Life Insurance & Annuities

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In November, we reported on the New York Court of Appeals’ decision in Kramer v. Phoenix Life Insurance Company, 15 N.Y.3d 539 (2010), in which the Court determined that a person may purchase a life insurance policy and then immediately transfer it to someone who lacks an insurance interest in that life, even if the policy were purchased with the intent of selling it. …
Read More Update: District Judge May Toss N.Y. STOLI Suit After Court of Appeals Ruling

This updates our June 30, 2010 blog posting.  The New York Insurance Department (“NYID”) issued a draft circular letter last year regarding the implications of excess withdrawals from annuities with guaranteed minimum withdrawal benefits (“GMWB”).  On February 7, 2011, the NYID finalized and issued the circular letter as Circular Letter No. 5 (“Circular Letter”). …
Read More New York issues Circular Letter requiring Consumer Disclosures Explaining Excess Withdrawals from Annuities

On January 6, 2011, New Jersey Governor Chris Christie signed legislation on the Interstate Insurance Product Regulation Compact (the “Compact”).  With the passage of this legislation, New Jersey becomes a member of the national commission that develops uniform standards and consumer protections for asset-based insurance products (e.g., life insurance, annuities, disability income and long-term care insurance).  The Compact also establishes a clearinghouse for review of these product filings. …
Read More New Jersey Joins the Interstate Insurance Product Regulation Compact

This updates our June 1, 2010 posting.  The Texas Department of Insurance (“TDI”) has officially banned the use of discretionary clauses in insurance contracts with an order issued on December 3, 2010 (the “Order”).  The ban is the result of a petition filed by the Texas Office of Public Insurance Counsel (OPIC) on October 28, 2009 requesting the ban.  Subsequent to the petition, the TDI held a public hearing on July 12, 2010. …
Read More UPDATE: Texas Bans Use Of Discretionary Clauses In Insurance Contracts

A five-judge majority of the New York Court of Appeals has declared that a person may procure an insurance policy on his or her own life and immediately transfer that policy to one without an insurable interest, regardless of the purchaser’s intent. …
Read More New York Court of Appeals Approves of Stranger-Owned Life Insurance Contracts, For Now

In Jackson v. Farmers New World Life Ins. Co., the United States District Court for the Eastern District of Oklahoma ruled that the insurer did not act in bad faith or breach its contractual duty when it rescinded a $150,000 non-smokers life insurance policy after discovering that the insured was, in fact, a smoker. …
Read More Court Upholds Insurer’s Decision to Deny Benefits to Smoker’s Widow

The NAIC Life and Annuities Committee has posted a draft model bulletin (the “Draft Bulletin”) recommending that insurers implement certain safeguards in order to limit their potential exposure to stranger-originated annuity transactions (“STOA”).  STOA transactions are defined in the Draft Bulletin as transactions in which agents or investors offer an individual, who is usually a stranger to the agent or investor, a nominal fee for the use of the individual’s identity as the measuring life on an investment oriented annuity. …
Read More NAIC Posts Draft STOA Bulletin for Comment

Effective July 1, 2010, Florida joined several other states in reducing the liability of trustees of irrevocable life insurance trusts (“ILITs”), with the enactment of § 736.0902 – Non-application of prudent investor rule.  The Florida prudent investor rule protections relieve the trustee from any duty to manage the life insurance as an investment.  Further, it relieves the trustee from liability for any loss sustained with respect to the life insurance. …
Read More Florida’s Statutory Reduction of ILIT Trustee Liability

On the heels of an investigation by the Attorney General of New York Andrew Cuomo regarding the use of retained asset accounts[1] by life insurers, United States House Representative Deborah Halvorson (Ill.-D) recently introduced legislation that would require, among other things, beneficiaries of the Servicemembers’ Group Life Insurance program to receive financial counseling and disclosure information regarding life insurance payments. …
Read More Legislation Introduced into the House that Mandates Certain Disclosures to Beneficiaries of Life Insurance for Military Personnel

As mentioned in our prior post, New York Attorney General Andrew Cuomo has begun an investigation into the alleged misuse of retained asset accounts by life insurance companies.  This probe started with two of the largest life insurers and has now been widened to include six more.  The latest subpoenas were sent on Friday, July 30th. …
Read More New York Attorney General Office Broadens its Probe into the Life Insurance Industry’s Use of Retained Asset Accounts; Class Action Lawsuit Against Life Insurer Filed