WELLS FARGO BANK v. AMERITAS LIFE INSURANCE CORP (2025)

MEMORANDUM AND ORDER

This matter is before the Court on Defendant Ameritas Life Insurance Corporation's (“Ameritas”) Motion for Summary Judgment. (Filing No. 228.) For the reasons explained below, the Motion will be granted.

STATEMENT OF FACTS

This action arises out of a dispute concerning the enforceability of a life insurance policy issued by Union Central Insurance Company (“Union Central”)—Defendant's predecessor in interest—to insure the life of Jerry Freid (“Freid”). The background and facts underlying this suit are set out below.

1. Michael Binday's STOLI Scheme

In the mid-2000's, Michael Binday (“Binday”) was an insurance producer/broker running an insurance brokerage firm—R. Bindy Plans and Concepts (the “Binday Firm”). In 2012, Binday and insurance writing agent, James Kevin Kegril (“Kegril”), were indicted for defrauding insurers through a stranger originated life insurance (“STOLI”) scheme. (Filing No. 245; Filing No. 251-2.) STOLI policies are insurance policies taken-out on the lives of senior citizens for the benefit of investors having no relationship to the seniors and are illegal in most states. On October 7, 2013, following a jury trial, Binday and Kergil were convicted of mail fraud, wire fraud, and conspiracy to commit mail and wire fraud relating to STOLI activity, which involved numerous policies across many insurers, but included the insurance policy issued to Freid. (Filing No. 245; United Sates v. Binday, 804 F.3d 558 (2d Cir. 2015)).

As part of Binday's STOLI scheme, seniors were solicited to purchase life insurance policies. (Filing No. 251-3.) The Binday Firm would then get a HIPAA release to obtain the senior's medical records, and also get life expectancy reports that estimated how much longer the senior was expected to live. (Filing No. 251-3.) Binday's assistant, Tracey Robinson (“Robinson”), testified that the normal process was for these life expectancy reports to be sent to policy funders with illustrations before policies were issued. (Filing No. 251-3.) Robinson stated that, based on her understanding, life expectancy reports were forwarded to potential funders so the funders could determine whether a not-yet-issued policy on that senior would make sense. (Filing No. 251-3.) According to Plaintiff, if an insured wanted to utilize premium financing, the lender would have to perform its own underwriting with respect to the loan, determine if the policy as collateral would have sufficient value in relation to the amount of the loan, and approve the loan application before the policy would be applied for with the carrier. (Filing No. 245.)

As part of his process, Binday (or someone in his office) would also direct creation of a trust, which would be administered by a trustee selected by Binday. (Filing No. 251-3; Filing No. 251-7.) Binday's cousin, Michael Block (“Block”), was designated as trustee for approximately 25 to 30 insurance policy trusts and was paid for his services. (Filing No. 251-7.) Block testified that Binday (or someone in his office) would send him documents, and that he signed the documents. (Filing No. 251-7.) Block testified that he believed Binday's strategy was to use the trust structure as a work-around to the problem that a senior is not supposed to be used to create an insurance policy. (Filing No. 251-7.)

A premium finance loan program created and funded by an entity known as HM Ruby was used to fund a portion of Binday's policies. (Filing No. 251-2; Filing No. 251-3.) According to Adam Weidenbaum (“Weidenbaum”), who was an analyst at HM Ruby beginning in August 2008, this lending program was meant for HM Ruby to pay premiums past an insurer's two-year contestability period for a policy.¹ (Filing No. 251-5.) Wayne Himelsein (“Himelsein”), a general partner of HM Ruby, testified that HM Ruby loans lasted, on average, around two and a half years. (Filing No. 251-30.) According to Himelsein, loans were structured to last longer than the contestability period of a policy due to loan collateral concerns—HM Ruby did not want to be in a situation where it would have to acquire collateral while a policy was still contestable. (Filing No. 251-30.) Himelsein explained that loans were not substantially longer because a lot more capital would be necessary, and investors expected liquidity. (Filing No. 251-30.)

HM Ruby coupled its loans with separate “put agreements.” (Filing No. 251-4.) Under these agreements, assuming all the requirements of the “put” option were satisfied, when the loan became due, a trust had a couple options. (Filing No. 251-4; Filing No. 251-5; Filing No. 251-29.) A trust could sell the policy on the open market to another buyer and use the proceeds from that sale to pay off the balance of the loan, or a trust could relinquish the policy back to HM Ruby in satisfaction of the loan. (Filing No. 251-4; Filing No. 251-5; Filing No. 251-29.) The trust also had the option to repay the total amount due on the loan and keep the policy. (Filing No. 251-5.)

Himelsein testified that the focus of HM Ruby's business was to lend premiums for policies that existed. (Filing No. 251-30.) Himelsein stated it was important to HM Ruby that it was not lending on policies that had not been issued. (Filing No. 251-30.) Himelsein stated that his expectation was that most of the premium finance loans HM Ruby made would be paid off. (Filing No. 251-30.) However, on July 13, 2007, Binday, via email to HM Ruby account executive Lionel Tapiero (“Tapiero”), expressed that: “Your program is not designed for estate planning, so don't kid us about it,” and that “We expect every policy that goes through HM to get sold in two years.” (Filing No. 251-6; Filing No. 251-29.) The email further provided that trusts owning policies must (1) pass insurance company muster and (2) allow their policies to be sold in two years. (Filing No. 251-6.)

According to Weidenbaum, by August 2008, HM Ruby was using its finance program to acquire policies for itself. (Filing No. 251-5.) Himelsein testified that HM Ruby stopped making loans in 2008 or 2009. (Filing No. 251-30.) He said that in 2009 and 2010, HM Ruby started buying life insurance policies on the market as investments. (Filing No. 247-2.) Himelsein testified that after the credit crisis, HM Ruby saw an opportunity in the market and believed if it could get outside capital, it could build a big portfolio of policies at good prices. (Filing No. 247-2.) HM Ruby obtained financing from a lender called Fortress around 2009 to provide capital to pay premiums on policies. (Filing No. 251-29.) According to Tapiero, prior to obtaining that financing, HM Ruby did not have the funds to acquire policies. (Filing No. 251-29.) HM Ruby ended up acquiring around ninety percent of the policies it premium financed—including the policy at issue in this case. (Filing No. 251-29; Filing No. 251-30; Filing No. 245.)

