Estate of Ann Boggess v. U.S. Bank, N.A.

U.S. District Court, District of Minnesota January 9, 2024

Trial Court Opinion

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

Estate of Ann Boggess, by its Executor, Civil No. 23-45 (DWF/DJF)
Thomas Boggess; Estate of Frank Bolle,
by its Executor, Frank L. Bolle; Estate of
Lena Longo, by its Executors, Joseph
Longo and Peter Longo; Estate of Saul MEMORANDUM
Offit, by its Executor, Marc Offit; Estate OPINION AND ORDER
of Naomi Pressma, by its Executor,
Conrad Pressma; Estate of Roberta Silbar,
by its Executors, David Silbar and Steven
Silbar; Estate of Georgia Towers, by its
Executor, Edwin Towers; and Estate of
Anna Zufelt, by its Executor, Cheryl
Howey,

Plaintiffs,

U.S. Bank, N.A., as Securities
Intermediary, and Wells Fargo Bank,
N.A., as Securities Intermediary,

Defendants.

INTRODUCTION
This matter is before the Court on a Motion to Dismiss for Lack of Article III
Standing Pursuant to Federal Rule of Civil Procedure 12(b)(1) brought by Defendants
U.S. Bank, N.A., as Securities Intermediary, and Wells Fargo Bank, N.A., as Securities
Intermediary (together, “Defendants”). (Doc. No. 57.) Plaintiffs oppose the motion.
(Doc. No. 65.) For the reasons set forth below, the Court denies the motion.
BACKGROUND
Plaintiffs are the Estates of Ann Boggess, Frank Bolle, Lena Longo, Saul Offit,
Naomi Pressma, Roberta Silbar, Georgia Towers, and Anna Zuflet. Plaintiffs initiated

this action on January 6, 2023. (Doc. No. 1 (“Compl.”).) Plaintiffs seek death benefit
proceeds of life insurance policies that insured the lives of the above individual insureds
(the “Insureds”). (Id.) This case involves stranger-originated life insurance (“STOLI”)
policies (collectively, the “Policies” or individually, a “Policy”).1 (Id. ¶ 1.) The Policies
were manufactured in and under Delaware law on the lives of the Insureds. (Id.)

Plaintiffs allege that the Insureds were victims of an illegal scheme organized by a family
of related Delaware entities known generally as Coventry. (Id. ¶ 25.) According to the
Complaint, Coventry operated a STOLI program that generated large numbers of multi-
million-dollar STOLI policies, including the Policies here. (Id. ¶ 2.) After the Insureds
passed away, the proceeds of the Policies were paid by the life insurers to Defendants, as

record owners and beneficiaries of the Policies. (Id. ¶¶ 4, 30.) Plaintiffs seek to recover

1 A STOLI policy is created when a stranger (i.e., a group of investors) purchases a
life insurance policy from an insured for a lump sum of money, after which the stranger-
purchaser pays premiums and becomes the beneficiary. When an insured who sells their
policy dies, the stranger-purchaser receives the death benefit. Sometimes a STOLI
scheme is explained by referring to the insured as the stranger: “In a [STOLI] scheme, a
speculator contrives to purchase a policy on the life of a stranger. If the stranger dies
before the value of the premiums paid by the speculator exceeds the death benefit of the
policy, the speculator’s bet pays off.” Wells Fargo Bank, N.A. v. Estate of Malkin,

278 A.3d 53

, 56 (Del. 2022).  With a STOLI policy, there is no connection between the 
insured and the stranger-purchaser (policy holder).  STOLI policies are illegal in some 
states because they violate the principle of insurable interest, which requires that there be 
an insurable interest, or a connection, between the policyholder, the insured, and the 
beneficiary.                                                              
these STOLI proceeds from Defendants2 because the Policies were allegedly procured 
“without an insurable interest as wagers on the Insureds’ lives.”  (Id. ¶ 86.)  Specifically, 
Plaintiffs allege that the Policies are illegal under Delaware’s common law and insurable 

interest statute, 18 Del. C. § 2704(b).                                   
    Defendants move to dismiss this case for lack of subject matter jurisdiction, 
arguing that Plaintiffs have failed to adequately allege that the Estates or the Insureds 
suffered concrete harm, or damage of any kind, caused by the Securities Intermediaries.  
The Court considers the motion below.                                     

