Dist. Ct. did not err in finding that $5 million life insurance policy issued by plaintiff-insurance company was void ab initio, since record showed that policy was essentially illegal wagering contract, where, although insured nominally procured policy on his own behalf, $300,000 yearly policy premiums were loaned to insured by third-party with expectation that at end of term of loan insured would assign rights to policy to third-party, which in turn sold policy to other entities having no insurable interest in life of insured. Record also showed that: (1) insured, who essentially paid nothing for instant policy, could not afford policy premiums; (2) financing of premiums had been concealed from plaintiff; and (3) there was no serious risk that insured would sell rights to policy to entity not associated with scheme or would retain rights to policy for himself at end of loan term. Dist. Ct. erred, though, in finding that plaintiff could not retain all premiums paid on policy, but rather found that last entity to hold interest in policy could receive $13,000 refund on premiums that it paid because last entity was unaware of instant deceptive scheme to obtain rights to policy. Ct. of Appeals found that last entity was not innocent purchaser of policy so as to qualify for refund, but rather was sophisticated buyer that purchased rights to policy knowing risk that court could find policy void ab initio.
Federal 7th Circuit Court
Civil Court
Insurance