2. The Freid Policy

In 2008, Freid was a 72-year-old retired, New Jersey resident. (Filing No. 251-39; Filing No. 251-40.) Freid sold his home in Pennsylvania for $365,100 in 1999, and had then moved to Iselin, New Jersey where he rented a townhome. (Filing No. 251-39; Filing No. 251-40.) Freid did not own any real estate in 2008, drove a used car, and according to his daughter, Eileen DeBeauchamp (“DeBeauchamp”), had a net worth of no more than $500,000. (Filing No. 251-40.) DeBeauchamp does not know if Freid had any stocks or bonds in 2007 or 2008 but does not think so. (Filing No. 251-40.) DeBeauchamp never saw Freid's bank account statements and Freid did not share his revenue or income with DeBeauchamp or discuss tax issues. (Filing No. 251-40.) As of 2008, Freid had three life insurance policies, totaling $275,000. (Filing No. 251-40.) In May 2010, Freid moved to Florida and purchased a home. (Filing No. 251-39.) DeBeauchamp stated Freid paid $116,500 in cash for the home. (Filing No. 251-39; Filing No. 251-40.)

In 2007, Binday began the process of obtaining an insurance policy (the “Policy”) for Freid. (Filing No. 251-3; Filing No. 253-1.) Robinson testified that she did not complete the Freid application. (Filing No. 251-3 at 59:8-14.) Robinson does not recall ever speaking to Freid and does not know why the Policy was purchased or what was said to Freid when he applied for the Policy. (Filing No. 251-3.) Robinson was not involved in the sales process. (Filing No. 251-3.) The Binday firm requested life expectancy reports for Freid. (Filing No. 253-3; Filing No. 253-4.)

In December 2007, the “Jerry Freid Irrevocable Trust” (the “Trust”) was created. (Filing No. 253-5.) Pursuant to the Trust Agreement, the laws of the State of New Jersey governed the validity, construction, interpretation and administration of the Trust. (Filing No. 253-5.) The Trust document indicates it was signed and notarized in New Jersey. (Filing No. 253-5.) At Binday's request, Block was named as trustee. (Filing No. 251-7; Filing No. 253-5.) Block testified that he only met Freid once—when Freid came to his office in Florida to pick up a check and to sign a document stating that he was giving up his interest in the Policy to a lender. (Filing No. 251-7.) Block thinks this meeting occurred in 2011. (Filing No. 251-7.) Block could not recall any other time he spoke to Freid. (Filing No. 251-7.) Block testified that he does not know why Freid applied for the Policy. (Filing No. 251-7.)

The Trust Agreement authorized Block to purchase life insurance on Freid's life and stated that Freid, as Grantor, “specifically intend[ed] that the Trustee retain and continue to hold any life insurance policy transferred to or secured by the Trust at any time, without any obligation to diversify any such investment.” (Filing No. 253-5.) Block was given “sole and absolute discretion” to “use trust income to purchase life insurance policies” and to “exercise all rights of ownership and control contained in the policies.” (Filing No. 253-5.) The Trust Agreement stated that the sole beneficiary was DeBeauchamp and, in the event of her death, her children. (Filing No. 253-5.) It also stated that the “primary purpose” of the Trust was to provide for the beneficiary. (Filing No. 253-5.) DeBeauchamp testified that she had no idea this Policy had been taken out on Freid's life. (Filing No. 253-40.)

In May 2008, Binday received life expectancy reports from life settlement companies estimating that Freid was expected to live another 168 months. (Filing No. 253-3; Filing No. 253-4.)

In May 2008, Union Central received an incomplete application for a life insurance policy on Freid's life in the amount of $4,000,000. (Filing No. 251-51.) It listed $4,450,000 as Freid's net worth and indicated that the purpose of the insurance was “estate tax” and “income replacement.” (Filing No. 251-51.) Kegril signed the application as the insurance agent and provided his license number on the application. (Filing No. 251-51.) “R. Binday Plans and Concepts” was listed as the agency. (Filing No. 251-51.) In July 2008, Union Central received another version of an insurance policy application for Freid. (Filing No. 251-52.) This version listed the Trust as the owner, indicated $4,450,000 was Freid's net worth, and noted that the purpose of the insurance was “estate tax” and “estate planning.” (Filing No. 251-52.) Kergil signed the application as the agent and provided his license number. (Filing No. 251-52.) R. Binday Plans and Concepts was listed as the agency. (Filing No. 251-52.) Freid's signature (or what purports to be Freid's signature) appears on both documents. (Filing No. 251-51; Filing No. 251-52.)

On August 14, 2008, the Binday Firm forwarded a formal life insurance application (the “Application”) to Union Central seeking a $4,000,000 policy on Freid's life. (Filing No. 251-13.) The Application was submitted on New Jersey insurance forms, and indicated the Policy's initial owner and beneficiary (the Trust) was in New Jersey, and that the insured (Freid) was in New Jersey. (Filing No. 251-13.) The Application stated Freid had filed for Chapter 7 bankruptcy in 2001 that had been discharged in 2001. (Filing No. 251-13.) The Application indicated it was signed by Kergil, Block, and Freid in Iselin, New Jersey. (Filing No. 251-13.) “R. Binday Plans and Concepts” was listed as the agency. (Filing No. 251-13.) Correspondence between the Bindy Firm and Union Central suggests Kergil's New Jersey insurance license number was provided to Union Central. (Filing No. 251-26.) The Binday Firm also submitted a policy illustration, signed by Block and Kergil, on New Jersey forms. (Filing No. 251-14.) The illustration stated it was “Designed for Jerry Freid NJ.” (Filing No. 251-14.) Kergil maintains he never met or had contact with Freid, and that he signed the paperwork because someone at Binday's office asked him to. (Filing No. 251-33.) Kergil averred that he does not know if Freid had a legitimate purpose for the policy. (Filing No. 251-33.)