                          DISCUSSION                                     
I.   Legal Standard                                                       
    Defendants move to dismiss this action under Rule 12(b)(1).  A motion to dismiss 
under Rule 12(b)(1) challenges the Court’s subject matter jurisdiction.  Fed. R. Civ. P. 
12(b)(1).  To survive a motion under Rule 12(b)(1), the party asserting jurisdiction has 

the burden of proving jurisdiction.  V S Ltd. P’ship v. Dep’t of Hous. & Urb. Dev.,

235 F.3d 1109, 1112

 (8th Cir. 2000).  “Subject-matter jurisdiction is a threshold 
requirement which must be assured in every federal case.”  Kronholm v. Fed. Deposit Ins. 
Corp.,

915 F.2d 1171, 1174

 (8th Cir. 1990).                               


2    As Securities Intermediaries, Defendants act for third-party customers who 
beneficially own assets.  Here, Defendants nominally own the life insurance policies at 
issue on behalf of the third-party customers.  Plaintiffs do not allege that Defendants were 
the owners-in-fact of the Policies.  (See, e.g., Compl. ¶¶ 75-76 (Defendants “acted as 
securities intermediaries and/or as agents in connection with each of the Policies for 
Coventry, Lavastone, and/or later for other stranger-investor(s)”)).      
    A Rule 12(b)(1) motion may challenge a plaintiff’s complaint either on its face or 
on factual truthfulness of its averments.  Osborn v. United States,

918 F.2d 724

, 729 n.6 
(8th Cir. 1990); see also Fairview Health Servs. v. Armed Forces Off. of Royal Embassy 

of Saudi Arabia, Civ. No. 21-2666,

2023 WL 4203035

, at *2 (D. Minn. June 27, 2023).  
Here, Defendants bring a facial challenge.  To survive a facial challenge, a complaint 
must contain “a short and plain statement of the grounds upon which the court’s 
jurisdiction depends.”  Titus v. Sullivan,

4 F.3d 590, 593

 (8th Cir. 1993) (internal 
quotation and citation omitted).  The familiar standards of Rule 12(b)(6) apply.  See 

Fairview Health Servs.,

2023 WL 4203035

, at *2.  Namely, a court assumes all facts in 
the complaint to be true and construes all reasonable inferences from those facts in the 
light most favorable to the complainant.  Morton v. Becker,

793 F.2d 185, 187

 (8th 
Cir. 1986); accord Osborn,

918 F.2d at 729

 n.6.  In doing so, however, a court need not 
accept as true wholly conclusory allegations, Hanten v. Sch. Dist. of Riverview Gardens,

183 F.3d 799

, 805 (8th Cir. 1999), or legal conclusions drawn by the pleader from the 
facts alleged, Westcott v. Omaha,

901 F.2d 1486, 1488

 (8th Cir. 1990).  To survive a 
motion to dismiss, a complaint must contain “enough facts to state a claim to relief that is 
plausible on its face.”  Bell Atl. Corp. v. Twombly,

550 U.S. 544, 570

 (2007).  Although a 
complaint need not contain “detailed factual allegations,” it must contain facts with 

enough specificity “to raise a right to relief above the speculative level.”

Id. at 555

. 
II.  Article III Standing                                                 
    Article III limits the federal judicial power to “Cases” and “Controversies.”  U.S. 
Const. art. III, § 2.  “For there to be a case or controversy under Article III, the plaintiff 
must have a personal stake in the case—in other words, standing.”  TransUnion LLC v. 
Ramirez,

594 U.S. 413, 423

 (2021) (quotation marks and citation omitted).  To establish 
standing, “a plaintiff must show (i) that he suffered an injury in fact that is concrete, 

particularized, and actual or imminent; (ii) that the injury was likely caused by the 
defendant; and (iii) that the injury would likely be redressed by judicial relief.”

Id.

 
(citing Lujan v. Defs. of Wildlife,

504 U.S. 555, 560-61

 (1992)).  “To establish injury in 
fact, a plaintiff must show that he or she suffered ‘an invasion of a legally protected 
interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or 

hypothetical.’”  Spokeo, Inc. v. Robins,

578 U.S. 330, 339

 (2016) (citing Lujan,

504 U.S. at 560

).  Plaintiffs, who are invoking the Court’s jurisdiction, bear the burden of 
establishing standing.  Id. at 338.                                       
    In this case, Plaintiffs allege a single cause of action for “Recovery of Insurance 
Proceeds Due to Lack of Insurable Interest” based on Delaware’s insurable interest 

statute, 18 Del. C. § 2704(b).  Plaintiffs allege that the Insureds were illegally induced 
into STOLI schemes that took advantage of them and converted their legitimate life 
insurance products into policies that were illegal wagers on the Insureds’ lives.  Plaintiffs 
also allege that Defendants were key players in this scheme because they entered into a 
series of contracts through which they agreed to serve as Securities Intermediaries for the 

