Estate of Phyllis M. Malkin v. Wells Fargo Bank, N.A.

Filing 199

ORDER ON MOTIONS FOR SUMMARY JUDGMENT. Signed by Judge Marcia G. Cooke on 3/29/2019. See attached document for full details. (smz)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 17-23136-Civ-COOKE/LOUIS
ESTATE OF PHYLLIS M. MALKIN,
By Its Personal Representative, Toni Ellen Guarnero,
Plaintiff,
vs.
WELLS FARGO BANK, N.A.,
As Securities Intermediary, and BERKSHIRE
HATHAWAY LIFE INSURANCE
COMPANY OF NEBRASKA,
Defendants.
________________________________________/
ORDER ON MOTIONS FOR SUMMARY JUDGMENT
THIS MATTER is before me on the Motions for Summary Judgment filed by
Defendant Wells Fargo Bank, N.A. (“Wells Fargo”) (ECF Nos. 77, 136); the Motion for
Summary Judgment filed by Defendant Berkshire Hathaway Life Insurance Company of
Nebraska (“Berkshire”) (ECF No. 133); and the Motion for Summary Judgment filed by
Plaintiff Estate of Phyllis M. Malkin (“the Estate”) (ECF No. 138). All of the motions are
fully briefed and ripe for the Court’s review.
I. BACKGROUND
I have previously noted that the factual background of this case overlaps with that of
another case from the Southern District of Florida. Order Denying Mot. to Dismiss, ECF No.
174, at p. 1. That case was Sun Life Assurance Co. of Canada v. U.S. Bank Nat’l Ass’n, 2016 U.S.
Dist. LEXIS 4732 (S.D. Fla. Jan. 13, 2016) (“Sun Life”). Like the instant case, Sun Life
centered around one of three insurance policies taken out on the life of Phyllis Malkin. 2016
U.S. Dist. LEXIS 4732, at *13–14. In Sun Life, Judge Beth Bloom determined that the
policy before her was a stranger-originated life insurance (“STOLI”) policy, and that it was
consequently void ab initio under Delaware law. Id. at *65–66.
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As Judge Bloom wrote in Sun Life, a STOLI policy is one that “lacks an insurable
interest at inception and is procured for the purpose of re-sale to investors on the secondary
market[.]” Id. at *2–3. While the instant case involves a different policy from the one in Sun
Life, I refer to Judge Bloom’s decision for the broader factual context of both cases,
including her discussion of the STOLI market and the businesses involved in it. See id. at
*2–12. For purposes of this Order, it is sufficient to note that one of the businesses involved
in the STOLI market in South Florida was Simba, founded by Larry Bryan. Id. at *4–11; see
also Estate’s Stmt. of Facts (“ESOF”), ECF No. 135, at ¶¶ 10–57. Also involved were certain
entities that the Estate refers to collectively as “Coventry.” ESOF at ¶¶ 1–2. 1
Furthermore, as will be clear from the summary that follows, even the more specific
facts of this case are virtually indistinguishable from those in Sun Life. The policies in the
two cases were issued only one month apart from each other in early 2006. ESOF at ¶¶ 115–
18. The applications for both policies, and their financing, were “overwhelmingly arranged
and governed” by “Coventry, along with its right hand, Simba.” Sun Life, 2016 U.S. Dist.
LEXIS 4732, at *63–64. And both policies were ultimately transferred to Coventry, which
then sold them to third-party investors. ESOF at ¶¶ 121–45.

In its Response to the Estate’s Statement of Facts, Berkshire objects to the use of “Coventry” as a
shorthand for these entities, whose individual names are Coventry First LLC, Coventry Capital I
LLC, and so on. See ESOF at ¶¶ 1–2; Berkshire’s Resp. to ESOF (“BRESOF”), ECF No. 144, at ¶ 1.
Indeed, in that one filing alone, Berkshire insists that “‘Coventry’ is not a legal entity” nearly three
dozen times. Berkshire suggests that such use of shorthand constitutes an improper application of the
“group pleading doctrine” or of an “alter ego theory” of corporate standing. See Berkshire’s Resp. to
Estate’s Mot. for Summ. J., ECF No. 145, at p. 12 n.8. Of course, those doctrines have nothing to do
with this case. See, e.g., Sides v. Simmons, 2008 WL 11412070, at *3 (S.D. Fla. Aug. 12, 2008) (“[T]he
group pleading doctrine. . . . allows a plaintiff to allege a securities fraud claim based on a company
publication against all high ranking officials of that corporation without fear of dismissal under the
particularity requirement of F.R.C.P. 9(b).”).
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More generally, Berkshire has misused its Response to “dispute” virtually every factual point made
by the Estate, without regard to whether those points are actually in controversy. To take just one
example, the Estate asserts that “[o]n October 29, 2014, Wells Fargo credited the full amount of the
death benefit [equaling $4,013,976.47] to an account it maintained on behalf of Berkshire.” ESOF at
¶ 147. Berkshire responds that this factual claim is: “Disputed. On October 29, 2014, Wells Fargo
credited the $4,013,976.47 to Berkshire’s securities account.” BRESOF at ¶ 147. By reflexively
denying almost every factual assertion made by the Estate, Berkshire has done nothing more than
transfer to the Court the “laborious process [of] attempt[ing] to determine what is actually disputed.”
Gomez v. Target Corp., 2017 WL 3601806, at *1 (S.D. Fla. Aug. 2, 2017).

2

The only significant difference between this case and Sun Life lies in what happened
after Ms. Malkin passed away. In Sun Life, the insurer refused to pay the policy’s death
benefit and filed suit against the investor, seeking a declaration that the policy was a STOLI
policy and therefore void under Delaware’s insurable interest law. Sun Life, 2016 U.S. Dist.
LEXIS 4732, at *33–34. Here, by contrast, the insurer paid out the policy’s $4-million death
benefit to Wells Fargo, which was acting as a securities intermediary for Berkshire. Thus, it
is Ms. Malkin’s Estate that brings this suit against Berkshire and Wells Fargo, seeking to
recover the policy’s death benefit under a separate provision of the same Delaware law. See
Del. Code Ann. tit. 18, § 2704(b).
In short, while the facts here are the largely the same as in Sun Life, the nature of the
Estate’s claim is different, as are the defenses that Berkshire and Wells Fargo assert.
A. Phyllis Malkin’s entry into the life insurance market
In 2005, Phyllis Malkin and her husband Paul were retired and living in Aventura,
Florida, when an acquaintance referred them to Simba. ESOF at ¶ 58; Amend. Compl., ECF
No. 88, at ¶ 68. The evidence indicates that Ms. Malkin “did not need” and “did not want”
life insurance prior to meeting with Simba. ESOF at ¶¶ 59–60. Neither did she express any
interest in paying for such insurance. Id. at ¶ 63. Rather, Ms. Malkin and her husband were
told that Simba could offer them a “risk free opportunity to make money.” Id. at ¶ 61.
On August 19, 2005, Ms. Malkin provided Simba with a release form allowing it
access to her medical records. Id. at ¶¶ 64–65. Coventry then used those records to generate
a life expectancy report for Ms. Malkin, which, in turn, it used to determine how valuable
any policies on her life might be. Id. at ¶¶ 67–68.
After receiving approval from American General Life Insurance Company (“AIG”)
and Sun Life, stating that they would issue policies on Ms. Malkin’s life, Simba confirmed
that Coventry was interested in the policies. Id. at ¶ 69. Eventually, three separate policies
were taken out on Ms. Malkin’s life: the $4-million AIG policy at issue here (“the Policy”);
the $5-million policy at issue in Sun Life (“the Sun Life Policy”); and another $4-million
policy procured through a separate entity called Sail Funding Trust II. Id. at ¶ 70; Amend.
Compl., ECF No. 88, at ¶ 74. Ms. Malkin, who until 2005 had not been in the market for life
insurance, thus obtained a total of $13 million in coverage.
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B. Ms. Malkin’s applications for the policies, the financing of the policies and the
creation of the Trust
Coventry acted as the program administrator and servicing agent of a life insurance
premium financing program known as Premium Finance Plus (“PFP”), in connection with
LaSalle Bank. ESOF at ¶ 73. In that capacity, on or about February 16, 2006, Coventry
approved a non-recourse premium finance loan for the Sun Life Policy. Id. at ¶ 74.
To move the process forward, Coventry required Ms. Malkin to fill out various
forms. Id. at ¶ 77. These documents were “not negotiable.” Id. at ¶ 78. On or about March 2,
2006, Ms. Malkin executed a document in which she appointed Coventry as her attorney-infact, with full authority to originate, service or liquidate “any life insurance policies on [her]
life[.]” Id. at ¶ 79. Ms. Malkin’s husband also executed a form granting Coventry similar
powers to act in his stead. Id. at ¶ 80.
Also on March 2, 2006, Ms. Malkin executed a PFP loan application form with
LaSalle Bank, and with Coventry as the program administrator for LaSalle Bank. Id. at ¶ 83.
The Malkins also executed a form providing that a trust was going to be established to hold
insurance policies on Ms. Malkin’s life. Id. at ¶ 84.
In early March 2006, Coventry noted internally that it was “hoping to add” another
policy on top of the Sun Life Policy, and that this would be a $4-million policy from AIG—
the Policy at issue in this case. Id. at ¶ 85.
On March 15, 2006, the Malkins entered into an agreement with Wilmington Trust
Company to create a Delaware statutory trust with an initial trust estate of $1, for the
express purpose of applying for and holding insurance policies on Ms. Malkin’s life (“the
Trust”). Id. at ¶ 87. Ms. Malkin was designated the settlor, Wilmington Trust Company the
trustee, and Mr. Malkin the beneficial owner and co-trustee. Id.
Also on March 15, 2006, Ms. Malkin signed applications for both the Sun Life
Policy and the Policy at issue here. Id. at ¶ 92. Both applications listed the Trust as the
proposed owner, beneficiary and premium payor of the policies. Id. at ¶ 93. Larry Bryan,
Simba’s founder, has stated that Ms. Malkin did not make the decision to apply for coverage
from either Sun Life or AIG. Id. at ¶ 94.