The Application was accompanied by a Statement of Policyowner and Agent Intent form signed by Block (as Trustee) and Kergil (as agent) which asked the following questions, to which all were answered in the negative:

1. Do you presently intend to assign or sell the insurance policy for which you are applying?

2. Have you spoken with an individual or company offering to pay you for your life insurance policy?

3. Have you spoken with an individual or company offering you ‘free’ or ‘no cost’ insurance?

4. Do you anticipate having to complete, or have you completed, any loan papers in connection with your purchase of this life insurance policy, or are the premiums otherwise being financed in any way?

5. Have you ever sold or assigned a life insurance policy that you owned to a third party?

(Filing No. 251-15.) A signature that purportedly belongs to Freid also appears on the document. (Filing No. 251-15.) Block stated he did not fill out the form or check the boxes. (Filing No. 251-7.) Robinson averred that Binday instructed his staff to always answer questions like these in the negative. (Filing No. 251-2.)

On or around August 25, 2008, Union Central mailed a letter to Kergil, referencing the Policy's number. (Filing No. 251-13.) The letter included “special instructions,” directing that the “applicant and agent” sign a policy delivery receipt when the Policy was delivered and then return it to Union Central's home office. (Filing No. 251-13.) The letter stated that the full premium had to be collected when the Policy was delivered, and that payment was to be submitted to Union Central's home office. (Filing No. 251-13.) The letter also stated that the Policy could not be delivered until a policy amendment was signed. (Filing No. 251-13.)

The Policy indicates it was issued on September 8, 2008, and states it was issued “based on payment of the initial premium and the answers in the application.” (Filing No. 251-16.) The annual premium for the Policy was listed as $177,120. (Filing No. 251-16.) The Policy was printed on New Jersey forms. (Filing No. 251-16.) The Policy included a provision titled: “CONFORMITY WITH LAWS” that stated that the Policy “is subject to the laws of the state where the application is signed.” (Filing No. 251-16.)

Block executed a “Note” (Filing No. 253-6), dated September 8, 2008, on behalf of the Trust, agreeing to pay HM Ruby the sum of $300,390 or, if less, the aggregate unpaid principal amount of a premium finance loan made by HM Ruby to the Trust pursuant to a credit agreement. (Filing No. 253-7.) On September 8, 2008, Block executed a Credit Agreement (the “Credit Agreement”) with HM Ruby, setting out terms of a 27-month loan between HM Ruby (as lender) and the Trust (as borrower) to fund the Policy. (Filing No. 253-6; Filing No. 253-7.) The amount of the loan was comprised of $212,500 in expected premiums; $80,000 for a “put agreement;” $5,890 for an origination fee; and a trustee fee. (Filing No. 253-6; Filing No. 253-7; Filing No. 253-8; Filing No. 253-10.) The Credit Agreement contained a provision allowing the Trust to request up to a five-year extension of the final maturity date of the loan. (Filing No. 253-7.)

On September 8, 2008, Freid purportedly signed HM Ruby's form Consent and Acknowledgement Agreement (the “C&A Agreement”). (Filing No. 253-8.) The C&A Agreement asked Freid to acknowledge and agree that “the Trust [would] be the sole owner of the Policy and that none of the Insured, the Spouse, or any heirs, executors, or assigns of the Insured or his/her estate [would] have any interest in the Policy or any proceeds therefrom, unless they [were] designated as beneficiaries under the Trust” and that in the event the Trust defaulted on the financing, the lender would be the “sole owner and beneficiary of the Policy.” (Filing No. 253-8.) The C&A Agreement indicated that the premium finance loan could be coupled with a put agreement, and, in the event the rights in the put agreement were exercised, “none of the Trust, the Insured, the Spouse, or any heirs, executors, or assigns of the Insured or his/her estate [would] have any rights associated with the premium financing provided.” (Filing No. 253-8.)

The C&A Agreement attached a copy of an opinion from the New York State Insurance Department, Office of General Counsel, and asked Freid to confirm that he received it and understood that the opinion “concludes that a recourse loan coupled with a put option strategy for the acquisition of a life insurance policy does not conform to the New York Insurance Law.” (Filing No. 253-8.) The attached opinion stated that such an arrangement “involves the procurement of insurance solely as a speculative investment for the ultimate benefit of a disinterested third party ․ and is contrary to the long-established public policy against ‘gaming’ through life insurance purchases.” (Filing No. 253-8.) The C&A Agreement asked Freid to acknowledge that he accepted all the possible consequences of the opinion on the premium financing arrangement between HM Ruby and the Trust. (Filing No. 253-8.) The C&A Agreement required Freid to “[u]nconditionally and irrevocably consent” to the application for the Policy, the Trust's assignment of the Policy to HM Ruby, and to HM Ruby accessing and using Freid's medical records. (Filing No. 253-8.) The C&A Agreement required Freid to “represent and warrant” that: “The Insured does not now need to purchase any additional insurance, for purposes of estate planning or for other purposes, and will not need to purchase such insurance at any time in the future.” (Filing No. 253-8.)

On September 10, 2008, the Binday Firm emailed Union Central a policy amendment, indicating that Kergil had witnessed Freid and Block sign the amendment on September 10, 2008 in “Iselin, NJ.” (Filing No. 251-23; Filing No. 251-24.) Also attached to the email was an executed Policy Delivery Receipt, which was signed by Block and Kegril and dated September 10, 2008. (Filing No. 251-25.) This was the same day Kergil represented he had witnessed Block sign the amendment in Iselin, New Jersey, but Block contends the Policy was delivered to him in Florida. (Filing No. 247-3; Filing No. 251-25.) In a Client Survey for Union Central completed by Block in or around November, 2008, Block indicated his address was in Florida. (Filing No. 246-5.)