investors.  (Compl. ¶¶ 31-34.)  Plaintiffs argue that the Insureds suffered harm by being 
subjects of wagers and giving strangers an interest in having them dead.  (Doc. No. 65 
at 6.)                                                                    
    Plaintiffs maintain that they have standing, stressing that they are not merely 
members of the general public and that Defendants are not innocent bystanders.3  
Plaintiffs argue that in TransUnion, the Supreme Court recognized that when a plaintiff 

asserts a private right of action for injuries “traditionally recognized as providing a basis 
for a lawsuit in American Courts,” that plaintiff has Article III standing.  See 
TransUnion,

594 U.S. at 427

.  Plaintiffs submit that their alleged injuries arise from 
insurable interest violations as reflected in their single claim under Delaware’s common 
law and insurable interest statute, 18 Del. C. § 2704(b).  Plaintiffs argue that this body of 

law is founded on the U.S. Supreme Court’s pre-Erie federal common law stemming 
from claims similar to the ones here, wherein the court considered challenges made by 
insureds’ estates against the recipients of proceeds from insurance policies on the 
insureds’ lives.  See, e.g., Cammack v. Lewis,

82 U.S. 643, 648-49

 (1872) (considering 
the claims of an insured’s estate to recover life insurance proceeds stemming from a 

policy that lacked an insurable interest); Warnock v. Davis,

104 U.S. 775, 782

 (1881) 
(considering a challenge and following decisions that are in “accord with the general 
policy of the law against speculative contracts upon human life”); Grigsby v. Russell, 



3    Plaintiffs argue that the cases that present difficult constitutional standing issues 
deal with (1) a plaintiffs’ assertion of a private claim to rectify a public harm and where 
the plaintiff is not impacted any more than the general citizenry, see, e.g., Lujan at 573-
74, or (2) a situation where a plaintiff alleges legal standing based only on a defendant’s 
procedural or technical violation of a newly-created statutory right, see, e.g., Spokeo,

578 U.S. at 339

222 U.S. 149, 154-55

 (1911) (considering a challenge and explaining that a policy 
lacking insurable interest is a “pure wager”).                            
    Plaintiffs contend that these pre-Erie decisions are reflected in Delaware common 

law and insurable interest statute.  See, e.g., PHL Variable Ins. Co. v. Price Dawe,

28 A.3d 1059,1071

 (Del. 2021) (determining the intent to codify the common law 
insurable interest requirement in § 2704; holding that insurance policies that lack 
insurable interest are void; explaining that “[f]or nearly one hundred years, Delaware law 
has required an insurable interest as a way to distinguish between insurance and wagering 

contracts”); Lavastone Cap. LLC v. Estate of Berland, 266 A.3d at 964, 970 (Del. 2021) 
(noting that § 2704 reflects an intent “to codify—not abrogate—the common law 
insurable interest requirement”); Wells Fargo Bank, N.A. v. Estate of Malkin,

278 A.3d 53

, 56 (Del. 2022) (“STOLI policies violate [] the Delaware Constitution, which prohibits
most forms of gambling. They also offend the longstanding public policy of this State.

Hence, 18 Del. C. § 2704(b) allows the estate of a deceased STOLI insured to ‘maintain
an action to recover’ the death benefit from its recipient.”). Plaintiffs also point to
numerous federal court cases wherein they claim the courts have recognized that
insureds’ estates have standing to pursue claims in federal court to recover the proceeds
of policies lacking insurable interest. (Doc. No. 65 at 15-17.)

Defendants, on the other hand, argue that Plaintiffs fail to identify any injury in
fact—much less any injury in fact actually caused by the Securities Intermediaries. (Doc.
No. 59 at 8-9.) Defendants submit that Plaintiffs’ argument above relies on outdated,
distinguishable and inapposite case law, and that Plaintiffs fail to identify any case
addressing standing to pursue their claims under TransUnion. Defendants dispute that
there is a long-standing common-law rule permitting estates to file insurable interest
lawsuits; instead, Defendants submit that the majority rule at common law was that only

the insurer could raise an insurable interest objection. See, e.g., 3 Couch on Ins. § 41:5
(2023) (“The majority of courts that have considered the issue of who may question the
lack of an insurable interest hold that only the insurer can raise the objection of want of
an insurable interest.”). Finally, Defendants argue that even if Plaintiffs could plead a
concrete injury, they have failed to allege that Defendants, as Securities Intermediaries,

caused those injuries. In this vein, Defendants point out that the alleged wrongdoers who
harmed the estates are the Delaware entities known as Coventry (Compl. ¶¶ 2-3), and that
Defendants simply hold the policies in securities accounts on behalf of their customers,
who themselves acquired the policies years after Coventry allegedly induced the Insureds
into participation.

