New Jersey lawmakers appear on their way to passing a prohibition on stranger-originated life insurance.
The state Assembly passed a bill 78-0 last week and sent it to the Senate, which previously introduced the legislation. The Democratic caucus is leading the effort in both houses and Gov. Phil Murphy, D, is likely to sign the final product.
The Assembly bill would establish civil penalties of up to $10,000 plus restitution.
The legislation seeks to “prevent the establishment of trusts or other means to initiate or procure policies for investors under the guise of insurable interest,” Assembly Democrats said in a news release.
In New Jersey, life insurance policies can only be taken out by those who stand to suffer financial loss from the death of the individual insured and who have an interest in their continued life – legally understood as insurable interest.
“The tragic loss of life should never be punctuated by a vulturine financial ploy. Life insurance was created to prevent families from becoming destitute after a loss,” said Assemblyman Gary Schaer, D-Bergen, Passaic. “STOLI undermines this intended purpose by rewarding wagers on human life. STOLI policies have led to widespread abuse including exploitation of the elderly and manipulation of policyholders through early cash outs. Those who suffer because of STOLI policies are the beneficiaries life insurance is meant to protect.”
‘Bold And Direct Response’
The legislation follows the 2019 ruling handed down by the New Jersey Supreme Court in Sun Life Assurance v. Wells Fargo, which reaffirmed that STOLI transactions counter standards set forth in existing state law…Read more>>