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The evidence indicates that Coventry’s initial plan was for the Sun Life Policy and
the Policy to be funded under a single PFP loan, which would be entered into by a single
sub-trust to the Trust. Id. at ¶ 97. On or around March 16, 2006, Ms. Malkin signed an
agreement to create such a sub-trust (“the Sub-Trust”), which would enter into a note and
security agreement with Coventry and LaSalle Bank, pursuant to which the Sub-Trust
would borrow money to pay premiums and hold any life insurance policy until the loan was
repaid or the policy was relinquished. Id. at ¶ 98.
However, by April 6 or 7, 2006, Coventry changed its plan of funding both policies
under a single loan, and ultimately each policy was funded under a separate but identical
loan. Id. at ¶ 99. In order to create a second loan transaction, the Malkins and Wilmington
Trust entered into another agreement instructing Wilmington Trust to establish a second
sub-trust (“the Sun Life Sub-Trust”). Id. at ¶ 100. The Sub-Trust was used to enter the PFP
loan for the Policy, and the Sun Life Sub-Trust was used to enter the PFP loan for the Sun
Life Policy. Id. at ¶ 101.
Around this time, Ms. Malkin and LaSalle Bank entered into a “Settlor NonRecourse Security Agreement” that was applicable to the Sub-Trust, and a separate but
identical agreement that was applicable to the Sun Life Sub-Trust. Id. at ¶ 103. These
agreements provided that Ms. Malkin pledged and assigned to Coventry and LaSalle Bank a
security interest in the Trust, the Sub-Trust and the Sun Life Sub-Trust, along with all their
assets. Id. at ¶ 104. The agreements further provided that the loans entered into by the subtrusts would be non-recourse to Ms. Malkin. Id.
Around the same time, the Sub-Trust, LaSalle Bank and Coventry (as program
administrator for LaSalle Bank) entered into a 26-month, non-recourse “Note and Security
Agreement” in the principal amount of $264,895.87, in order to fund the Policy (“the
Loan”). Id. at ¶ 105. According to Coventry’s internal records from April 7, 2006, the Loan
was to be funded that day, and the Sun Life Policy would be “issued [the] next week, but
[was] no longer under the same loan” as the Policy, and thus Coventry needed “to send new
trust docs, same info, for the [Sun Life] policy.” Id. at ¶ 106.
Thus, on May 25, 2006, the Sun Life Sub-Trust, LaSalle Bank and Coventry (again
as program administrator) entered into a non-recourse “Note and Security Agreement” in
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the principal amount of $238,050, in order to fund the Sun Life Policy (“the Sun Life
Loan”). Id. at ¶ 107. Like the Loan, the Sun Life Loan would mature after a period of 26
months. Id. at ¶¶ 108–09. After 26 months, the total amount due on the Loan would be
$360,265.34, while the total amount due on the Sun Life Loan would be $340,496.41. Id. at
¶¶ 110–11; BRESOF at ¶ 110.
C. The issuance and delivery of the policies
On or about March 16, 2006, AIG issued the Policy to Wilmington Trust, as trustee
for the Trust, in Wilmington, Delaware. ESOF at ¶ 115. Scott A. Huff, a Senior Financial
Services Officer, signed a “Policy Acceptance Acknowledgement” form in Wilmington,
Delaware, on March 17, 2006. Id.; Estate’s Ex. 45, ECF No. 137-12, at p. 2. The Policy
states: “THIS IS A DELAWARE CONTRACT.” ESOF at ¶ 116.
Similarly, Sun Life delivered the Sun Life Policy to Wilmington Trust, as trustee for
the Trust, in Wilmington, Delaware. Id. at ¶ 118. Wilmington Trust acknowledged receipt
of the Sun Life Policy in Wilmington, Delaware, on April 20, 2006. Id.
On April 7, 2006, Coventry paid the initial premiums to AIG on the Policy. Id. at ¶
117. Mr. Bryan, Simba’s founder, has confirmed that the Malkins did not pay any premiums
in relation to either the Policy or the Sun Life Policy. Id. at ¶ 119.
D. Ms. Malkin’s relinquishment of the policies to Coventry
On June 16, 2008, Coventry sent a “Notice of Foreclosure of Collateral” to the SubTrust, informing it that the outstanding balance of $360,265.34 on the Loan for the Policy
had been due by June 9, 2008, and that the Sub-Trust was in default. Id. at ¶ 120. The notice
stated that Coventry was going to “foreclose upon and sell or otherwise liquidate” the
Policy unless Ms. Malkin paid the entire Loan amount plus additional interest. Id.
Around that time, Ms. Malkin signed a “Premium Finance Plus Election Notice.”
Id. at ¶ 121. That document indicated that the Sub-Trust, as the borrower under the Loan,
would satisfy the outstanding balance of $360,265.34 on the Loan by “[r]elinquishing all
right, title an[d] interest in and to the [Policy].” Id.
On or around June 20, 2008, Mr. Malkin executed a resignation letter as co-trustee
of the Trust, while Ms. Malkin signed an “Irrevocable Settlor Instruction Letter.” Id. at ¶
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122. The latter document instructed Wilmington Trust to relinquish all rights, interests and
powers in relation to the Trust and any sub-trust to Coventry. Id. at ¶ 123. The document
also provided that Wilmington Trust would cancel the trust certificate in the name of Ms.
Malkin’s husband and “issue a new Trust Certificate and Sub-Trust Certificate in the name
of the Servicing Agent,” which was Coventry. Id. at ¶ 124.
On or around July 24, 2008, one Coventry entity (Coventry Capital I LLC) sold the
Policy to another (Coventry First LLC) for $280,000. Id. at ¶ 126. On or around August 1,
2008, Coventry First LLC, U.S. Bank and yet another Coventry entity known as LST I LLC
entered into a “Tripartite Entitlement Order.” Id. at ¶ 127. Through that document, the
Policy was transferred to LST I LLC. Id. at ¶ 128. U.S. Bank then submitted ownership and
beneficiary change forms to AIG, requesting that the owner and beneficiary of the Policy be
changed to U.S. Bank, as securities intermediary for LST I LLC. Id.
As with the Policy and the Loan, on July 28, 2008, Coventry wrote a letter to the
Sun Life Sub-Trust informing it that the outstanding balance of $340,496.41 on the Sun Life
Loan had been due by July 25, 2008, and that the Sun Life Sub-Trust was in default. Id. at ¶
129. On or around August 5, 2008, Mr. Malkin executed another copy of the resignation
letter as co-trustee of the Trust, and Ms. Malkin executed another copy of the “Irrevocable
Settlor Instruction Letter,” this time in connection with the Sun Life Policy. Id. at ¶ 130. As
with the Policy, Coventry Capital I LLC sold the Sun Life Policy to Coventry First LLC for
$255,000. Id. at ¶ 132.
E. Coventry’s sale of the policies to third parties
In September 2012, the owner and beneficiary of the Policy was changed from U.S.
Bank, as securities intermediary, to Wells Fargo, as securities intermediary. Id. at ¶ 134.
When Wells Fargo became the owner and beneficiary of the Policy, it did so on behalf of
Coventry and LST Holdings Ltd. Id. at ¶ 135.
In June 2013, Wells Fargo entered into a contract with Berkshire for the purposes of
Berkshire’s purchase of life insurance policies. Id. at ¶ 136. Berkshire then acquired the
Policy, along with approximately 124 other policies, by executing a purchase agreement
with Coventry and LST Holdings Ltd. Id. at ¶ 137. In that agreement, Berkshire received a
representation by Coventry that to its knowledge none of the policies “was originated in
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connection with a STOLI transaction.” Id. at ¶ 138. Under the agreement, Wells Fargo was
to serve as securities intermediary for both the seller of the Policy (LST Holdings Ltd.) and
the purchaser (Berkshire). Id. at ¶ 139.
In connection with the agreement, Berkshire paid Coventry $322,103 for the Policy,
and it subsequently made total premium payments to AIG of $137,194.20. Id. at ¶ 145.
The Sun Life Policy was also transferred to a third party. On August 18, 2008, U.S.
Bank executed ownership and beneficiary change request forms asking Sun Life to change
the Sun Life Policy’s record owner and beneficiary from the Trust to U.S. Bank, as
securities intermediary for AIG. Id. at ¶ 133; BRESOF at ¶ 133; Sun Life, 2016 U.S. Dist.
LEXIS 4732, at *28–29.
F. Payment of the Policy’s death benefit to Berkshire
On September 13, 2014, Ms. Malkin passed away. Id. at ¶ 146. On October 27, 2014,
AIG issued a check to Wells Fargo in the amount of $4,013,976.47, as payment of the
Policy’s death benefit. Id. On October 29, 2014, Wells Fargo credited that full amount to the
securities account that it maintained on behalf of Berkshire. Id. at ¶ 147. Berkshire then
transferred the proceeds to another account that it maintained at Wells Fargo. Id. at ¶ 148.
G. The Sun Life case and this case
Unlike AIG, “Sun Life refused to pay the death benefits due under the [Sun Life]
Policy” to the policy’s owner, U.S. Bank. Sun Life, 2016 U.S. Dist. LEXIS 4732, at *33. In
November 2014, Sun Life brought suit in the Southern District of Florida, seeking a
declaration that the Sun Life Policy was a STOLI policy and was therefore void. Id. at *33–
34. On January 13, 2016, Judge Beth Bloom issued an order on the parties’ motions for
summary judgment. Id. at *75. Judge Bloom found that the Sun Life Policy was governed
by Delaware law, id. at *46–47, and that the Sun Life Policy “lacked an insurable interest at
its inception and was clearly a disguised wager on the life of Phyllis Malkin.” Id. at *75. On
appeal, Judge Bloom’s “thorough and well-reasoned orders” were largely affirmed by the
Eleventh Circuit Court of Appeals. 693 F. App’x 838, 840 (11th Cir. 2017).
On August 17, 2017, Ms. Malkin’s Estate filed the instant lawsuit, originally against
Wells Fargo only. Compl., ECF No. 1. The Estate sought to recover the Policy’s proceeds
8