The Court considers this case under the recent United States Supreme Court
decision in TransUnion, which articulated the appropriate standard for Article III
standing, wherein Plaintiffs must allege both a concrete harm and that the alleged harm
was caused by Defendants. In addition, the Supreme Court in TransUnion discussed the
requirement that there be a “concrete” harm, explaining that in addition to traditional

tangible harms, such as physical or monetary harms, standing is permitted based on
claims arising out of an injury or harm that has a close historical or common-law
analogue.

594 U.S. at 424

-25 (citing Spokeo,

578 U.S. at 341

).  Under TransUnion, even 
where a statutory cause of action exists, “[o]nly those plaintiffs who have been concretely 
harmed by a defendant’s statutory violation may sue that private defendant over that 
violation in federal court.”

Id. at 427

 (emphasis in original).          
    The Court acknowledges that, despite the numerous cases cited and discussed by 

the parties, there appears to be no case directly on point that addresses the particular facts 
of this case—whether an estate has Article III standing to bring a state-law claim in a 
federal STOLI action against a securities intermediary based on lack of insurable interest.  
Even so, based on the weight of the authority, the Court finds that Plaintiffs have 
sufficiently alleged facts that demonstrate their standing to bring this case.   

    First, the Court agrees with Plaintiffs that pre-Erie common law recognized a 
cause of action arising from insurable interest violations.  In addition, the case law 
demonstrates that this common law was codified by the Delaware statute at issue here.  
See, e.g., PHL Variable Ins. Co.,

28 A.3d at 1072-73

 (“Although the insurable interest 
requirement is originally a creature of both state and pre-Erie federal common law, it is 

now codified in the Delaware Insurance Code.”); Lavastone Cap., 266 A.3d at 970 
(noting an estate’s argument that the “common law concept that the proceeds of a STOLI 
policy are payable to the insured’s estate dates back” for many years, and observing that 
§ 2704 reflects and intent to codify common law); Wells Fargo Bank N.A. v. Est. of 
Malkin, 278 A.3d at 61 (citing Warnock and explaining that Delaware’s insurable interest 

statute “codifies the longstanding common-law rule that, if the insurer pays the death 
benefit on a policy that lacks an insurable interest, the estate may sue to receive that 
benefit”).                                                                
    In addition, numerous federal cases before TransUnion allowed an insured’s estate 
to pursue claims in federal court to recover proceeds from policies lacking insurable 
interest and where the insureds were alleged to have been subject to human life wagers.  

See, e.g., Estate of Berland v. Lavastone Cap., Civ. No. 18-2002,

2022 WL 15023450

, 
at *7 (D. Del. Sept. 28, 2022) (granting estate’s motion for partial summary judgment on 
estate’s claim under § 2704(b) to recover death benefit proceeds); Estate of Rink v. 
Vicof II Trust, Civ. No. 20-39,

2021 WL 6064890

, at *7 (W.D. N.C. Dec. 20, 2021) 
(denying cross-motions for summary judgment in an action brought by estate to recover 

proceeds on STOLI policy); Estate of Malkin v. Wells Fargo Bank, N.A., Civ. 
No. 19-14689,

2022 WL 2285884

, at *3 (11th Cir. June 23, 2022) (affirming judgment in 
favor of estate in § 2704(b) claim against policy owner and securities intermediary); 
Estate of Hoefer v. ATC Realty Fifteen, Inc., Civ. No. 20-6698,

2021 WL 148087

, at *3 
(N.D. Cal. Jan. 15, 2021) (denying motion to dismiss estate’s claim to recover death 

benefit under STOLI policy); Mayo v. Hartford Life Ins. Co.,

354 F.3d 400, 409

 (5th Cir. 
2004) (awarding proceeds of corporate-owned life insurance policy that lacked insurable 
interest under Texas law to estate); Lewis v. Wal-Mart Stores, Inc., Civ. No. 02-944,

2005 WL 3263377

, at *7 (N.D. Okla Dec. 1, 2005) (finding estate of employee had standing to 
recover paid-out death benefit under a corporate-owned life insurance policy where 

employer had no insurable interest in life of insured); Kramer v. Lockwood Pension 
Servs.,

