Sun Life Assurance Company of Canada v. Imperial Premium Finance, LLC, 091818 FED11, 17-10189
|Docket Nº:||17-10189, 17-10415|
|Opinion Judge:||WALKER, Circuit Judge.|
|Party Name:||SUN LIFE ASSURANCE COMPANY OF CANADA, Plaintiff-Appellee, v. IMPERIAL PREMIUM FINANCE, LLC, Defendant-Appellant. SUN LIFE ASSURANCE COMPANY OF CANADA, Plaintiff-Appellant, v. IMPERIAL HOLDINGS, INC., IMPERIAL PREMIUM FINANCE, LLC, IMPERIAL LIFE FINANCING II, LLC, IMPERIAL LIFE SETTLEMENTS, LLC, IMPERIAL PFC FINANCING, LLC, et al., Defendants-...|
|Judge Panel:||Before MARTIN, JORDAN, and WALKER, Circuit Judges. JORDAN, Circuit Judge, concurring.|
|Case Date:||September 18, 2018|
|Court:||United States Courts of Appeals, Court of Appeals for the Eleventh Circuit|
Appeals from the United States District Court for the Southern District of Florida D.C. Docket Nos. 9:13-cv-80385-DLB, 9:13-cv-80730-DLB
Before MARTIN, JORDAN, and WALKER, [*] Circuit Judges.
WALKER, Circuit Judge.
These two appeals arise from dueling lawsuits pitting Sun Life Assurance Company of Canada ("Sun Life"), a life insurance company, against Imperial Holdings, Inc. and its affiliates ("Imperial"), a company that offers financing for insureds to pay their monthly premium payments. Both suits relate to life insurance policies that were issued by Sun Life to non-parties and that were subsequently acquired by Imperial. Imperial is therefore a stranger to the insureds, yet, as the owner of the policies, it stands to receive the life insurance benefits upon the deaths of the insureds. Sun Life alleges that Imperial's ownership of the policies violates state laws that are designed to prohibit wagering on human lives, but, more centrally, that Imperial secured the policies through an unlawful and tortious conspiratorial scheme. Imperial, for its part, contends that its acquisition and ownership of the policies is lawful, and alleges that Sun Life's attempts to interfere with its ownership of and rights under the policies, including its filing of its lawsuit here, is itself part of Sun Life's own fraudulent scheme and in breach of the policy contracts. In a series of rulings after consolidating the two cases, the United States District Court for the Southern District of Florida (Dave Lee Brannon, Magistrate Judge)1 dismissed all claims in both cases, some at the pleading stage and the remainder at summary judgment. We VACATE in part, AFFIRM in part, and REMAND both cases for further proceedings.
These appeals require us to address several issues surrounding the rights to acquire and own life insurance policies that, upon the death of the insured, distribute benefits to an entity that had no specific interest in the continuation of the insured's life. In some contexts referred to as "stranger-originated life insurance," or "STOLI," courts and lawmakers have been grappling for more than a century with such policies, juggling two competing concerns: (i) limiting the ability to wager on human life and (ii) promoting the free assignability of property rights. See Grigsby v. Russell, 222 U.S. 149, 155-57 (1911) (Holmes, J.) (concluding that, despite the wagering concerns, a life insurance policy is akin to any other property and may be sold); see also Sciarretta v. Lincoln Nat'l Life Ins. Co., 778 F.3d 1205, 1207-09 (11th Cir. 2015).
The life insurance policies subject to these disputes were issued initially to senior citizens by Sun Life but were ultimately procured by Imperial through an affiliated company that offered loans to the insureds to cover their policy premiums. As to nearly all of the policies relevant to these cases, 2 Imperial's ownership came about as follows: (i) a senior citizen applied for and received a life insurance policy from Sun Life, naming as the policy beneficiary an irrevocable life insurance trust established for the benefit of his or her spouse and/or children; (ii) the insured secured non-recourse financing for the payment of the monthly policy premiums from Imperial, with the policy serving as collateral; (iii) pursuant to the loan agreements, Imperial was permitted to foreclose on and acquire the policy if the borrower defaulted; and (iv) the borrower defaulted, leading Imperial to take ownership of the insured's policy.
