Life Insurance – Statutory Interpretation

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7^th Circuit Court of Appeals

Case Name: Sun Life Assurance Co of Canada v. U.S. Bank National Association

Case No.: 16-1049

Officials: BAUER, POSNER, and EASTERBROOK, Circuit Judges.

Focus: Life Insurance – Statutory Interpretation

In 2007 an insurance company named Sun Life (the defendant in this case and the appellant in this court) issued a $6 million policy on the life of a wealthy 81‐year‐old named Charles Margolin. He died in 2014. U.S. Bank (the plaintiff in this suit and the appellee in this court) had bought the policy three years before Margolin’s death, becoming the policy’s beneficiary. U.S. Bank is designated in the caption as a securities intermediary, however, because Margolin’s policy either is a security or has been bundled together with other life insurance policies to create a security or securities, and be‐ cause U.S. Bank bought the policy as an intermediary on be‐ half of another investor. See Jenny Anderson, “Wall Street Pursues Profit in Bundles of Life Insurance,” New York Times, Sept. 5, 2009, www.nytimes.com/2009/09/06/business/06ins urance.html?_r=1 (visited Oct. 11, 2016). Sun Life declared that it would refuse to pay U.S. Bank the policy proceeds until it investigated the policy’s validity. That refusal, should it ripen from tentative to definitive up‐ on completion of the investigation, would be profitable be‐ cause during the seven years that the policy was in force Sun Life had collected and retained almost $2.5 million in premiums paid by the successive owners of the policy. And even if Sun Life was ordered to return the premiums, see Venisek v. Draski, 150 N.W.2d 347, 353–54 (Wis. 1967), it would save $6 million if it didn’t have to pay U.S. Bank the policy proceeds. Reacting to Sun Life’s declaration and armed by Wisconsin’s requirement that insurers in Wisconsin pay claims within 30 days, Wis. Stat. § 628.46, U.S. Bank brought this diversity suit against Sun Life, and prevailed in the district court; the district judge ruled that the bank was entitled to the policy proceeds—the $6 million—plus statutory interest and “bad faith” damages for Sun Life’s foot dragging.

Affirmed

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.