pursuant to subsection (b) of Delaware’s insurable interest statute. Id. at ¶¶ 102–07. In the
alternative, it sought recovery under a theory of unjust enrichment. Id. at ¶¶ 108–10.
Wells Fargo notified Berkshire of the Estate’s Complaint by email on November 3,
2017. ESOF at ¶ 153. On November 17, 2017, Wells Fargo and Berkshire demanded that
Coventry and LST Holdings Ltd. indemnify them in connection with the Estate’s claims. Id.
at ¶ 154. When Coventry and LST Holdings declined this demand, Wells Fargo filed a
third-party complaint against various Coventry entities, seeking indemnification for itself
and Berkshire. Wells Fargo’s 3d-Party Compl., ECF No. 21. On May 24, 2018, Wells Fargo
dismissed that third-party complaint with prejudice. Stip. of Dismissal, ECF No. 65.
On July 3, 2018, the Estate filed its Amended Complaint, adding Berkshire as a
defendant. Amend. Compl., ECF No. 88; see also Endorsed Omnibus Order, ECF No. 89.
II. SUMMARY JUDGMENT STANDARD
“A party may move for summary judgment, identifying each claim or defense—or
the part of each claim or defense—on which summary judgment is sought.” Fed. R. Civ. P.
56(a). “The court shall grant summary judgment if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Id. In reviewing a motion for summary judgment, the court is “required to view the
evidence and all factual inferences therefrom in the light most favorable to the non-moving
party, and resolve all reasonable doubts about the facts in favor of the non-movant.”
Feliciano v. City of Miami Beach, 707 F.3d 1244, 1247 (11th Cir. 2013) (quoting Skop v. City of
Atlanta, 485 F.3d 1130, 1143 (11th Cir. 2007)).
III. DISCUSSION
All three Parties have moved for summary judgment. The Estate, in its motion,
argues that the Court should apply Delaware law in interpreting the Policy, and that under
Delaware law the Policy is void ab initio as a STOLI policy—in other words, that the Policy
was an illegal wager on the life of Phyllis Malkin. Estate’s Mot. for Summ. J., ECF No. 138, at
pp. 4–5. The Estate therefore argues that it is entitled to recover the Policy’s death benefit
under subsection (b) of Delaware’s insurable interest statute. Id. at p. 5. According to the
Estate, that statute “precludes—without exception and as a matter of public policy—STOLI
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investors from retaining the death benefit of a life insurance policy manufactured through a
STOLI scheme.” Id.
Berkshire asserts an array of defenses in its own motion for summary judgment.
“First and foremost,” Berkshire contends that it is “immunized from this suit” as a bona fide
purchaser for value under the Uniform Commercial Code (“UCC”). Berkshire’s Mot. for
Summ. J., ECF No. 133, at pp. 1–2. Second, Berkshire argues that the Estate’s claim against
it under the insurable interest statute is barred by Delaware’s three-year statute of limitations
for statutory claims. Id. at p. 2. Third, Berkshire argues that Ms. Malkin relinquished any
right her Estate had to the Policy’s death benefit, both under the Policy itself and under the
insurable interest statute. Id. at pp. 2, 14–17. Fourth, Berkshire denies that the Policy here
was a STOLI policy at all. Id. at p. 2. Finally, Berkshire argues that the Estate’s alternative
claim of unjust enrichment fails because the Estate did not “confer[] any direct benefit on
Berkshire, which is a required element of that claim.” Id.
Wells Fargo, for its part, has filed two motions for summary judgment. 2 In those
motions, Wells Fargo adopts each of the Berkshire defenses outlined above, apart from the
statute of limitations defense. Wells Fargo’s 2d Mot. for Summ. J., ECF No. 136, at pp. 1–2.
Wells Fargo also asserts an additional defense of its own—namely, that Wells Fargo enjoys
further protection from suit under the UCC, due to its “ministerial role” as a securities
intermediary. Id. at pp. 3–4; Wells Fargo’s 1st Mot. for Summ. J., ECF No. 77, at p. 3.
For the reasons set forth below, the Court rules on the Parties’ motions as follows: 1)
the Estate’s principal claim against Berkshire and Wells Fargo, brought under a Delaware
statute, is governed by Delaware law; 2) the Policy in this case, like the one in Sun Life, is a
STOLI policy; 3) Ms. Malkin did not relinquish her Estate’s statutory right to the Policy’s
proceeds; 4) Berkshire and Wells Fargo’s affirmative defenses based on the UCC fail as a
matter of law; 5) the Estate’s statutory claim is not time-barred; 6) the Estate is entitled to
recover the Policy’s proceeds; and 7) the Estate’s alternative claim of unjust enrichment fails
because an adequate legal remedy is available.

