What is an “insurable interest?”

It was a slow week in the Fifth District, enlivened only by a sleazy lawyer getting his just deserts. “In October 2004, insurance agent Paul W. Moses, II, filled out an application with ReliaStar Life Insurance Company to insure the life of then 85-year-old Verlee Tennant.
Mr. Moses was unrelated by blood or law to Ms. Tennant. He had served as Ms. Tennant’s broker from approximately 1993 to 1996 and had traded some existing annuities on her behalf in the spring of 2004. In the fall of 2004, Mr. Moses sought Ms. Tennant’s permission to take out a policy on her life with himself named as the beneficiary. Ms. Tennant agreed to the arrangement. Mr. Moses had Ms. Tennant sign an application for a life insurance policy that would pay $370,912 in life insurance proceeds to the named beneficiary upon her passing.

On the application, however, Mr. Moses did not list himself as the beneficiary. Rather, Mr. Moses designated “TTSI Irrevocable Trust, K.M. Kern, Trustee” as the owner and primary beneficiary of the policy. When asked in the application to describe the proposed policy owner’s relationship to the proposed insured, Mr. Moses wrote, ‘Family Trust.’ In fact, there was no relationship between Ms. Tennant and TTSI. The beneficiaries of the TTSI Irrevocable Trust were Mr. Moses and his children. The trustee, K.M. Kern, had never met nor had any relationship with Ms. Tennant.”

The insurance policy was issued in June of 2005. For three years, the premiums were paid by TTSI, until in 2008, Ms. Tennant received correspondence from ReliaStar which included a copy of her application for the subject policy.
Ms. Tennant informed Reliastar that she did not know Mr. Kern and did not have a family trust. ReliaStar thereupon conducted an investigation and ultimately cancelled the policy based on its conclusion there was no insurable interest between Ms. Tennant and TTSI.
After cancellation, a suit was brought. “ReliaStar answered the complaint and later moved for summary judgment based on the argument that the policy was void ab initio because TTSI never had an insurable interest in Ms. Tennant’s life. At the trial level, TTSI argued that Ms. Tennant was a ‘key client’ of Mr. Moses and therefore it had an insurable interest in Ms. Tennant’s life.” This argument was rejected by the trial court. The trust then argued, “that notwithstanding the invalidity of the insurance policy, it is still entitled to a refund of the premiums paid.”

“Sorry,” says the Fifth. “We see no reason to depart from the general rule where, as in the instant case, the party seeking to enforce the contract is the only party who engaged in deceptive and misleading conduct at the time the contract was entered into.” Mr. Moses gets no proceeds when Ms. Tennant dies, nor does he get a refund of the premiums paid. What he does win from his appeal is a nice little bar grievance courtesy of footnote two. “Mr. Moses is also an attorney licensed to practice law in the State of Florida. This court is forwarding a copy of this opinion to The Florida Bar for its consideration.”
And who says courts never provide justice?

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