Ameritas lawsuit: $5M New Jersey policy hid a STOLI connection
Ameritas Life Insurance Co. is challenging another life insurance policy under New Jersey’s ban on stranger-originated life insurance (STOLI).
The insurer filed a lawsuit in federal court in March, claiming that a $5 million life policy from 2008 looks similar to an illegal STOLI attempt. Stranger-originated life insurance is a policy someone, usually an investor, buys on another person with whom they don’t have an existing relationship.
Most states have laws banning the practice. Ameritas has several lawsuits either active or settled related to STOLI allegations.
“A secondary market for life insurance has emerged whereby multi-million dollar life insurance policies have been manufactured, on the lives of senior citizen insureds, by and for the benefit of third-party investors,” Ameritas’ attorneys say in court documents. “While there are many variations, all STOLI schemes have one objective in common: to give investors with no insurable interest in the life of the insured a financial stake in the death of the insured.”
A 2019 decision by the Supreme Court of New Jersey found that STOLI policies may be invalidated for lack of an insurable interest following the contestability period. That was followed by the state Legislature enacting anti-STOLI legislation in 2020 that effectively codified that decision.
Meanwhile, defendants deny the policy is a STOLI and say it was always meant to benefit a nonprofit Jewish organization.
To be used for estate taxes
The policy in question dates to March 2008, when Union Central Life Insurance Co., a predecessor of Ameritas, issued a $5 milliom policy insuring the life of Alexander Bienenstock. The “Alexander Bienenstock Life Insurance Trust” was designated as the owner and beneficiary.
The trustee of the trust was identified as Michael S. Mosberg, of Bergenfield, N.J., court documents say.
According to the application, Bienenstock had a net worth of more than $30 million and the policy was to help pay estate taxes upon his death. The trust was to pay the premiums, court documents say.
At the time the policy was issued, Mosberg and producer Abraham Leifer filled out and signed a Statement of Policyowner and Agent Intent.
In it, they acknowledged that “they did not intend to assign or sell the applied-for life insurance policy; they had not spoken to any individual or company offering to pay for the insurance or offering ‘free’ or ‘no cost’ insurance; they did not complete or anticipate to complete any loan papers in connection with the purchase of the policy; the premiums were not being otherwise financed; they had never sold a life insurance policy they owned to a third party,” the Ameritas complaint said.
On June 9, 2011, the trust changed the owner and beneficiary of the policy to Wilmington Savings Fund Society, a securities intermediary, which is the current owner of record. Bienenstock died on Jan. 12, 2024.
Investigation commenced
Following Bienenstock’s death and the subsequent claim, Ameritas said it investigated the policy sale.
“The premiums were funded by a group of investors who lacked an insurable interest in Mr. Bienenstock’s life, who were participating in a wager on his life so that they might profit (either by selling the Policy on the secondary market after two years or collecting the death benefit),” their complaint states.
Ameritas asks the court to declare the policy an “illegal human life wagering contract.”
Motion to dismiss filed
The Wilmington Savings Fund Society filed a motion to dismiss, which was withdrawn last week. Both sides will proceed with the discovery phase of the lawsuit, court documents say.
“Ameritas is aware and has always been aware that the Policy was procured by the Insured on behalf of a not-for-profit organization that the Insured supports,” the motion reads. “Ameritas knows this because over the past two decades, it has received checks directly from the not-for-profit to pay for premiums. Such life insurance is recognized as not only legal but benevolent and is protected under New Jersey law.”
Bienenstock was a member of The Kolel, a religious organization that promotes the advancement of the Orthodox Jewish faith and Talmudic studies, the motion claims.
“Since its inception, members and the supporters of the Kolel have taken out policies of life insurance to benefit Kolel and which is deemed vital to Kolel’s legally established purpose,” the motion reads. “The Policy was never sold, it was transferred to Wilmington which holds it as a securities intermediary. The Policy is beneficially owned by the Kolel and the Kolel and no other entity will receive the death benefit.”
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