A case involving the immediate sale of a life policy and insurable interest will go to trial in New York after a federal judge denied a motion for judgment last month.
In a ruling dated January 22, Judge Denny Chin of the U.S. District Court for the Southern District of New York said the daughter of a man who had purchased a $10 million life insurance policy, who put it into a trust and then sold his interest in that trust to a third party, had made enough of claim to bring the matter to trial.
The case, Life Product Clearing LLC v. Linda Angel v. Leon Lobel Insurance Trust and Jonathan S. Berck, trustee (No. 07 Civ. 475 (DC), began with Leon Lobel, a retired 77-year-old butcher who established the Leon Lobel Insurance Trust and named himself beneficiary on Nov. 15, 2005.
At the same time, he applied for a $10 million life insurance policy designating the Trust as sole beneficiary. Six days later, Lobel sold his interest in the trust and any rights to the policy proceeds to LPC, receiving $300,000. On Jan. 6, 2006, he died. A year later, Lincoln Life & Annuity Company of New York paid $10,712,329 to the trust, including interest.
The dispute arose when LPC filed an action claiming the proceeds, and Lobel’s daughter, Linda Angel, filed a counterclaim. Angel also filed a complaint seeking a declaration that the trust is void and that Lobel’s estate should receive the money.
In his ruling, Judge Chin also noted that the issue at hand was whether the facts of the case provided a basis for Angel’s claims that LPC was a stranger to Lobel and that the transaction was essentially a wager on his death.
Noting precedents, Judge Chin said the law “has long shown a disdain” for such “wager” transactions. Although he also pointed out that New York State law allows an individual to assign the benefits of their life policy to someone else, at any time, he noted that the law also requires that the policy be purchased on the insured’s own initiative to be considered in line with insurable interest rules.