United States District Court, E.D. Tennessee
case concerns a life insurance policy issued by Sun Life
Assurance Company of Canada on the life of Erwin Collins. Sun
Life filed this action seeking a declaration that the policy
is void due to having been procured as a wagering contract on
the life of Collins. Sun Life contends the policy is a
“stranger originated life insurance (STOLI)”
policy, wherein investors utilized Collins' life as a
conduit to procure the policy, wager on his life, and profit
from his death. Therefore, Sun Life argues Conestoga has no
right to recover proceeds from the life insurance policy
because the policy is void ab initio.
Conestoga Trust Services, LLC, is the sixth assignee of the
ownership rights in the policy. Conestoga responds there is
no evidence that “stranger investors” procured
the policy, and it is permissible to take out a life
insurance policy with the hope of trying to sell the policy
on the secondary market. In the event the court declares the
Sun Life policy void, Conestoga asserts Sun Life must return
to Conestoga the premiums paid to Sun Life.
reasons that follow, the court finds there was a pre-existing
agreement for Erwin Collins to obtain the policy and transfer
it to a stranger investor. Therefore, the policy constitutes
a STOLI scheme, and under Tennessee law, it violates public
policy and is void ab initio. As a result, Sun Life
does not have to pay the death benefit to Conestoga. However,
Sun Life must refund the premiums to Conestoga so that Sun
Life does not obtain a windfall.
to discussing the motions for summary judgment, the court
will address Conestoga's motion to amend and Sun
Life's motion to strike.
Motion to Amend
moves to amend its answer and counter-complaint to include an
alternative claim for bad faith under Tennessee law, and an
alternative claim for return of premiums paid by Conestoga to
Sun Life [R. 71]. Sun Life opposes the motion as untimely,
futile, and delaying the proceedings [R. 82].
to Federal Rule of Civil Procedure 15(a)(2), a party may
amend its pleading only with the opposing party's written
consent or the court's leave. Although the decision to
permit amendment of pleadings is committed to the discretion
of the court, the court's discretion is limited by Rule
15(a)'s liberal policy of permitting amendments to ensure
the determination of claims on their merits. Marks v.
Shell Oil Co., 830 F.2d 68, 69 (6th Cir.
1987). Because Rule 15(a) envisions liberal allowance of
amendments to pleadings, there must be some substantial
reason justifying denial of the motion. Smith v. Garden
Way, Inc., 821 F.Supp. 1486, 1488 n. 2 (N.D.Ga. 1993).
In evaluating the interests of justice, courts typically
consider whether the amendment is brought in bad faith or for
dilatory purposes, would result in undue delay or prejudice
to the opposing party, or would be futile. Graham v.
Luttrell, 191 F.3d 452 (6th Cir. 1999).
Conestoga's motion to amend is timely under the
court's order extending the trial date and all associated
pretrial deadlines. See R. 37. Further, the court
finds the proposed amendments will cause Sun Life no
prejudice or delay because the parties' summary judgment
filings already address the claims for bad faith penalty and
for return of premiums. Accordingly, in the interests of
justice and pursuant to Rule 15(a), Conestoga's motion to
file an amended answer and counter-complaint [R. 71] is
Motion to Strike
the close of briefing on the parties' cross-motions for
summary judgment, Sun Life filed a notice of supplemental
authority to apprise the court of a development in one of the
cases cited in Sun Life's brief [R. 107]. Conestoga filed
its own notice of supplemental authority that included
argument regarding the relevance of Sun Life's
supplemental authority and Conestoga's supplemental
authority [R. 108]. Sun Life, in turn, filed a motion to
strike Conestoga's notice of supplemental authority on
the grounds Conestoga was attempting to expand on its
previous arguments [R. 109]. Conestoga filed a response to
Sun Life's motion to strike arguing that Conestoga merely
responded to Sun Life's characterization of the
supplemental authority [R. 110].
court appreciates the parties providing notice of
supplemental authority decided since the close of briefing.
However, the court will decide for itself whether the cited
authority is relevant to the issues in this case.
Accordingly, the court finds no merit to Sun Life's
motion to strike [R. 109], and the motion is
court will now address the parties' motions for summary
Motions for Summary Judgment A. Standard of
judgment under Rule 56 of the Federal Rules of Civil
Procedure is proper “if the movant shows that there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a). The moving party bears the burden of establishing that
no genuine issues of material fact exist. Celotex Corp.
v. Cattrett, 477 U.S. 317, 330 n. 2 (1986); Moore v.
Philip Morris Co., Inc., 8 F.3d 335, 339 (6th
Cir. 1993). All facts and inferences to be drawn therefrom
must be viewed in the light most favorable to the nonmoving
party. Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986); Burchett v.
Keifer, 301 F.3d 937, 942 (6th Cir. 2002).
the moving party presents evidence sufficient to support a
motion under Rule 56, the nonmoving party is not entitled to
a trial merely on the basis of allegations. Celotex,
477 U.S. at 317. To establish a genuine issue as to the
existence of a particular element, the nonmoving party must
point to evidence in the record upon which a reasonable
finder of fact could find in its favor. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The
genuine issue must also be material; that is, it must involve
facts that might affect the outcome of the suit under the
governing law. Id.
Court's function at the point of summary judgment is
limited to determining whether sufficient evidence has been
presented to make the issue of fact a proper question for the
factfinder. Id. at 250. The Court does not weigh the
evidence or determine the truth of the matter. Id.
at 249. Nor does the Court search the record “to
establish that it is bereft of a genuine issue of
fact.” Street v. J.C. Bradford & Co., 886
F.2d 1472, 1479 (6th Cir. 1989). Thus, “the
inquiry performed is the threshold inquiry of determining
whether there is a need for a trial - whether, in other
words, there are any genuine ...