653 F. Supp. 2d 354, 375

 (S.D.N.Y. 2009) (representative of estate had standing 
under declaratory judgment act to seek life insurance proceeds not yet paid to investors). 
    Plaintiffs are not suing merely to ensure compliance with regulatory law; instead, 
they seek to recover from Defendants the proceeds of illegal wagers on the Insureds’ 
lives based on an alleged STOLI scheme in which Defendants were a party.  Plaintiffs 

have set forth allegations of the STOLI scheme in which Defendants were involved, 
including allegations that Plaintiffs were induced into illegal wagering transactions, that 
the Insureds’ private health information was used for purposes of illegal wagering, that 
the Insureds’ and their families were repeatedly contacted with inquiries about whether 
an Insured had died, and that there is an ongoing impoverishment caused by Defendants’ 

unlawful receipt and retention of the STOLI proceeds to which Plaintiffs are entitled.  In 
short, Plaintiffs seek relief for injuries caused by human life wagering.  This type of 
injury has historically been considered an injury warranting judicial relief.  Further, the 
Delaware statute under which Plaintiffs bring this action—18 Del. C. § 2704(b)—
codifies a private right of action based on law stemming from claims brought by 

insured’s estates seeking to recover proceeds of policies that were procured without 
insurable interest.  The Court finds that Plaintiffs’ allegations suffice to establish an 
injury for purposes of standing because of the “close relationship” between the alleged 
harm and the harm that has been traditionally recognized.  See TransUnion,

594 U.S. at 417

.  In addition, to the extent that Plaintiffs can prove their allegations that 

Defendants were involved in the scheme as Securities Intermediaries, it is conceivable 
that Plaintiffs’ alleged injuries were caused by Defendants.              
    At this early stage of the litigation, the Court finds that the Complaint on its face 
sufficiently avers facts to confer subject matter jurisdiction.  This ruling, however, makes 
no intimation of the strength of Plaintiffs’ claims on the merits.  That, of course, will be 
considered at a later date.                                               
                         CONCLUSION                                      

    Based on the files, records, and proceedings herein, and for the reasons set forth 
above, IT IS ORDERED that Defendants’ Motion to Dismiss for Lack of Article III 
Standing Pursuant to Federal Rule of Civil Procedure 12(b)(1) (Doc. No. [57]) is 
respectfully DENIED.                                                      

Dated:  January 9, 2024       s/Donovan W. Frank                          
                             DONOVAN W. FRANK                            
                             United States District Judge

Trial Court Opinion

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

Plaintiffs,

U.S. Bank, N.A., as Securities
Intermediary, and Wells Fargo Bank,
N.A., as Securities Intermediary,

Defendants.

record owners and beneficiaries of the Policies. (Id. ¶¶ 4, 30.) Plaintiffs seek to recover

278 A.3d 53

, 56 (Del. 2022).  With a STOLI policy, there is no connection between the 
insured and the stranger-purchaser (policy holder).  STOLI policies are illegal in some 
states because they violate the principle of insurable interest, which requires that there be 
an insurable interest, or a connection, between the policyholder, the insured, and the 
beneficiary.                                                              
these STOLI proceeds from Defendants2 because the Policies were allegedly procured 
“without an insurable interest as wagers on the Insureds’ lives.”  (Id. ¶ 86.)  Specifically, 
Plaintiffs allege that the Policies are illegal under Delaware’s common law and insurable 

interest statute, 18 Del. C. § 2704(b).                                   
    Defendants move to dismiss this case for lack of subject matter jurisdiction, 
arguing that Plaintiffs have failed to adequately allege that the Estates or the Insureds 
suffered concrete harm, or damage of any kind, caused by the Securities Intermediaries.  
The Court considers the motion below.                                     

                          DISCUSSION                                     
I.   Legal Standard                                                       
    Defendants move to dismiss this action under Rule 12(b)(1).  A motion to dismiss 
under Rule 12(b)(1) challenges the Court’s subject matter jurisdiction.  Fed. R. Civ. P. 
12(b)(1).  To survive a motion under Rule 12(b)(1), the party asserting jurisdiction has 

the burden of proving jurisdiction.  V S Ltd. P’ship v. Dep’t of Hous. & Urb. Dev.,

235 F.3d 1109, 1112

 (8th Cir. 2000).  “Subject-matter jurisdiction is a threshold 
requirement which must be assured in every federal case.”  Kronholm v. Fed. Deposit Ins. 
Corp.,

915 F.2d 1171, 1174

 (8th Cir. 1990).                               