On September 13, 2008, Freid purportedly executed another form HM Ruby document entitled “Guaranty,” through which Freid agreed to pay the outstanding balance on the loan to HM Ruby in the event the Trust (as borrower) defaulted. (Filling No. 253-9.) Also on that day, Block, as trustee, executed HM Ruby's Put Agreement. (Filing No. 253-10.) The Put Agreement, provided, in part:

(a) Granting of Rights, Option Purchase Price. Subject to the limitations set forth herein, at any and only one time after the Rights Effective Date and prior to the Expiration Date the Holder, upon written notice to HM Ruby (a “Notice”), shall be entitled to sell, and HM Ruby shall be obligated to purchase all of the Holder's right, title and interest in and to the Life Policy at the Option Purchase Price. The Right shall terminate automatically if the Notice is not timely delivered or deemed delivered prior to the Expiration Date. Notwithstanding anything contained in this Agreement to the contrary, if an event of default has occurred, and is continuing beyond the applicable cure period, pursuant to any other loan agreement, promissory note and/or security agreement between the Holder and HM Ruby, including for this purpose any of its Affiliates, the Holder shall be deemed to have delivered a Notice (unless the Holder shall previously have delivered a Notice) on that date which is one (1) day after expiration of the applicable cure period in such agreement. HM Ruby shall, on or about the Rights Effective Date, send a copy of this Agreement to the Holder.

(Filing No. 253-10.) “Rights Effective Date” meant “that date which is the latter of (a) two (2) years and one (1) day after the ‘issue date’ with respect to the Life Policy, and (b) the Effective Date.” (Filing No. 253-10.) “Expiration Date” meant “that date which is NINETY (90) days after the Rights Effective Date.” (Filing No. 253-10.) Pursuant to the Put Agreement, HM Ruby would purchase the Policy from the Trust—for the precise amount of money the Trust owed under the loan—if the Trust either: (1) exercised this “put” option; or (2) failed to repay the loan, at which point the put option would be deemed exercised. (Filing No. 253-10.) On September 19, 2008, Block, as trustee, with funds supplied by HM Ruby, wired $177,120 to Union Central from the Trust's bank account in Florida. (Filing No. 251-27; Filing No. 251-7.)

On February 3, 2011, approximately twenty-nine months after the funds were wired, Ivan Sekeres on behalf of Quantlife, LLC (which was owned by HM Ruby) sent an email to Lon Pastuch from Life Settlements International, LLC (“LSI”), with an initial bid to purchase the Policy for $447,390. (Filing No. 251-30; Filing No. 253-33.) The amount was broken down as follows: $433,090 as net payment to seller—with $430,590 of that amount to be sent towards repaying a loan on the Policy and $2,500 going to the Trust; $3,500 as brokerage commission; and $10,800 as a fee to LSI. (Filing No. 253-33.) LSI and Quantlife had a business relationship in which Quantlife would purchase policies from LSI. (Filing No. 253-46; Filing No. 251-29.) Taperio testified that LSI acted as a life settlement provider so that HM Ruby or an affiliated entity could purchase the policies thorough LSI. (Filing No. 251-30.)

On March 7, 2011, LSI acquired the Policy from the Trust. (Filing No. 253-15; Filing No. 253-46.) On that date, Block, on behalf of the Trust, signed a Viatical Settlement Agreement, agreeing to sell the policy to LSI for $436,590, with a net purchase price of $433,090. (Filing No. 253-15.) Block's signature on the Agreement was notarized in Florida. (Filing No. 253-15.) The Agreement also purports to have been signed by Freid—as the insured. (Filing No. 253-15.) The Viatical Settlement Agreement stated that its terms would be construed in accordance with the laws of New Jersey and/or jurisdictions within New Jersey. (Filing No. 253-15.)

As part of the closing packet for the sale of the Policy, Block and Binday signed an Insurable Interest and Premium Finance Questionnaire (“Questionnaire”). (Filing No. 251-71.) The Questionnaire stated there was a $433,090 loan still outstanding on the Policy. (Filing No. 251-71.) The Questionnaire represented that the “insured and viator's original purpose” for buying the Policy was “estate planning,” and “No” was stated in response to the following questions:

a. Did the insured or any other person or entity (other than the insurance broker/agent or insurance carrier) receive any payment of anything of value at the time of issuance of the policy that was related to the policy issuance?

․

c. Did the viator [the Trust] purchase the policy with its or the insured's intent to subsequently sell the policy?

d. Did the viator or the insured discuss the possibility of a viatical or life settlement contract with the insurance agent of record or any other person before the issuance of the policy?

(Filing No. 251-71.) In June 2011, Union Central processed a change of owner and beneficiary for the Policy to Plaintiff, as securities intermediary. (Filing No. 245; Filing No. 251-59; Filing No. 251-60; Filing No. 251-16.)

The Policy was later acquired by Vida Longevity Fund, LP (“Vida”), now called “Obra,” for $485,000. (Filing No. 251-86; Filing No. 253-35.) Plaintiff has owned and maintained the Policy as securities intermediary on behalf of Vida since that date. (Filing No. 251-86.) Plaintiff has carried the Policy as a New Jersey policy on its books and records. (Filing No. 266-3; Filing No. 266-4.)

3. This Litigation

Freid died on July 29, 2020. (Filing No. 194; Filing No. 259.) On or about August 17, 2020, Plaintiff notified Defendant of Freid's death and sought to collect death benefit payments under the Policy. (Filing No. 194; Filing No. 251-69.) After Defendant conducted an internal investigation, it concluded that the Policy was procured by a third-party who lacked an insurable interest in Freid's life. (Filing No. 251-87; Filing No. 251-88; Filing No. 251-89; Filing No. 251-90.) On February 9, 2021, Defendant commenced a declaratory judgment action in the United States District Court for the District of New Jersey seeking to have the Policy deemed void ab initio, arguing the Policy was a STOLI policy because Plaintiff lacked a valid insurable interest in Freid's life. See Ameritas v. Wells Fargo, Case No. 2:21-cv-2136 (D.N.J.). On February 10, 2021, Defendant wrote to Plaintiff and stated that Defendant completed a review of the Policy and determined that it “was procured as a stranger-originated life insurance transaction” and that it intended to deny the claim and void the policy. (Filing No. 251-91.)

