U.S. Bank Nat'l Ass'n v. Sun Life Assurance Co. of Canada, No. 16-1049 (7th Cir. 2016)
Annotate this CaseIn 2007 Sun Life issued a $6 million policy on the life of an 81‐year‐old. He died in 2014. U.S. Bank had purchased the policy in 2011, becoming the policy’s beneficiary. Sun declared that it would refuse to pay U.S. Bank the proceeds until it investigated the policy’s validity. Sun had collected and retained almost $2.5 million in premiums. The common law remedy for buying a life insurance policy without having an insurable interest in the life of the insured was to invalidate the policy. A 1975 Wisconsin retains the common law principle forbidding the purchase of a life insurance policy by one who lacks an insurable interest, but provides that “no insurance policy is invalid merely because the policyholder lacks insurable interest … but a court ... may order the proceeds to be paid to someone other than the person to whom the policy is designated to be payable, who is equitably entitled thereto.” The Seventh Circuit affirmed that the bank was entitled to the policy proceeds plus statutory interest and “bad faith” damages. No one who is equitably entitled to the proceeds has claimed them; U.S. Bank, is, therefore, entitled to them. The court rejected arguments that the award amounted to allowing illegal gambling.
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