Wells Fargo’s successive motions are permissible under the Local Rules, which state that a party
may “fil[e] both a motion for summary judgment asserting an immunity from suit and a later motion
for summary judgment addressing any issues that may remain in the case.” S.D. Fla. L.R. 7.1(c)(2).

2

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A. The Estate’s statutory claim is governed by Delaware law
As I have noted, the facts of this case and of Sun Life are virtually the same, with both
cases involving insurance policies taken out on the life of Phyllis Malkin during a onemonth period in 2006. ESOF at ¶¶ 115–18. Both cases also share the same “critical,” core
issue: whether their respective policies were STOLI policies and therefore void under
Delaware law. Sun Life, 2016 U.S. Dist. LEXIS 4732, at *34. Nevertheless, there is one
important difference between this case and Sun Life. The types of claims brought by the
plaintiffs in the two cases are distinct, as a result of the divergent courses of action taken by
the two insurers after Ms. Malkin passed away.
In Sun Life, the insurance company refused to pay the Sun Life Policy’s $5-million
death benefit to the policy’s owner, U.S. Bank. 2016 U.S. Dist. LEXIS 4732, at *33–34.
Instead, the insurer brought suit, seeking (and obtaining) a declaration that the Sun Life
Policy violated Delaware’s insurable interest statute and was therefore void. Id. at *3–4.
Here, by contrast, the insurance company that issued the Policy is not a party to this suit—
AIG paid out the Policy’s $4-million death benefit to the Policy’s owner Berkshire, evidently
without a fight. ESOF at ¶ 146–48. Instead, it is Ms. Malkin’s Estate that brings suit, seeking
to recover the death benefit from Berkshire under subsection (b) of the insurable interest
statute, which creates a right of action under these circumstances.
In short, while the plaintiff-insurer’s claim in Sun Life was “unequivocally” a contract
claim, the Estate’s claim in this case is just as clearly a statutory one, brought under a specific
provision of the Delaware Code. Sun Life, 2016 U.S. Dist. LEXIS 4732, at *35. The Parties
appear to recognize this, at least for certain purposes. See, e.g., Berkshire’s Mot. for Summ. J.,
ECF No. 133, at pp. 2, 11 (arguing that “the Estate’s statutory claim” falls outside
Delaware’s three-year limitations period for an “action based on a statute”). For the most
part, however, the Parties have briefed this case as one sounding in contracts, and they urge
the Court to conduct a choice-of-law inquiry on that basis, just as Judge Bloom did in Sun
Life. See, e.g., id. at p. 3; Estate’s Mot. for Summ. J., ECF No. 138, at pp. 7–8.
Under the unique circumstances presented here, and for the limited purposes of this
Order, the Court does not find that a choice-of-law inquiry is necessary. Simply put, this is
not a contract case to be governed by the law of one state or another, depending on where
11

the contract was executed. For one thing, the Estate does not claim here that it has any
contractual rights under the Policy. Nor could it—if the Estate’s claim is correct, “there is
no contract at all.” PHL Variable Ins. Co. v. Price Dawe 2006 Ins. Tr., 28 A.3d 1059, 1065–67
(Del. 2011) (under Delaware law, a STOLI policy “is void as against public policy and thus
never comes into force”). What is more, even if a valid contract existed, Ms. Malkin signed
papers “[r]elinquishing all right, title an[d] interest in and to” that contract. ESOF at ¶¶ 121–
24. Thus, if the Policy were valid, it would be the Policy’s purchaser and owner Berkshire—
not Ms. Malkin’s Estate—that would have a contractual right to the Policy’s proceeds.
To be sure, much of this was also true of the plaintiff-insurer’s claim in Sun Life. And
the plaintiff there also generally relied on Delaware’s insurable interest statute—indeed, the
statute provides the starting point for any Delaware STOLI case. See 2016 U.S. Dist. LEXIS
4732, at *51–53. Unlike the Sun Life plaintiff, however, the Estate here gains nothing by
merely nullifying the Policy. Rather, the Estate’s only hope for relief in this case is found in
a specific subsection of the insurable interest statute, subsection (b), which establishes its
right of action and governs every element of its claim. Subsection (b) provides as follows:
If the beneficiary, assignee or other payee under any contract made in
violation of this section receives from the insurer any benefits thereunder
accruing upon the death, disablement or injury of the individual insured, the
individual insured or his or her executor or administrator, as the case may be,
may maintain an action to recover such benefits from the person so receiving
them.
Del. Code Ann. tit. 18, § 2704(b).
A contract is “made in violation of” the insurable interest statute when it is a STOLI
policy, as defined in the statute:
Any individual of competent legal capacity may procure or effect an
insurance contract upon his or her own life or body for the benefit of any
person, but no person shall procure or cause to be procured any insurance
contract upon the life or body of another individual unless the benefits under
such contract are payable to the individual insured or his or her personal
representatives or to a person having, at the time when such contract was
made, an insurable interest in the individual insured.
Del. Code Ann. tit. 18, § 2704(a).
Finally, the statute states that it “applies to all insurance contracts . . . other than . . .
[p]olicies or contracts not issued for delivery in [Delaware] nor delivered in [Delaware].”
12

Del. Code Ann. tit. 18, § 2701(2). The statute specifically provides that “a trust-owned life
insurance policy, if delivered to the place of business in Delaware of the trustee of said
trust[,] shall be deemed to have been delivered in [Delaware].” Del. Code Ann. tit. 18, §
2704(g). And the statute further states that “[t]he existence of an insurable interest with
respect to . . . [a] trust-owned life insurance policy shall be governed by this section without
regard to an insured’s state of residency or location.” Id.
In short, while Delaware’s insurable interest statute was central to the analysis in Sun
Life, here the statute itself is the vehicle by which the Estate has brought its claim. The
statute establishes the Estate’s cause of action, it sets a bright-line rule for what contracts it
covers, and it defines the terms of the Estate’s success or failure. Under these circumstances,
it is not necessary to conduct a choice-of-law inquiry in order to determine that Delaware
law governs the Estate’s claim.
Nevertheless, the Court must determine whether in fact the Policy here falls within
the Delaware statute’s ambit. That question bears some similarity to Florida’s fact-intensive
lex loci contractus test, but it is simpler. Under the Florida test, “while the place of delivery of
the policy may be the place that the policy was deemed to be executed [and whose law
therefore governs], it is not necessarily the place that the policy was executed.” Nat’l Tr. Ins.
Co. v. Graham Bros. Const. Co., 916 F. Supp. 2d 1244, 1252 (M.D. Fla. 2013). By contrast,
Delaware’s insurable interest statute applies to all contracts issued for delivery in Delaware
or delivered in Delaware. Del. Code Ann. tit. 18, § 2701(2).
There is no question that the statute applies here. The Policy in this case was issued
for delivery in Delaware, and it was delivered in Delaware. On or about March 16, 2006,
AIG issued the Policy to Wilmington Trust, as trustee for the Trust, in Wilmington,
Delaware. ESOF at ¶ 115. The next day, a Senior Financial Services Officer named Scott A.
Huff signed a “Policy Acceptance Acknowledgement” form in Wilmington, Delaware,
“acknowledg[ing] receipt and acceptance of the policy[.]” Id.; Estate’s Ex. 45, ECF No. 13712, at p. 2. Apart from the dates, these are precisely the same circumstances presented in
Sun Life, where Judge Beth Bloom found that the Sun Life Policy was “indisputably”
delivered and accepted in Delaware. 2016 U.S. Dist. LEXIS 4732, at *21–22, 39 (noting

