligence and Equity: Court Bars Recovery of Equitable Lien Under ERISA Plan

The Supreme Court issued its decision in Montanile v. Board of Trustees of National Elevator Industry Health Benefit Plan , holding that the fiduciary could not enforce its equitable lien against general assets. The court reversed the Eleventh Circuit, finding that where a plan participant has obtained a settlement from a third party — but has dissipated the settlement on nontraceable items — the fiduciary cannot bring a suit under Section 502(a)(3) to attach the general assets of the participant as the claim is not …

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Employee’s Equitable Interest in Boss’s Life Insurance Policy Trumps Boss’s Ability to Designate Wife as Beneficiary

In Shuttle v. Ligor (Mass. App. Ct., Nov. 20, 2015) the Massachusetts Court of Appeals held an employer was equitably estopped from changing the beneficiary of his life insurance policy from his employee to his wife, but the wife (who received the policy proceeds) owed nothing to the employee.

An employee of many years had been informed by her boss that she was designated as a beneficiary under his life insurance policy. The employee was told that her boss’s designation of her as beneficiary …

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Equity Trumps “Love.” And Designated Beneficiaries. With ERISA’s Blessing. Court Imposes Constructive Trust on Life Insurance Proceeds and Insurer Triumphs Through Interpleader

In McCarthy v. Estate of McCarthy, 2015 U.S. Dist. LEXIS 153107 (SDNY, November 10, 2015), a federal judge imposed a constructive trust on the proceeds of a life insurance policy in favor of the decedent’s ex-wife and children over his girlfriend. Equity required the constructive trust due to the decedent’s breach of his divorce agreement, regardless of who was actually the designated beneficiary.

Pursuant to the terms of a 2012 divorce settlement, the decedent agreed to a number of conditions regarding spousal and child …

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