A Minnesota judge has blocked efforts by Sun Life Assurance Company of Canada to amend a complaint in a lawsuit alleging lack of insurable interest in connection with 7 life insurance policies purchased by an 84-year-old businessman.

Sun Life Assurance, a unit of Sun Life Financial Inc., Toronto, originally filed the complaint in the U.S. District Court in Minneapolis in September 2007.

The defendants named in the complaint include names John Paulson, the purchaser of the policies, as well as the agents who handled the transaction and several investors.

Coventry First L.L.C., Fort Washington, Pa., one of the sources of investment funds listed, moved to dismiss the complaint, arguing that the complaint did not sufficiently allege that Coventry had intended and agreed to buy the policy when Paulson acquired it.

The court granted the Coventry First motion.

After Coventry First succeeded with that motion, the other defendants also asked to be dismissed, contending that the claims against them were “identical” to the claims against Coventry First.

The latest order, signed Sept. 3, states that Sun Life then asked the defendants to agree to an amended complaint.

When the defendants declined, Sun Life filed a request to submit an amended complaint to the court.

U.S. Magistrate Judge Susan Richard Nelson writes in the order of the Sun Life request that the request lacks the “requisite specificity” that the defendants reached an agreement with defendant Paulson or “intended to purchase the policies at the time they were issued.”

“Indeed,” Nelson writes, “the allegations could refer to any person or entity” and the Sun Life motion “contains no specific factual allegations of intent.”

Nelson also notes that “the mere fact that a life settlement company purchased a policy from Paulson after the expiration of the contestability period does not establish that the company intended to purchase the policy when it was issued.”

Sun Life declined to comment on the case, citing the fact that the matter is still in litigation.

Thomas Brever, the attorney for Paulson, says the order does not end the suit. His client is waiting for Sun Life’s decision about how to proceed with the case.

“If they proceed with the claims, then it has to prove damages,” Brever says.

The policies have been in place 4 to 5 years, and, the longer Paulson survives, the more likely it will be that the policies will become profitable, Brever says.

Life companies build in certain lapse rate assumptions into their life insurance contracts and “in proving damages it will have to explain those lapse rates to the world,” Brever says.

When asked about press reports that his client also had a number of policies in force with companies other than Sun Life, Brever said he is not sure how many contracts are in-force.

Paulson had a need for insurance both because he had commercial real estate interests valued at $40 million to 50 million and has a large family, including a spouse, 5 children and more than 20 grandchildren, Brever says.

Policies were lapsed when cheaper replacement coverage was found, and some policies were surrendered and others were settled, Brever says.

Michael Freedman, a senior vice president with Coventry, says, “The court got it right” in affirming that, in order to prove the existence of a stranger-originated life insurance transaction, there needs to be evidence of a preconceived agreement by a third party at the contract’s inception.