2    As Securities Intermediaries, Defendants act for third-party customers who 
beneficially own assets.  Here, Defendants nominally own the life insurance policies at 
issue on behalf of the third-party customers.  Plaintiffs do not allege that Defendants were 
the owners-in-fact of the Policies.  (See, e.g., Compl. ¶¶ 75-76 (Defendants “acted as 
securities intermediaries and/or as agents in connection with each of the Policies for 
Coventry, Lavastone, and/or later for other stranger-investor(s)”)).      
    A Rule 12(b)(1) motion may challenge a plaintiff’s complaint either on its face or 
on factual truthfulness of its averments.  Osborn v. United States,

918 F.2d 724

, 729 n.6 
(8th Cir. 1990); see also Fairview Health Servs. v. Armed Forces Off. of Royal Embassy 

of Saudi Arabia, Civ. No. 21-2666,

2023 WL 4203035

, at *2 (D. Minn. June 27, 2023).  
Here, Defendants bring a facial challenge.  To survive a facial challenge, a complaint 
must contain “a short and plain statement of the grounds upon which the court’s 
jurisdiction depends.”  Titus v. Sullivan,

4 F.3d 590, 593

 (8th Cir. 1993) (internal 
quotation and citation omitted).  The familiar standards of Rule 12(b)(6) apply.  See 

Fairview Health Servs.,

2023 WL 4203035

, at *2.  Namely, a court assumes all facts in 
the complaint to be true and construes all reasonable inferences from those facts in the 
light most favorable to the complainant.  Morton v. Becker,

793 F.2d 185, 187

 (8th 
Cir. 1986); accord Osborn,

918 F.2d at 729

 n.6.  In doing so, however, a court need not 
accept as true wholly conclusory allegations, Hanten v. Sch. Dist. of Riverview Gardens,

183 F.3d 799

, 805 (8th Cir. 1999), or legal conclusions drawn by the pleader from the 
facts alleged, Westcott v. Omaha,

901 F.2d 1486, 1488

 (8th Cir. 1990).  To survive a 
motion to dismiss, a complaint must contain “enough facts to state a claim to relief that is 
plausible on its face.”  Bell Atl. Corp. v. Twombly,

550 U.S. 544, 570

 (2007).  Although a 
complaint need not contain “detailed factual allegations,” it must contain facts with 

enough specificity “to raise a right to relief above the speculative level.”

Id. at 555

. 
II.  Article III Standing                                                 
    Article III limits the federal judicial power to “Cases” and “Controversies.”  U.S. 
Const. art. III, § 2.  “For there to be a case or controversy under Article III, the plaintiff 
must have a personal stake in the case—in other words, standing.”  TransUnion LLC v. 
Ramirez,

594 U.S. 413, 423

 (2021) (quotation marks and citation omitted).  To establish 
standing, “a plaintiff must show (i) that he suffered an injury in fact that is concrete, 

particularized, and actual or imminent; (ii) that the injury was likely caused by the 
defendant; and (iii) that the injury would likely be redressed by judicial relief.”

Id.

 
(citing Lujan v. Defs. of Wildlife,

504 U.S. 555, 560-61

 (1992)).  “To establish injury in 
fact, a plaintiff must show that he or she suffered ‘an invasion of a legally protected 
interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or 

hypothetical.’”  Spokeo, Inc. v. Robins,

578 U.S. 330, 339

 (2016) (citing Lujan,

504 U.S. at 560

).  Plaintiffs, who are invoking the Court’s jurisdiction, bear the burden of 
establishing standing.  Id. at 338.                                       
    In this case, Plaintiffs allege a single cause of action for “Recovery of Insurance 
Proceeds Due to Lack of Insurable Interest” based on Delaware’s insurable interest 

statute, 18 Del. C. § 2704(b).  Plaintiffs allege that the Insureds were illegally induced 
into STOLI schemes that took advantage of them and converted their legitimate life 
insurance products into policies that were illegal wagers on the Insureds’ lives.  Plaintiffs 
also allege that Defendants were key players in this scheme because they entered into a 
series of contracts through which they agreed to serve as Securities Intermediaries for the 

investors.  (Compl. ¶¶ 31-34.)  Plaintiffs argue that the Insureds suffered harm by being 
subjects of wagers and giving strangers an interest in having them dead.  (Doc. No. 65 
at 6.)                                                                    
    Plaintiffs maintain that they have standing, stressing that they are not merely 
members of the general public and that Defendants are not innocent bystanders.3  
Plaintiffs argue that in TransUnion, the Supreme Court recognized that when a plaintiff 

asserts a private right of action for injuries “traditionally recognized as providing a basis 
for a lawsuit in American Courts,” that plaintiff has Article III standing.  See 
TransUnion,