13

that delivery in Delaware was “confirm[ed]” by a “‘Delivery Form’ . . . signed by Scott A.
Huff, Senior Financial Services Officer on April 20, 2006 at ‘Wilmington, DE’”).
Berkshire argues that the Policy was delivered in Florida, relying on an affidavit by
Simba’s founder Larry Bryan. Berkshire’s Resp. to Estate’s Mot. for Summ. J., ECF No. 145, at
pp. 6–7. Mr. Bryan states that at the time AIG issued the Policy, he “was authorized by
AIG to sell life insurance policies on its behalf.” Berkshire’s Ex. M, ECF No. 144-13, at ¶ 3.
Mr. Bryan further states that “[i]n [his] experience as an agent for AIG, AIG would send an
issued policy to [him] in Florida.” Id. at ¶ 5. Mr. Bryan “would, in turn, make copies and
send the original to the insured and the policyowner.” Id. Mr. Bryan states that he has “no
reason to believe that this practice did not occur with respect to the Policy” in this case. Id.
Mr. Bryan’s equivocal statement about his past “practice” does not change the fact
that the Policy here was delivered in Delaware. Even assuming that his actions in this case
conformed with his practice, Mr. Bryan was acting as “an agent for AIG.” The fact that
AIG “sen[t the] issued policy” to its agent in Florida does not mean the Policy was
“delivered” there. Put another way, AIG did not “deliver” the Policy to its agent. See Terra
Nova Ins. Co. v. Nanticoke Pines, Ltd., 743 F. Supp. 293, 295–96 & n.4 (D. Del. 1990) (under
Delaware law, whether a broker’s receipt of an insurance policy constitutes delivery depends
on whether the broker is acting as an agent for the insurer or the insured). Rather, delivery
occurred when the insurer AIG, or its agent Mr. Bryan, “sen[t] the original [Policy] to the
insured and the policyowner”—the latter being the Trust in Delaware, care of its trustee
Wilmington Trust. See Del. Code Ann. tit. 18, § 2704(g) (“[A] trust-owned life insurance
policy, if delivered to the place of business in Delaware of the trustee of said trust[,] shall be
deemed to have been delivered in [Delaware].”).
In sum, the Policy here was delivered in Delaware, and Delaware’s insurable interest
statute therefore applies. The next, critical question is whether the Policy here was “made in
violation of” the statute—in other words, whether the Policy is a STOLI policy under
Delaware law. Del. Code Ann. tit. 18, § 2704(b).
B. The Policy in this case is a STOLI policy under Delaware law
As has been noted throughout this Order, the facts in this case are almost totally
aligned with those in Sun Life. The applications for the Policy and for the Sun Life Policy,
14

together with their financing, were “overwhelmingly arranged and governed” by “Coventry,
along with its right hand, Simba.” Sun Life, 2016 U.S. Dist. LEXIS 4732, at *63–64. Before
Ms. Malkin applied for the policies, she granted Coventry the power to originate, service
and liquidate “any life insurance policies on [her] life.” ESOF at ¶¶ 79–82. Both the Policy
and the Sun Life Policy were owned by the same Trust, and both were financed through 26month non-recourse loans. Id. at ¶¶ 87–114. Neither Ms. Malkin nor her husband ever paid
the premiums for either the Policy or the Sun Life Policy. Id. at ¶¶ 117–19. And ultimately,
Ms. Malkin relinquished her rights under both policies in order to satisfy the balances of
their respective premium finance loans. Id. at ¶¶ 105–08, 120–33.
Indeed, these facts are not just identical to those in Sun Life—they are also “the same
set of facts” presented in countless other STOLI cases. Wilmington Tr., N.A. v. Lincoln Benefit
Life Co., 2018 U.S. Dist. LEXIS 162010, at *2 (S.D. Fla. Sept. 20, 2018) (“[In a typical
STOLI case], a senior citizen applies for and receives a life insurance policy. Then, the
insured secures financing for the monthly premiums from a third party using the policy as
collateral. Finally, the third party acquires the policy when the insured purposefully defaults
on the loan.”). On the basis of these shared facts, Judge Bloom determined that the Sun Life
Policy “lacked an insurable interest at its inception and was clearly a disguised wager on the
life of Phyllis Malkin.” 2016 U.S. Dist. LEXIS 4732, at *75.
Here, Berkshire boasts of disputing “nearly one hundred and forty of the Estate’s one
hundred and sixty four so-called . . . statements of fact.” Berkshire’s Resp. to Estate’s Mot. for
Summ. J., ECF No. 145, at p. 2; see also supra note 1. But Berkshire does not meaningfully
deny the factual similarity between this case and Sun Life. Instead, Berkshire argues, in
effect, that Sun Life was wrongly decided. Thus, Berkshire emphasizes that “the sole, named
beneficiary of the Trust was Ms. Malkin’s husband, Paul Malkin,” and that Mr. Malkin
would have received the Policy’s death benefit “if Ms. Malkin had died at any time between
the Policy’s issuance through June 2008[.]” Berkshire’s Mot. for Summ. J., ECF No. 133, at p.
18, 21. As further evidence of this, Berkshire points to an agreement the Malkins entered
into, laying out their plans for what to do with the Policy proceeds if indeed Ms. Malkin
passed away while her husband was still the beneficiary. Id. at p. 18.

15

Berkshire claims that the parties in Sun Life failed to bring this “case-dispositive”
point to Judge Bloom’s attention. Id. at p. 1. “In the Sun Life [c]ase,” Berkshire claims, the
“parties argued—and the court therefore considered and addressed—whether the policy at
issue was procured by Ms. Malkin or by third parties who did not have insurable interest in
her life.” Id. at p. 21. Berkshire goes on: “The court in the Sun Life case did not address
whether . . . , even if a third party procured the policy, . . . there was insurable interest
because the beneficiary of the policy at inception had insurable interest in the life of the
insured.” Id. (emphasis added).
That is an outright misrepresentation of the record and holding in Sun Life. In fact,
the defendant in Sun Life argued, exactly as Berkshire does here, that “the insurable interest
requirement was satisfied” because “at the time [Ms.] Malkin applied for the [Sun Life]
Policy, her husband, Mr. Malkin, had an insurable interest in her life,” and “Mr. Malkin
was the ultimate beneficiary of . . . the [Sun Life] Policy until the [Sun Life] Policy was sold
in 2008[.]” 2016 U.S. Dist. LEXIS 4732, at *55; see also U.S. Bank’s Resp. to Sun Life’s Mot. for
Summ. J., Case No. 14-cv-62610, ECF No. 98, at p. 13 (pointing out that “if [Ms.] Malkin
died prior to the sale of the [Sun Life] Policy in 2008, her husband and her children would
have received the death benefit”).
Berkshire’s key argument was thus squarely raised in Sun Life, contrary to Berkshire’s
representation to this Court. And the argument was just as squarely rejected. Judge Bloom
held in Sun Life that the fact that “Mr. Malkin was the ultimate beneficiary” under the Sun
Life Policy until 2008, and that the Malkins actually “received coverage for two years,” was
“irrelevant” to the STOLI inquiry. 2016 U.S. Dist. LEXIS 4732, at *55, 65. Indeed, the fact
that Coventry would have “los[t] the wager” if Ms. Malkin had died in the first two years of
the Policy was simply “part and parcel of the gamble.” Id. at *65.
Incidentally, Judge Bloom also rejected Berkshire’s other key argument, namely that
it was not a “foregone conclusion that Ms. Malkin would relinquish the Policy,” and that
she was free to repay the Loan and keep the Policy for herself. Berkshire’s Mot. for Summ. J.,
ECF No. 133, at pp. 21–22 & n.13; cf. Sun Life, 2016 U.S. Dist. LEXIS 4732, at *65 (noting
that U.S. Bank “attempts to obscure” matters by arguing that Ms. Malkin “was not bound
to sell the [Sun Life] Policy to Coventry at the end of the [Sun Life] Loan”).
16