On June 14, 2021, Plaintiff filed this suit, asserting breach of contract, bad faith, promissory estoppel, and unjust enrichment. (Filing No. 1.) Plaintiff sought a declaration that Defendant must pay benefits under the Policy and compensatory damages. (Filing No. 1.) Plaintiff requested, in the alternative, that in the event the Policy was declared unenforceable, that premium payments Plaintiff made under the Policy be returned. (Filing No. 1.) On September 27, 2021, the Nebraska proceedings were stayed pending disposition of a motion to dismiss for lack of personal jurisdiction in the New Jersey action. (Filing No. 36.) The New Jersey District Court ultimately denied Plaintiff's motion to dismiss and stayed the New Jersey proceedings.

On October 31, 2022, this Court lifted the stay of the Nebraska action. (Filing No. 70.) Defendant then filed a motion to dismiss (Filing No. 75) seeking to dismiss Plaintiff's promissory estoppel claim. Defendant argued such equitable relief was unavailable under New Jersey law because the Policy was void ab initio. Senior United States District Court Judge John Gerrard denied the motion to dismiss on September 22, 2023. (Filing No. 131.) In doing so, Judge Gerrard determined that New Jersey—as opposed to Nebraska—law governs the dispute. Judge Gerrard determined New Jersey law applies because the insurance application was signed in New Jersey and the Policy included a provision stating that the Policy “is subject to the laws of the state where the application is signed.” (Filing No. 31-4.) Judge Gerrard further found that even without the provision, New Jersey law governs because New Jersey has the most significant relationship to the transaction and the parties.

On April 8, 2024, Plaintiff filed an Amended Complaint (Filing No. 194), asserting breach of contract and bad faith breach of covenant of good faith and fair dealing. The Amended Complaint did not allege claims for promissory estoppel or unjust enrichment as were set out in the original Complaint. (Filing No. 194.) Through its Amended Complaint, Plaintiff seeks a declaration that Defendant must pay Plaintiff the benefits owed under the Policy, plus compensatory damages in an amount to be determined at trial, but no less than $4,000,000, plus interest.

STANDARD OF REVIEW

Summary judgment is proper if the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). “The movant bears the initial responsibility of informing the district court of the basis for its motion, and must identify those portions of the record which it believes demonstrate the absence of a genuine issue of material fact.” Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (quotation omitted). If the movant does so, “the nonmovant must respond by submitting evidentiary materials that set out specific facts showing that there is a genuine issue for trial.” Id.

“On a motion for summary judgment, facts must be viewed in the light most favorable to the nonmoving party only if there is a genuine dispute as to those facts.” Id. “Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.” Id. However, the nonmovant “must do more than simply show that there is some metaphysical doubt as to the material facts.” Id. “In order to show that disputed facts are material, the party opposing summary judgment must cite to the relevant substantive law in identifying facts that might affect the outcome of the suit.” Quinn v. St. Louis Cty., 653 F.3d 745, 751 (8th Cir. 2011) (quotation omitted). “The mere existence of a scintilla of evidence in support of the nonmovant's position will be insufficient; there must be evidence on which the jury could reasonably find for the nonmovant.” Barber v. C1 Truck Driver Training, LLC, 656 F.3d 782, 791-92 (8th Cir. 2011) (quotation omitted). “Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.” Torgerson, 643 F.3d at 1042 (quotation omitted).

DISCUSSION

1. Choice of Law

As a preliminary matter, the Court must address the issue of which state's laws govern this dispute. Defendant contends New Jersey law applies, whereas Plaintiff maintains that Florida law governs.² This Court previously found that New Jersey law was applicable. However, at the time of that decision, Plaintiff did not assert that Florida law governed. Rather, the Court addressed the question of whether New Jersey or Nebraska law applied. Plaintiff now contends that evidence uncovered during discovery shows that Florida law governs because Block signed the Policy application in Florida—not New Jersey as previously believed. Plaintiff points to the provision in the Policy boldly titled, “CONFORMITY WITH LAWS,” that states that the Policy “is subject to the laws of the state where the application is signed.” Plaintiff contends this clause operates as a choice of law provision and dictates, based on where Block allegedly signed the application, that this dispute is governed by Florida law. Plaintiff asserts that, at the very least, a factual dispute remains necessitating a trial on the choice of law issue based on Block's assertion that he signed the application in Florida.

A district court sitting in diversity applies the choice of law rules of the forum state. Dorman v. Emerson Elec. Co., 23 F.3d 1354, 1358 (8th Cir. 1994). Nebraska will generally give effect to the parties’ choice of law. See Vanice v. Oehm, 247 Neb. 298, 300, 526 N.W.2d 648, 651 (1995); Am. Nat'l Bank v. Medved, 281 Neb. 799, 806, 801 N.W.2d 230, 236-37 (Neb. 2011). Here, however, the parties dispute whether there was ever an agreement that Florida's laws would govern. Defendant maintains that the clause titled “CONFORMITY WITH LAWS” does not operate as a choice of law provision, but rather is exactly what it says it is: a conformity with laws provision serving only to ensure the Policy would be treated as conforming to the legal requirements of the state where the application was signed. See AEI Life LLC v. Lincoln Benefit Life Co., 892 F.3d 126, 134 (2d Cir. 2018) (“A conformity clause has the effect of excising a provision of an insurance policy that conflicts with or is voided by state law and replacing the provision with the prevailing state statute or judicial rule of law.”) (quotation omitted). The Court agrees with Defendant.

A conformity of laws clause does not operate as a choice of law provision. This has been recognized by numerous courts. See AEI, 892 F.3d at 134 (stating most courts to consider the issue have held that a conformity clause does not determine the applicable law); Nat'l Sur. Corp. v. Mack, No. CV 15-35-BLG-SPW, 2015 WL 8779995, at *2 (D. Mont. Dec. 15, 2015) (finding that a provision entitled “Conformance with State Law” did not operate as a choice-of-law provision); Crisler v. Unum Ins. Co. of Am., 233 S.W.3d 658, 661 (Ark. 2006) (concluding that a clause titled “Conformity with state statutes” was not a choice of law clause because “[n]o specific state [was] mentioned, and a reasonable construction of this provision [was] simply that any illegal provisions [were] void to the extent that they deviate[d] from the law of the state in which the policy [was] delivered”).