594 U.S. at 427

.  Plaintiffs submit that their alleged injuries arise from 
insurable interest violations as reflected in their single claim under Delaware’s common 
law and insurable interest statute, 18 Del. C. § 2704(b).  Plaintiffs argue that this body of 

law is founded on the U.S. Supreme Court’s pre-Erie federal common law stemming 
from claims similar to the ones here, wherein the court considered challenges made by 
insureds’ estates against the recipients of proceeds from insurance policies on the 
insureds’ lives.  See, e.g., Cammack v. Lewis,

82 U.S. 643, 648-49

 (1872) (considering 
the claims of an insured’s estate to recover life insurance proceeds stemming from a 

policy that lacked an insurable interest); Warnock v. Davis,

104 U.S. 775, 782

 (1881) 
(considering a challenge and following decisions that are in “accord with the general 
policy of the law against speculative contracts upon human life”); Grigsby v. Russell, 



3    Plaintiffs argue that the cases that present difficult constitutional standing issues 
deal with (1) a plaintiffs’ assertion of a private claim to rectify a public harm and where 
the plaintiff is not impacted any more than the general citizenry, see, e.g., Lujan at 573-
74, or (2) a situation where a plaintiff alleges legal standing based only on a defendant’s 
procedural or technical violation of a newly-created statutory right, see, e.g., Spokeo,

578 U.S. at 339

222 U.S. 149, 154-55

 (1911) (considering a challenge and explaining that a policy 
lacking insurable interest is a “pure wager”).                            
    Plaintiffs contend that these pre-Erie decisions are reflected in Delaware common 

law and insurable interest statute.  See, e.g., PHL Variable Ins. Co. v. Price Dawe,

28 A.3d 1059,1071

 (Del. 2021) (determining the intent to codify the common law 
insurable interest requirement in § 2704; holding that insurance policies that lack 
insurable interest are void; explaining that “[f]or nearly one hundred years, Delaware law 
has required an insurable interest as a way to distinguish between insurance and wagering 

contracts”); Lavastone Cap. LLC v. Estate of Berland, 266 A.3d at 964, 970 (Del. 2021) 
(noting that § 2704 reflects an intent “to codify—not abrogate—the common law 
insurable interest requirement”); Wells Fargo Bank, N.A. v. Estate of Malkin,

278 A.3d 53

, 56 (Del. 2022) (“STOLI policies violate [] the Delaware Constitution, which prohibits
most forms of gambling. They also offend the longstanding public policy of this State.

tangible harms, such as physical or monetary harms, standing is permitted based on
claims arising out of an injury or harm that has a close historical or common-law
analogue.

594 U.S. at 424

-25 (citing Spokeo,

578 U.S. at 341

).  Under TransUnion, even 
where a statutory cause of action exists, “[o]nly those plaintiffs who have been concretely 
harmed by a defendant’s statutory violation may sue that private defendant over that 
violation in federal court.”

Id. at 427

 (emphasis in original).          
    The Court acknowledges that, despite the numerous cases cited and discussed by 

the parties, there appears to be no case directly on point that addresses the particular facts 
of this case—whether an estate has Article III standing to bring a state-law claim in a 
federal STOLI action against a securities intermediary based on lack of insurable interest.  
Even so, based on the weight of the authority, the Court finds that Plaintiffs have 
sufficiently alleged facts that demonstrate their standing to bring this case.   

    First, the Court agrees with Plaintiffs that pre-Erie common law recognized a 
cause of action arising from insurable interest violations.  In addition, the case law 
demonstrates that this common law was codified by the Delaware statute at issue here.  
See, e.g., PHL Variable Ins. Co.,

28 A.3d at 1072-73

 (“Although the insurable interest 
requirement is originally a creature of both state and pre-Erie federal common law, it is 

now codified in the Delaware Insurance Code.”); Lavastone Cap., 266 A.3d at 970 
(noting an estate’s argument that the “common law concept that the proceeds of a STOLI 
policy are payable to the insured’s estate dates back” for many years, and observing that 
§ 2704 reflects and intent to codify common law); Wells Fargo Bank N.A. v. Est. of 
Malkin, 278 A.3d at 61 (citing Warnock and explaining that Delaware’s insurable interest 

statute “codifies the longstanding common-law rule that, if the insurer pays the death 
benefit on a policy that lacks an insurable interest, the estate may sue to receive that 
benefit”).                                                                
    In addition, numerous federal cases before TransUnion allowed an insured’s estate 
to pursue claims in federal court to recover proceeds from policies lacking insurable 
interest and where the insureds were alleged to have been subject to human life wagers.  