In rejecting U.S. Bank’s, now Berkshire’s, arguments, Judge Bloom explained that
the critical question under Delaware’s insurable interest law is “not what the formal
consequences are of obtaining a life insurance policy.” Sun Life, 2016 U.S. Dist. LEXIS
4732, at *65. Rather, “[t]he question must always be who procured the policy,” and in
answering that question “courts look to who paid the premiums.” Id. at *54, 65; see also Price
Dawe, 28 A.3d at 1075 (“To determine who procured the policy [under Delaware law], we
look at who pays the premiums.”).
In Sun Life, the evidence was “clear . . . that neither [Ms.] Malkin nor any other
individual or entity with an insurable interest in [Ms.] Malkin’s life was responsible for the
premium payments on the [Sun Life] Policy.” 2016 U.S. Dist. LEXIS 4732, at *61. Rather,
“the entity that allowed [Ms.] Malkin to obtain the [Sun Life] Policy by providing her with
the financial means to do so was the same entity that dictated the deal from its inception
and ultimately purchased the [Sun Life] Policy”—namely, Coventry. Id. at *62. As has been
stressed, the operative facts in this case are identical to those in Sun Life, and Judge Bloom’s
reasoning applies here with full force. See, e.g., Estate’s Ex. 5, ECF No. 135-5, at p. 6 (Simba’s
founder stating that “[t]he Malkins, like the other Simba clients who did Coventry deals
before them, paid no premium payments (or anything else for that matter)”).
Finally, if there were any doubt about the soundness of Sun Life’s ruling, that doubt
would be extinguished by the Eleventh Circuit’s decision on appeal, which affirmed in all
relevant parts Judge Bloom’s “thorough and well-reasoned orders.” Sun Life, 693 F. App’x
at 840. In fact, the same arguments that Berkshire claims were not raised in Sun Life were
raised not only before Judge Bloom but also before the Eleventh Circuit, and to no avail. See
Brief for U.S. Bank, Sun Life, 693 F. App’x 838, 2016 WL 4417366, at *39–40 (arguing that
“an insurable interest existed at the time that the [Sun Life] Policy was applied for and
issued” because Ms. Malkin’s “husband [w]as the ultimate beneficiary”).
To sum up, the Policy in this case, like the Sun Life Policy, is a STOLI policy under
Delaware law. As such, the Policy was “made in violation of” Delaware’s insurable interest
statute, and the Estate is therefore entitled “to recover [the] benefits” from the “payee[s]”
under the Policy—here, Berkshire and Wells Fargo—unless the latter’s affirmative defenses
hold. Del. Code Ann. tit. 18, § 2704(b).
17

C. Ms. Malkin did not relinquish her Estate’s right to the Policy proceeds
The most straightforward of Berkshire and Wells Fargo’s affirmative defenses is that
Ms. Malkin “voluntarily relinquished” her Estate’s right to bring this action against them.
Berkshire’s Mot. for Summ. J., ECF No. 133, at p. 2. Berkshire and Wells Fargo argue that
“when [Ms. Malkin] elected to relinquish the [P]olicy in satisfaction of the premium finance
loan,” that “relinquishment” extended to the Estate’s right to recover the Policy’s proceeds
under subsection (b) of Delaware’s insurable interest statute. Id. at pp. 2, 14–17; see also Wells
Fargo’s 2d Mot. for Summ. J., ECF No. 136, at pp. 1–2 (adopting Berkshire’s argument as its
own, without the need for “additional analysis”).
I have already addressed this argument in denying Berkshire’s motion to dismiss,
where it was first raised:
The Court declines to interpret [Ms. Malkin’s] release form in a manner that
is so contrary to “Delaware’s clear public policy,” Price Dawe, 28 A.3d at
1068—particularly where the form made no mention of the [insurable
interest] statute, and where there is little reason to believe that Ms. Malkin
even read the form before signing it. See, e.g., Am. Compl., ECF No. 88, at ¶¶
77–78 (the terms of the Coventry contracts were “not negotiable,” and the
forms Ms. Malkin signed were “blank”). To hold that Ms. Malkin gave up her
rights under Delaware’s insurable interest statute by signing a “boilerplate,
non-negotiable form[],” id. at ¶ 64, would allow entities like Coventry to
defeat the statute’s intent with the same type of “feign[ed] technical
compliance” that characterizes STOLI schemes in general. Price Dawe, 28
A.3d at 1074.
Order Denying Mot. to Dismiss, ECF No. 174, at pp. 7–8.
No evidence has come to light that would cast any doubt on that ruling. The Court
therefore finds as a matter of law that Ms. Malkin did not relinquish her Estate’s right to
recover the Policy’s death benefit under Delaware’s insurable interest statute.
D. Berkshire and Wells Fargo’s UCC-based defenses fail as a matter of law
Berkshire and Wells Fargo’s “foremost” defenses are based on Delaware’s Uniform
Commercial Code. Berkshire’s Mot. for Summ. J., ECF No. 133, at pp. 1–2. Thus, Berkshire
argues that its position here is that of a bona fide purchaser for value—in other words, that
“Berkshire acquired the [P]olicy for value . . . and had no knowledge of any potential
adverse claim[.]” Id. Wells Fargo argues that it, too, is “protected under the Delaware UCC
18

as a bona fide purchaser.” Wells Fargo’s 2d Mot. for Summ. J., ECF No. 136, at pp. 3–4. Wells
Fargo adds that it enjoys further “protections afforded to securities intermediaries” under
the same statutory framework. Id. at p. 3. In short, both Berkshire and Wells Fargo assert
that Delaware’s UCC “completely immunizes” them “from any liability in this case.” Wells
Fargo’s 1st Mot. for Summ. J., ECF No. 77, at p. 3.
Section 8-502 of Delaware’s UCC 3 provides that “[a]n action based on an adverse
claim to a financial asset, whether framed in conversion, replevin, constructive trust,
equitable lien, or other theory, may not be asserted against a person who acquires a security
entitlement under Section 8-501 for value and without notice of the adverse claim.” Del.
Code Ann. tit. 6, § 8-502. Meanwhile, section 8-501 states in relevant part that “a person
acquires a security entitlement if a securities intermediary: (1) indicates by book entry that a
financial asset has been credited to the person’s securities account; [or] (2) . . . acquires a
financial asset for the person and . . . accepts it for credit to the person’s securities
account[.]” Del. Code Ann. tit. 6, § 8-501(b).
Regarding securities intermediaries, section 8-115 states that apart from certain
exceptions “[a] securities intermediary that has transferred a financial asset pursuant to an
effective entitlement order . . . is not liable to a person having an adverse claim to the
financial asset[.]” Del. Code Ann. tit. 6, § 8-115. Section 8-116 further provides, in relevant
part, that “[a] securities intermediary that receives a financial asset and establishes a security
entitlement to the financial asset in favor of an entitlement holder is a purchaser for value of
the financial asset.” Del. Code Ann. tit. 6, § 8-116.
The rules, definitions and exceptions only spiral outward from there. As a result, the
Parties devote a substantial portion of their motion papers to arguing whether the Policy in
this case was a “financial asset,” whether it was a “security entitlement,” whether Berkshire
and Wells Fargo had “notice of an adverse claim”—indeed, whether “the Estate has an
‘adverse claim’” at all. Berkshire’s Mot. for Summ. J., ECF No. 133, at pp. 5–10; Estate’s Resp.
to Berkshire’s Mot. for Summ. J., ECF No. 147, at pp. 11–16.
Berkshire and Wells Fargo rely on Delaware’s UCC but note that “the UCC provision in all other
potentially applicable states is identical” to Delaware’s, so “the analysis will be the same regardless
of which state’s law applies.” Berkshire’s Mot. for Summ. J., ECF No. 133, at p. 5 n.3; see also Wells
Fargo’s Resp. to Estate’s Mot. for Summ. J., ECF No. 149, at p. 2 n.3.
3