A particularly illustrative case on this point is AEI Life LLC v. Lincoln Benefit Life Co., 892 F.3d 126, 134 (2d Cir. 2018). In AEI, the Second Circuit dealt with the issue of whether a provision in an insurance policy acted as a choice of law clause. The “Conformity With State Law” clause stated: “This certificate is subject to the laws of the state where the application was signed. If any part of the certificate does not comply with the law, it will be treated by us as if it did.” AEI, 892 F.3d at 132. The Second Circuit determined that the clause was not a choice of law provision. In so finding, the court acknowledged that a choice of law and conformity clause could theoretically be contained in one clause, but that was not the situation. The court found that if the parties had intended for the provision to act as a choice of law clause, the court would expect it to have a title that indicated it was serving such a purpose. The court stated it would “also anticipate that the clause would name the chosen state if it were also operating as a choice of law clause.” Id. Further, specifically evaluating the language of the provision, the court found that “in making the certificate ‘subject to’ such laws, the clause suggest[ed] only conformity to such laws.” Id.

As in AEI, the title of the provision in this case does not include the phrase “Governing Law,” or something similar. Instead, it is only labeled: “CONFORMITY WITH LAWS.” The name of the chosen state does not appear and the phrase “subject to” is used, rather than the phrase “governing law,” “choice of law,” or something else along those lines. Significantly, other courts faced with the identical language the Court is dealing with here have concluded that this clause does not operate as a choice of law provision. See Wilmington Trust v. Ameritas, No. 1:23-cv-2097, 2024 WL 3551131, at *4 (N.D. Ga. May 15, 2024); (Ameritas's identical “Conformity Clause does not operate as a choice-of-law provision”); Ameritas v. U.S. Bank, No. 22-cv-623, 2023 WL 9419169, at *6 (D. Del. Oct. 5, 2023) (“[C]aselaw overwhelmingly suggests that [the conformity with laws] provision is not a choice of law clause”). The Court finds, as determined in those previous cases, that the conformity with laws provision in the Policy is not an expression of the parties’ intent that the Policy would be governed by the law where the application was (allegedly) signed.

In the absence of a contractual stipulation about which law controls, Nebraska has adopted the Restatement (Second) of Conflict of Laws to resolve the choice of law in contract disputes. Johnson v. U.S. Fid. and Guar. Co., 269 Neb. 731, 743, 696 N.W.2d 431, 441 (2005) (citing Restatement (Second) of Conflict of Laws § 188). The Court must determine which state has the most “significant relationship” to the transaction and the parties, based on the principles outlined in § 6 of the Restatement. The “most compelling factor” is the parties’ justifiable expectations. Id. at 745, 696 N.W.2d at 442. The Court also considers the places of contracting, negotiation, performance, subject matter of the contract, and the parties. Id. at 743, 696 N.W.2d at 441.

Senior United States District Court Judge John Gerrard previously found that New Jersey supplies the governing law in this case, in part because New Jersey has the most significant relationship to the transactions and the parties. This Court finds no reason to reconsider this ruling. This Court has no trouble concluding that New Jersey has the most significant relationship and that it was the parties’ actual expectation that the Policy would be governed by New Jersey law. This conclusion is overwhelming supported by the record. At the time the Policy was issued, Freid was a New Jersey resident. A New Jersey trust was created to apply for the Policy. New Jersey forms were used to complete the Application, as well as numerous other documents. The Trust Agreement, Application, and Policy amendment all state that they were signed in New Jersey. Plaintiff even carried the Policy on its books and records as a New Jersey policy. Any assertion that the parties expected the Policy to be governed by anything other than New Jersey law is, quite frankly, disingenuous. New Jersey law governs this dispute.

2. Enforceability of the Policy

Having determined that New Jersey law applies, the Court turns to the question of whether the Policy is STOLI, and thus void pursuant to New Jersey law. The Court, having scrutinized the facts and record, finds that the Policy is undoubtably STOLI and, therefore, unenforceable.

The Supreme Court of New Jersey has determined that STOLI policies—those taken-out by strangers having no “insurable interest” in the person whose life is insured—are void ab initio and; therefore, incontestability provisions do not bar challenges to the policies.³ In Sun Life Assur. Co. of Canada v. Wells Fargo Bank, N.A., 208 A.3d 839 (N.J. 2019), the court concluded that “[i]f a third party without an insurable interest procures or causes an insurance policy to be procured in a way that feigns compliance with the insurable interest requirement, the policy is a cover for a wager on the life of another and violates New Jersey's public policy.” Id. at 849. The court explained that “[i]t would elevate form over substance” to conclude that feigned compliance with the insurable interest requirement satisfied the law and that such an approach “would effectively allow strangers to wager on human lives.” Id. The court also stated that “if a person with an insurable interest takes out a policy because he has an agreement to sell it to a third party, the transaction could be as much of an attempt to circumvent the insurable interest requirement as if a stranger had funded the policy at the outset. In either event, the aim of the insurable interest requirement would be thwarted.” Id. The court further explained that if a purchaser and investors “discussed an arrangement in advance, a third party without an insurable interest may have caused the policy to be procured – even if no firm agreement had yet been finalized.” Id. at 851.

The court went further to describe a typical STOLI arrangement: “[A] life settlement broker persuades a senior citizen to take out a life insurance policy not to protect the person's family but for a cash payment or some other current benefit arranged with a life settlement company.” Id. at 848 (quotation omitted). The court went on to outline a classic STOLI scheme:

Generally, an investor funds a STOLI policy from the outset, which makes it possible to obtain a policy with a high face value. The investor may lend the insured the money to pay the premiums for the period of incontestability, typically two years. It is also common for an insured to buy the policy in the name of a trust and name a spouse or other loved one as the trust beneficiary.