See, e.g., Estate of Berland v. Lavastone Cap., Civ. No. 18-2002,

2022 WL 15023450

, 
at *7 (D. Del. Sept. 28, 2022) (granting estate’s motion for partial summary judgment on 
estate’s claim under § 2704(b) to recover death benefit proceeds); Estate of Rink v. 
Vicof II Trust, Civ. No. 20-39,

2021 WL 6064890

, at *7 (W.D. N.C. Dec. 20, 2021) 
(denying cross-motions for summary judgment in an action brought by estate to recover 

proceeds on STOLI policy); Estate of Malkin v. Wells Fargo Bank, N.A., Civ. 
No. 19-14689,

2022 WL 2285884

, at *3 (11th Cir. June 23, 2022) (affirming judgment in 
favor of estate in § 2704(b) claim against policy owner and securities intermediary); 
Estate of Hoefer v. ATC Realty Fifteen, Inc., Civ. No. 20-6698,

2021 WL 148087

, at *3 
(N.D. Cal. Jan. 15, 2021) (denying motion to dismiss estate’s claim to recover death 

benefit under STOLI policy); Mayo v. Hartford Life Ins. Co.,

354 F.3d 400, 409

 (5th Cir. 
2004) (awarding proceeds of corporate-owned life insurance policy that lacked insurable 
interest under Texas law to estate); Lewis v. Wal-Mart Stores, Inc., Civ. No. 02-944,

2005 WL 3263377

, at *7 (N.D. Okla Dec. 1, 2005) (finding estate of employee had standing to 
recover paid-out death benefit under a corporate-owned life insurance policy where 

employer had no insurable interest in life of insured); Kramer v. Lockwood Pension 
Servs.,

653 F. Supp. 2d 354, 375

 (S.D.N.Y. 2009) (representative of estate had standing 
under declaratory judgment act to seek life insurance proceeds not yet paid to investors). 
    Plaintiffs are not suing merely to ensure compliance with regulatory law; instead, 
they seek to recover from Defendants the proceeds of illegal wagers on the Insureds’ 
lives based on an alleged STOLI scheme in which Defendants were a party.  Plaintiffs 

have set forth allegations of the STOLI scheme in which Defendants were involved, 
including allegations that Plaintiffs were induced into illegal wagering transactions, that 
the Insureds’ private health information was used for purposes of illegal wagering, that 
the Insureds’ and their families were repeatedly contacted with inquiries about whether 
an Insured had died, and that there is an ongoing impoverishment caused by Defendants’ 

unlawful receipt and retention of the STOLI proceeds to which Plaintiffs are entitled.  In 
short, Plaintiffs seek relief for injuries caused by human life wagering.  This type of 
injury has historically been considered an injury warranting judicial relief.  Further, the 
Delaware statute under which Plaintiffs bring this action—18 Del. C. § 2704(b)—
codifies a private right of action based on law stemming from claims brought by 

insured’s estates seeking to recover proceeds of policies that were procured without 
insurable interest.  The Court finds that Plaintiffs’ allegations suffice to establish an 
injury for purposes of standing because of the “close relationship” between the alleged 
harm and the harm that has been traditionally recognized.  See TransUnion,

594 U.S. at 417

.  In addition, to the extent that Plaintiffs can prove their allegations that 

Defendants were involved in the scheme as Securities Intermediaries, it is conceivable 
that Plaintiffs’ alleged injuries were caused by Defendants.              
    At this early stage of the litigation, the Court finds that the Complaint on its face 
sufficiently avers facts to confer subject matter jurisdiction.  This ruling, however, makes 
no intimation of the strength of Plaintiffs’ claims on the merits.  That, of course, will be 
considered at a later date.                                               
                         CONCLUSION                                      

    Based on the files, records, and proceedings herein, and for the reasons set forth 
above, IT IS ORDERED that Defendants’ Motion to Dismiss for Lack of Article III 
Standing Pursuant to Federal Rule of Civil Procedure 12(b)(1) (Doc. No. [57]) is 
respectfully DENIED.                                                      

Dated:  January 9, 2024       s/Donovan W. Frank                          
                             DONOVAN W. FRANK                            
                             United States District Judge

Reference

Status: Unknown