Once Sun Life learned of Imperial's procurement of the policies, it began to question the propriety of Imperial's ownership, both under the insurance contracts and under state and federal law. Sun Life's doubts as to the lawfulness of Imperial's acquisition and ownership of the policies led to the two competing lawsuits that are the subjects of the instant appeals.
Sun Life's Complaint. Sun Life filed suit in the Southern District of Florida, alleging not just that Imperial's ownership of the policies violates state law restrictions on the wagering on human life, but, in what Sun Life refers to as the "nucleus" of its suit, that Imperial secured its Sun Life policies through a fraudulent and conspiratorial scheme. No. 17-10415 Br. of Appellant at 35. Sun Life alleged that Imperial knew that Sun Life, due principally to profitability concerns, would not have issued a life insurance policy if it knew of the applicant's predetermined intent to use premium financing or to transfer ownership of the policy to a premium finance company, such as Imperial, that would use the policies primarily as an investment vehicle. Desirous of obtaining profitable Sun Life insurance policies nonetheless, Imperial orchestrated a scheme to obtain them.
The premise of Imperial's alleged scheme rested upon the difference between policies likely to be in effect over a long period (profitable to Sun Life but not to Imperial) and policies that would likely be paid out in the short term (less profitable to Sun Life but more profitable to Imperial). Under the scheme, if Imperial were the owner or beneficiary of multiple policies it could decide which ones were more likely to result in an early payout and stop paying premiums on the rest.
The alleged scheme worked as follows. "At the core of Imperial's scheme was a network of insurance producers" that served as "referral sources for [Imperial's] premium finance business" by actively "recruit[ing] senior citizens in order to originate life insurance policies that would be funded by Imperial." Dkt. 150 ("SL SAC") ¶¶ 34-36. The producers, at the direction of Imperial, see SL SAC ¶¶ 34-35, "solicited senior citizens through advertisements in periodicals, seminars, flyers, and personal solicitation at senior care centers, hospitals, restaurants, and clubs frequented by senior citizens." SL SAC ¶ 38. The producers would then assist the senior citizens in obtaining the requisite medical records and life expectancy reports, which the producers would submit in the first instance to Imperial for Imperial to "determine whether the proposed senior was suitable for Imperial's purposes." SL SAC ¶ 39 (emphasis added). If Imperial so concluded, Imperial would then direct the producers "to move forward with a formal application, . . . typically direct[ing] the producer in selecting the insurer, the insurance product, and the face amount of the policy." SL SAC ¶ 40.
With each life insurance application submitted to Sun Life, Sun Life required the producers and the proposed insureds to answer certain questions, including whether premium financing would be used to fund the policy. SL SAC ¶ 42. The producers falsely answered those inquiries in the negative, having full knowledge that Imperial had already made the decision internally to provide financing for the insureds' premium payments. SL SAC ¶¶ 42-44. Although Sun Life paid the producers a commission for their services, the producers were required to turn over those commissions in full to Imperial, who would then remit to the producers between 10 to 50% of the Sun Life commission. SL SAC ¶ 45.
After the policies were issued, Imperial hid from Sun Life the fact that it was making premium payments, which ultimately meant that Sun Life was unaware of Imperial's procurement of the policies until it was too late for Sun Life to contest it. Imperial accomplished this by "funnel[ing] [the] premium payments through the Bank of Utah and the Family Insurance Trust." SL SAC ¶¶ 358, 392. The Bank of Utah was a co-trustee of the irrevocable life insurance trusts that served as the ownership vehicles for each of the policies. SL SAC ¶¶ 46-47. Although at the policies' outset there was a sole trustee-generally a family member of the insured-"after the policy was issued Imperial immediately replaced the trust agreement with its own amended and restated trust agreement . . . [that] name[d] Bank of Utah as the co-trustee, and virtually eliminated any discretion on the part of the original trustee to manage the trust assets." SL SAC ¶ 47. Imperial would deposit the funds for the insureds' policy payments into an account created at the Bank of Utah (in the name of the Family Insurance Trust), which would then issue the payments to Sun Life, thereby concealing Imperial's involvement. SL SAC ¶ 48.
The Imperial loans were structured such that the borrowers would generally default...
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