․

If the insured dies within the contestability period, his spouse, as beneficiary of the insurance trust, will get the death benefit (the free insurance), pay back the loan plus interest from the proceeds, and often pay the broker up to fifty percent of the benefit received. If the insured lives beyond two years or the contestability period, then the life settlement company buys the beneficial interest in the insurance trust, paying the insured a lump sum percent of the face value of the policy. The life settlement company or its investors will continue to pay the premiums on the policy, and when the insured dies, they will get the death benefit. Clearly, the sooner the insured dies, the greater the company's profit.

Id. at 848 (internal citations and quotations omitted). The court recognized that in some situations, it may not be clear whether a policy was procured by a STOLI arrangement. Id. at 851. The court observed that in those cases, to determine whether a third party without an insurable interest may have caused the policy to be procured, several factors are important to consider, including “the nature and timing of any discussions between the purchaser and the strangers; the reasons for the transfer; and the amount of time the policy was held.” Id. The court recognized that the key difference between non-STOLI and STOLI policies “is simply one of timing and certainty; whereas a non-STOLI policy might someday be resold in an investor, a STOLI policy is intended for resale before it is issued.” Id.

Plaintiff claims genuine issues of fact exist as to whether the Policy was STOLI which precludes summary judgment. Plaintiff contends there remains a fact question as to whether Freid and his lender, HM Ruby, intended the Policy at its issuance to benefit a person without an insurable interest in Freid's life, or for an investor to collect the Policy proceeds or profit from Freid's death. Plaintiff maintains the structure of the transaction suggests that the core purpose of the Policy was for estate planning, pointing out that the Trust Agreement stated that the Trust's primary purpose was to “provide for the Beneficiary,” and that if Freid had died while the loan was outstanding and the Trust owned the Policy, Freid's beneficiaries would have received the Policy's death benefit. Thus, according to Plaintiff, the facts suggest there was no “feigned compliance” and that Freid was not a “straw man” insured serving as a pawn for an investor.

As one of these supposed remaining factual disputes, Plaintiff argues no one knows Binday's intent in pursuing the Policy. Plaintiff points to the Statement of Policyowner and Agent Intent form signed by Block, Freid, and Kergil on August 14, 2008, which answered “no” to the following questions: (1) “Do you presently intend to assign or sell the insurance policy for which you are applying;” (2) “Have you spoken with an individual or company offering to pay you for your life insurance policy;” (3) “Have you spoken with an individual or company offering you free or no cost insurance;” (4) “Do you anticipate having to complete, or have you completed, any loan papers in connection with your purchase of this life insurance policy, or are the premiums otherwise being financed in any way;” and (5) “Have you ever sold or assigned a life insurance policy that you owned to a third party.”

Plaintiff also points to the Questionnaire executed when the Policy was sold in 2011, on which Binday and Block indicated that the “insured and viator's original purpose” for buying the Policy was “estate planning,” and answered “No” to these questions: (1) “Did the insured or any other person or entity (other than the insurance broker/agent or insurance carrier) receive any payment of anything of value at the time of issuance of the policy that was related to the policy issuance;” (2) “Did the viator [the Trust] purchase the policy with its or the insured's intent to subsequently sell the policy;” and “Did the viator or the insured discuss the possibility of a viatical or life settlement contract with the insurance agent of record or any other person before the issuance of the policy.” Plaintiff claims Defendant has no evidence that the responses to these questions were lies because Kergil, Robinson and Block do not have personal knowledge that Binday's representations were false.

Plaintiff further argues questions of fact remain because there is evidence in the record suggesting that HM Ruby did not originally want to purchase the Freid Policy, and that HM Ruby only changed its business model and began purchasing policies after the financial crisis and after it obtained additional investor funding—which occurred after the Policy was issued. According to Plaintiff, HR Ruby was established to loan money and earn interest income, not to acquire policies, and HR Ruby loaned money to finance policies that were already issued. Plaintiff asserts the evidence shows HR Ruby did not want to foreclose on its loans, but rather wanted the loans repaid. Plaintiff claims that had the loan been a cover to allow HM Ruby to acquire the Policy, it would not have allowed a final maturity date extension, as is provided for in the Policy.

Finally, Plaintiff argues that a genuine dispute of fact remains because nobody knows for certain what Freid's intent was when seeking the Policy. Plaintiff maintains it is unclear whether Binday sought Freid out, or vice versa, and that no one knows what Freid and Binday discussed. Plaintiff claims there is also a question as to whether Freid could afford the Policy's premiums because no witness has sufficient personal knowledge of Freid's financial condition at the time the Policy was issued.

Despite Plaintiff's arguments to the contrary, the Court finds that no genuine issues of fact remain as to whether the Policy was STOLI. The record shows the Policy was not meant to benefit any person with an insurable interest in Freid's life. Plaintiff's attempt to create genuine issues of fact by raising questions as to the intentions of Freid, HM Ruby, and Binday in procuring and funding the Policy is unavailing.

First off, the Policy was procured using Binday's STOLI scheme playbook—the scheme for which he was convicted and sentenced to prison. True to form, before the Policy application was submitted, Binday commissioned life expectancy reports on Freid's life. Then, per the usual, Binday directed the creation of a trust, and enlisted his cousin to serve as trustee. Binday received life expectancy reports for Freid's life, and then Block, in his role as trustee, applied for the Policy. HM Ruby agreed to fund the Policy through a 27-month premium finance loan, coupled with a “put agreement.” Then, at the conclusion of the loan period, HM Ruby acquired the Policy. Plaintiff apparently expects the Court to ignore this backdrop and attribute it to mere happenstance to necessitate a trial. Despite this invitation, the Court is not inclined to check its common sense at the door. The record, taken as a whole, could not lead a rational trier of fact to find in Plaintiff's favor as to the character of the Policy.

