In AEI Life LLC v. Lincoln Benefit Life Co.,
No. 17-224, 2018 U.S. App. LEXIS 15485 (2d Cir. Jun. 8, 2018), a
Trust purchased a $6.5 million life insurance policy on an
individual. On the application, it claimed that the named
individual had a net worth of $87 million and an annual income of
$1.5 million. It would later prove that this simply wasn't
true. But in the meantime, a stranger to the policy deposited money
into the Trust, which was used to pay the $205,000 in yearly
premiums.
Roughly three years later, the Trust sold the policy to another
entity, who had no knowledge of the fraud. The new policy owner
eventually sued the insurer, seeking a declaration that the insurer
was barred from challenging the validity of the policy under New
York's two-year contestability statute. The district court
granted the policy owner's motion for summary judgment and the
Second Circuit Court of Appeals affirmed.
