Examining the Wilmington Trust v. Ameritas Life Insurance Legal Precedent

Case Update: Wilmington Trust, National Association v. Ameritas Life Insurance Corp.

In a recent decision from the Supreme Court of Georgia, the case of Wilmington Trust, National Association v. Ameritas Life Insurance Corp. highlighted pivotal issues regarding a $6 million life insurance policy insuring Jacqueline Leone. The controversy unfolded when Ameritas Life Insurance Corp. denied Wilmington Trust's death benefits claim, invoking the policy's classification as a stranger-originated life insurance (STOLI) arrangement, thus constituting an unauthorized wager on human life.

The core issue involved Georgia's insurable-interest statute, OCGA § 33-24-3(i) (2006), which nullifies life insurance policies initiated by third parties lacking an insurable interest at the contract's start. The U.S. District Court for the Northern District of Georgia sought clarity from the Georgia Supreme Court about when third-party involvement triggers this legal provision. This inquiry aims to refine the regulatory compliance requirements surrounding insurable interest.

The Georgia Supreme Court developed a methodology to determine when a policy is “procured or caused to be procured” by a third party. Breaking from rigid roles like insured participation, they adopted a "totality-of-the-circumstances" approach to assess who effectively secured the policy. This method recognizes the complex nature of transactions such as STOLI schemes, premium-financing programs, and life-settlement arrangements, reflecting both historical and contemporary regulatory considerations.

Referencing cases like Crum v. Jackson Nat'l Life Ins. Co., the Court reaffirmed that life insurance must serve legitimate, interest-aligned purposes rather than act as speculative investment vehicles. The ruling underscores that even when the insured is involved, a third party might still be deemed the policy procurer if they were the primary actor in its acquisition.

The decision sets a critical precedent for life insurance carriers in Georgia, emphasizing scrutiny of policies potentially exploitative under the guise of legitimate contracts. By crafting this nuanced assessment framework, the Georgia Supreme Court safeguards the integrity of the insurable interest requirement, aligning regulatory enforcement with the evolving dynamics of the insurance industry.

This case offers insight into the judicial approach to complex insurance arrangements in Georgia, impacting insurers' underwriting, risk management, and compliance strategies. The industry must now adapt to this clarified regulatory landscape, focusing on real control dynamics over mere transactional appearances.

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