To be clear, there is more to this story than just an “uncanny” resemblance to a typical Binday STOLI-scheme transaction. Here, the record shows the Policy was controlled by an investor from the very start. The Trust was not created, controlled, or funded by Freid. Block, as trustee, was given sole and absolute discretion to purchase life insurance policies and to exercise all rights of ownership and control over policies. Despite this broad authority, Block had never spoken to, or met, Freid. Kegril signed the policy application as the insurance agent, but he had likewise never met or had any contact with Freid. HM Ruby agreed to pay the premium per a 27-month financing arrangement with the Trust, coupled with a put option pursuant to which HM Ruby agreed to purchase the Policy from the Trust. Freid did not directly receive any funds from HM Ruby or pay any premiums for the Policy. The money all went to the Trust from HM Ruby. This whole transaction was nothing but form over substance.

The timing of events shows the entire transaction was orchestrated. Block executed a Note, dated September 8, 2008, agreeing to pay HM Ruby the sum of $300,390 or, if less, the aggregate unpaid principal amount of a premium finance loan made by HM Ruby to the Trust pursuant to a Credit Agreement. The Credit Agreement was executed on September 8, 2008. The Policy reflects it was also issued on September 8, 2008. Then, on February 3, 2011, approximately 29-months after HM Ruby wired funds into the Trust's bank account, HM Ruby (through Quantlife) bid to purchase the Policy, and ultimately acquired the Policy in or around March 2011. There can be no doubt that the nature and timing of these events and transactions show the Policy was intended for resale before it was issued.

Moreover, even though an HM Ruby executive said it was HM Ruby's hope that all loans would be paid back, this is not what Binday believed. Binday expected all HM Ruby policies to be sold within two years. In 2007, Binday emailed Taperio, stating: “Your program is not designed for estate planning, so don't kid us about it,” and that Binday expected that “every policy that goes through HM to get sold in two years.” Plaintiff tries to create a genuine issue of fact by citing the “no” responses to questions on the Statement of Policyowner and Agent Intent form, which included the question: “Do you anticipate having to complete, or have you completed, any loan papers in connection with your purchase of this life insurance policy, or are the premiums otherwise being financed in any way?” This question was answered in the negative, but Robinson stated that Binday instructed his staff to always answer questions like these in the negative. And tellingly, less than a month after that document was submitted to Union Central, documents were executed for a loan arrangement through which HM Ruby would finance the Policy.

Although Freid's financial condition is disputed, it is obvious his net worth was misstated on policy applications. The only evidence in the record is that Freid was not a wealthy man. In 2008, Freid was a 72-year-old retired man who rented a townhome. Freid did not own any real estate, drove a used car, and according to his daughter, had a net worth of no more than $500,000—not $4,500,000 as stated on policy applications. When Freid moved to Florida, he purchased a home for $116,500. This amount is significantly less than the $177,000 annual premium for the Policy.

Plaintiff maintains this case resembles West Coast Life Insurance Co. v. Wells Fargo Bank, N.S., as Securities Intermediary, Case No. 20-04350 (D. N.J. June 27, 2023), which involved the same HM Ruby premium finance loan program at issue here. In West Coast, the plaintiff sought a declaratory judgment that an insurance policy of the life of Miriam Waldman was STOLI and thus void. The United States District Court for the District of New Jersey denied the plaintiff's motion for summary judgment, finding that resolution of disputed facts was necessary to decide the choice of law question. In a footnote, the court also stated that the record raised sufficient factual questions as to whether HM Ruby procured or caused to be procured the policy and Waldman's intended purpose for the policy. Suffice it to say, this is not true in this case. There is no evidence in the record on which the jury could reasonably reach the conclusion Plaintiff advances. The record shows the Policy was intended, from its onset, to benefit an investor. It is an unenforceable STOLI policy.

3. Bad Faith Claim

To prove bad faith under New Jersey law, a policy owner “must show the absence of a reasonable basis for denying benefits of the policy and the defendant's knowledge or reckless disregard of the lack of reasonable basis for denying the claim.” Allstate v. Tawil, No. 18-8843, 2021 WL 2253544, at *6 (D.N.J. June 3, 2021). “A plaintiff cannot prevail on a bad faith claim where the coverage is ‘fairly debatable.’ ” Id. Once a policy is declared void, insurance bad faith claims fail as a matter of law. Id. Because the Policy is void, Plaintiff's bad faith claim fails. Therefore, this claim will likewise be dismissed.

Accordingly,

IT IS ORDERED that Defendant's Motion for Summary Judgment (Filing No. 228) is granted.

Dated this 9th day of June, 2025.

FOOTNOTES

1.   The “contestability period,” which typically lasts two-years, allows an insurer to deny benefits or rescind a policy due to misstatements or fraud in a policy application. See Binday, 804 F.3d at 566 n.4.

2.   A conflict of law exists in this case. Under New Jersey law, Defendant can challenge the validity of the Policy based on lack of insurable interest after the expiration of the incontestability period, but under Florida law Defendant cannot. See Sun Life Assur. Co. of Canada v. Wells Fargo Bank, N.A., 208 A.3d 839 (N.J. 2019) (finding that STOLI policies violate New Jersey public policy and are void ab initio); Wells Fargo Bank, Nat'l Ass'n v. Pruco Life Ins. Co., 200 So. 3d 1202, 1207 (Fla. 2016) (holding that, under Florida law, a party cannot “challenge the validity of a life insurance policy after the two-year incontestability period ․ because of its creation through a STOLI scheme”).

3.   New Jersey's legislature expressly imposed an insurable interest requirement for insurance policies. New Jersey statute 17B:24-1.1 provides that no person shall “procure or cause to be procured any insurance contract upon the life, health or bodily safety of another individual unless the benefits under that contract are payable to the individual insured or his personal representative, or to a person having, at the time when that contract was made, an insurable interest in the individual insured.” The statute also outlines situations in which an individual has an insurable interest: “(1) An individual has an insurable interest in his own life, health and bodily safety. (2) An individual has an insurable interest in the life, health and bodily safety of another individual if he has an expectation of pecuniary advantage through the continued life, health and bodily safety of that individual and consequent loss by reason of his death or disability. (3) An individual has an insurable interest in the life, health and bodily safety of another individual to whom he is closely related by blood or by law and in whom he has a substantial interest engendered by love and affection.” N.J.S.A. § 17B:24-1.1.

Susan M. Bazis United States District Judge