19

With regard to Berkshire and Wells Fargo’s shared defense, the fact that the Policy is
void ab initio under Delaware law means that they are very likely not bona fide purchasers.
See Pruco Life Ins. Co. v. Brasner, 2011 WL 13117063, at *10 (S.D. Fla. Nov. 14, 2011)
(holding, in another STOLI case involving Wells Fargo, that “the bona fide purchaser for
value defense fails because the policy is void ab initio,” so that it “never [went] into effect”
and the purported purchaser “never took valid title”), vacated on other grounds sub nom. Pruco
Life Ins. Co. v. Wells Fargo Bank, N.A., 846 F.3d 1188 (11th Cir. 2017); Conestoga Tr. Servs.,
263 F. Supp. 3d at 703–04 (“Once the policy has been tainted as a wagering contract,
subsequent assignees take no greater rights in the policy than the initial wagerer[.]”).
The Court need not wade into such complexity, however, because even if the UCC’s
terms were met here, the UCC would pose no barrier to the Estate’s claim. To be sure,
section 8-502 of Delaware’s UCC gives protection to bona fide purchasers, without any
explicit exception for STOLI policies, or any other nod to Delaware’s “immense public
policy against wagering contracts.” Sun Life, 2016 U.S. Dist. LEXIS 4732, at *70–71. But
that is not surprising, given that the section has been uniformly adopted across multiple
states. See supra note 3. Far more significant, in the Court’s view, is the fact that Delaware’s
insurable interest statute takes no notice of the UCC, and makes no exception for bona fide
purchasers. As the Estate contends, the statute appears on its face to “preclude[]—without
exception and as a matter of public policy—STOLI investors from retaining the death benefit of
a life insurance policy manufactured through a STOLI scheme.” Estate’s Mot. for Summ. J.,
ECF No. 138, at p. 5.
Nevertheless, Berkshire and Wells Fargo argue that the text of the insurable interest
statute implies that it is intended to give way to defenses like those embodied in the UCC.
Specifically, Berkshire and Wells Fargo rely on the statute’s provision that “an insured (or
his executor or administrator) ‘may’ bring an action . . . to recover the death benefits” under
a STOLI policy. Berkshire’s Resp. to Estate’s Mot. for Summ. J., ECF No. 145, at pp. 23–24
(emphasis added). The use of the word “may,” according to this reading, means that
recovery under the statute is “not automatic” but “subject to all defenses available to the
defendant.” Id. at p. 21.

20

There are two problems with this reading. First, it places too much weight on a single
word. After all, as the Estate points out, one can hardly imagine the statute saying that the
insured or her estate “must” bring suit. See Estate’s Resp. to Berkshire’s Mot. for Summ. J., ECF
No. 147, at p. 18 n.10 (“[T]he vast majority of STOLI schemes and policies go uncovered,
so of course the statute could not require that an insurer or an estate bring a claim.”
(emphasis added)). Even more importantly, Berkshire and Wells Fargo’s reading would gut
the statute’s effectiveness. All that would be required for STOLI policies to yield profits to
investors would be for the policies’ procurers to bundle them and sell them wholesale to
third-parties, who could then disclaim any awareness of the policies’ origins—in other
words, precisely what happened here. See ESOF at ¶¶ 136–38.
The Court also takes guidance here from the Delaware Supreme Court’s landmark
decision in Price Dawe. Cf. Sun Life, 2016 U.S. Dist. LEXIS 4732, at *53 (“Price Dawe is
controlling and guides this Court’s inquiry.”). Price Dawe involved, among other issues, a
standoff between Delaware’s insurable interest law and another Delaware statute requiring
incontestability clauses in all insurance contracts. See 28 A.3d at 1064–68. The question was
whether Delaware insurance policies could be challenged as STOLIs at any time, despite
legally mandated contract provisions limiting the period of contestability to two years. Id.
That question was not altogether different from the one here, where Berkshire and Wells
Fargo contend that they acquired the Policy several years after any “wrongdoing” occurred,
and that they are thus entitled to enjoy the fruits of their lawful investment. Wells Fargo’s 1st
Mot. for Summ. J., ECF No. 77, at p. 2; cf. 28 A.3d at 1066 (noting that incontestability
clauses “essentially serve the same function as statutes of limitation and repose”).
The Price Dawe court answered the question before it in unmistakable terms: “[I]f a
life insurance policy lacks an insurable interest at inception, it is void ab initio because it
violates Delaware’s clear public policy against wagering. It follows, therefore, that if no
insurance policy ever legally came into effect, then neither did any of its provisions,
including the statutorily required incontestability clause.” 28 A.3d at 1067–68.
Price Dawe all but answers the question before this Court. While that case did not
involve the specific statutory provision at issue here, the text of subsection (b) is entirely
aligned with the spirit of Price Dawe. At its core, Price Dawe reaffirmed the unsavory truth
21

about STOLI policies: they are nothing more or less than a bet that a stranger will die. See
id. at 1065; Grigsby v. Russell, 222 U.S. 149, 154 (1911) (Justice Holmes observing that “[a]
contract of insurance upon a life in which the insured has no interest is a pure wager that
gives the insured a sinister counter interest in having the life come to an end”). Price Dawe
held that in Delaware, at least, such bets never pay off.
Subsection (b) puts that promise into effect under the circumstances presented here.
Subsection (b) provides that if the “payee” under a STOLI policy is someone other than the
“insured or . . . her executor or administrator,” then the latter may bring suit “to recover
[the] benefits.” Del. Code Ann. tit. 18, § 2704(b). The provision makes no exception for
“payee[s]” who are bona fide purchasers, and this Court does not believe that the Delaware
Supreme Court would fashion such an exception if given the opportunity. See Towne Realty,
Inc. v. Safeco Ins. Co. of Am., 854 F.2d 1264, 1269 n.5 (11th Cir. 1988) (“[W]hen considering
a diversity case under state law, [federal courts] are bound to decide the case the way it
appears the state’s highest court would.”). Based on Price Dawe, it appears that Delaware’s
highest court would hold that subsection (b) means exactly what it says: as between the
insured’s loved ones and the strangers who sought to profit from her death, the former have
the better claim to the insurance money, regardless of the latter’s status under the UCC.
The same reasoning applies to Wells Fargo’s unique defense based on its “ministerial
role” as a securities intermediary. Wells Fargo’s 2d Mot. for Summ. J., ECF No. 136, at pp. 3–
4. To the extent that Wells Fargo, after receiving the Policy proceeds, merely passed them
on in full to Berkshire, Wells Fargo would appear to have no liability under subsection (b).
See, e.g., Wells Fargo’s 1st Mot. for Summ. J., ECF No. 77, at p. 6. On the other hand, if Wells
Fargo retained any of the proceeds for itself, then it is very much a “payee under [a] contract
made in violation” of the insurable interest statute. Del. Code Ann. tit. 18, § 2704(b). The
factual question of which entity maintains “custody and control” over the proceeds appears
to be disputed, ESOF at ¶¶ 147–48, and the Court does not resolve it here. But as to whether
Wells Fargo’s purported status under the UCC protects it from suit under Delaware’s
insurable interest statute, the Court answers that question in the negative.
For all of these reasons, the Court determines that Berkshire and Wells Fargo’s
UCC-based defenses fail as a matter of law.
22

E. The Estate’s statutory claim is not time-barred
The final defense asserted against the Estate’s statutory claim is asserted by Berkshire
alone. Berkshire notes that although the Estate filed its original Complaint against Wells
Fargo on August 17, 2017, the Estate did not file its Amended Complaint, listing Berkshire
as a defendant, until July 3, 2018—more than three years after Berkshire’s receipt of the
Policy’s proceeds on October 29, 2014. Berkshire’s Mot. for Summ. J., ECF No. 133, at p. 11.
Berkshire therefore contends that the Estate’s statutory claim against it is barred under
Delaware’s three-year statute of limitations for “action[s] based on a statute.” Id. (quoting
Del. Code Ann. tit. 10, § 8106(a)).
Berkshire acknowledges that Wells Fargo did, in fact, “notif[y] Berkshire of the
Estate’s original complaint by email on November 3, 2017.” ESOF at ¶ 153; cf. BRESOF at ¶
153 (claiming this fact is “[d]isputed” before stating in the very next sentence: “Berkshire
first learned of this action on November 3, 2017, upon receipt of an email from Wells
Fargo”). Thus, Berkshire received notice of the Estate’s action within the grace period
allowed for by the “relation-back” rules under both federal and Delaware law. See Fed. R.
Civ. P. 4(m), 15(c) (allowing for relation back of amended pleading where conditions are
met within 90 days after original pleading is filed); Del. Super. Ct. Civ. R. 4(j), 15(c) (same,
where conditions are met within 120 days).
Nevertheless, Berkshire argues that one of the conditions for relation back of the
Amended Complaint was not met here. Specifically, Berkshire argues that “there can be no
relation back . . . because . . . the Estate did not make a ‘mistake concerning the identity of
the proper party.’” Berkshire’s Mot. for Summ. J., ECF No. 133, at p. 12 (quoting Del. Super.
Ct. Civ. R. 15(c)); see also Krupski v. Costa Crociere S. p. A., 560 U.S. 538, 541 (2010) (“Where
an amended pleading changes a party or a party’s name, [Federal Rule 15(c)] requires,
among other things, that ‘the party to be brought in by amendment . . . knew or should have
known that the action would have been brought against it, but for a mistake concerning the
proper party’s identity.’” (quoting Fed. R. Civ. P. 15(c)(1)(C))).
Before turning to the merits of this contention, the Court must determine whether the
federal or Delaware state rules apply. In its opening motion papers, Berkshire initially
claimed that the Court was required to apply Delaware’s rules without any inquiry at all.
23

Berkshire asserted that “[f]ederal courts sitting in diversity apply the relation-back rules of
state law where, as here, state law provides the statute of limitations for the action.”
Berkshire’s Mot. for Summ. J., ECF No. 133, at p. 11 (citing Richmond Manor Apts., Inc. v.
Certain Underwriters at Lloyd’s London, 2010 WL 11507006, at *4 (S.D. Fla. Oct. 18, 2010)).
Once again, Berkshire was simply misstating the law. Indeed, the very case cited by
Berkshire refutes its claim. In Richmond Manor Apts., the court correctly stated the law as
follows: “Rule 15(c)(1) [of the Federal Rules of Civil Procedure] allows federal courts sitting
in diversity to apply relation-back rules of state law where . . . state law provides the statute
of limitations for the action.” 2010 WL 11507006, at *4 (emphasis added) (quoting Saxton v.
ACF Indus., Inc., 254 F.3d 959, 963 (11th Cir. 2001)). “Nevertheless, [t]he state’s relationback rules are only applied if more liberal than the federal rule.” 2010 WL 11507006, at *4
(emphasis added) (internal quotation marks and citations omitted); see also, e.g., Abernathy v.
Dewey, 277 F. Supp. 3d 129, 137–38 (D. Mass. 2017) (“[I]n effect, Rule 15(c)(1)(A) ‘cements
in place a one-way ratchet; less restrictive state relation-back rules will displace federal
relation-back rules, but more restrictive state relation-back rules will not.’” (quoting Morel v.
DaimlerChrysler AG, 565 F.3d 20, 26 (1st Cir. 2009))).
In its reply papers, Berkshire has adopted a different, if somewhat paradoxical,
approach. Berkshire now argues that the Court should apply Delaware’s relation-back rule
because that rule is “more generous” than the federal rule, given the “more liberal 120-day
period” in which to meet its conditions. Berkshire’s Reply in Supp. of Mot. for Summ. J., ECF
No. 153, at p. 10. It is plain enough that Berkshire is not pushing for Delaware’s rule to be
applied because it is “more generous” to Berkshire’s adversary. Nor is the Estate in need of
the extra 30 days Delaware’s rule affords. See BRESOF at ¶ 153 (“Berkshire first learned of
this action on November 3, 2017,” 78 days after the original Complaint was filed). Rather,
Berkshire is pushing for Delaware’s rule to apply because it is decidedly stricter on the only
issue in contention: whether the Estate’s failure to include Berkshire in the original
Complaint was due to a “mistake concerning the identity of the proper party.” Berkshire’s
Mot. for Summ. J., ECF No. 133, at p. 12 (quoting Del. Super. Ct. Civ. R. 15(c)).
Delaware “has traditionally followed the ‘strict approach’ to what a mistake under
Rule 15(c) means.” Difebo v. Bd. of Adjustment of New Castle Cty., 132 A.3d 1154, 1158 (Del.
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2016) (emphasis added). Under that approach, “a mistake occurs when the [plaintiff] makes
a true mistake as to the identity or name of the proper party as opposed to where the
plaintiff merely chose the wrong party to sue.” Id. (quoting CCS Inv’rs, LLC v. Brown, 977
A.2d 301, 313 (Del. 2009)). Thus, “Delaware’s approach as to what constitutes mistake
under Rule 15(c) turns on plaintiffs’ demonstration of intent to sue the proper parties.”
Cordrey v. Doughty, 2017 WL 4676593, at *6 (Del. Super. Ct. Oct. 11, 2017).
By contrast, Federal Rule 15(c) “asks what the prospective defendant knew or should
have known during the [90-day] period, not what the plaintiff knew or should have known at
the time of filing her original complaint.” Krupski, 560 U.S. at 548. In other words, “[t]he
reasonableness of the mistake is not itself at issue.” Id. at 549. Rather, “[t]he question under
Rule 15(c)(1)(C)(ii) is . . . whether [the prospective defendant] knew or should have known
that it would have been named as a defendant but for an error.” Id. at 548. Under the
circumstances presented here, the federal relation-back rule is more liberal than the “strict”
Delaware rule, and the Court therefore applies the federal rule.
As noted, Wells Fargo, the sole defendant named in the original Complaint, notified
Berkshire about the Complaint on November 3, 2017—78 days after the filing of the
Complaint and 12 days short of the federal rule’s 90-day limit. ESOF at ¶ 153. The
Complaint asserted the exact same statutory and unjust-enrichment claims against Wells
Fargo that are now asserted, in the Amended Complaint, against Wells Fargo and
Berkshire. Compl., ECF No. 1, at ¶¶ 102–10. Berkshire therefore cannot—and does not—
dispute that the Estate’s claims against it “arose out of the conduct, transaction, or
occurrence set out . . . in the original pleading,” or that Berkshire “received such notice of
the action that it [would] not be prejudiced in defending on the merits[.]” Fed. R. Civ. P.
15(c)(1)(C)(i). Instead, Berkshire denies only that it “knew or should have known that the
action would have been brought against it, but for a mistake concerning [its] identity.” Fed.
R. Civ. P. 15(c)(1)(C)(ii).
Contrary to Berkshire’s argument, the standard for a “mistake” under Rule 15(c) is
met here. The Estate initially brought suit only against Wells Fargo, it appears, because
Wells Fargo was the formal owner and beneficiary of the Policy and received payment of
the Policy’s proceeds, albeit in its role “as securities intermediary.” ESOF at ¶¶ 134–35. It
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was only after the Estate learned that Wells Fargo had transferred the proceeds to Berkshire
that the Estate added Berkshire as a defendant. See, e.g., Estate’s Resp. to Berkshire’s Mot. for
Summ. J., ECF No. 147, at p. 27. Nevertheless, the Estate’s intent was clear from the start: it
meant to bring suit against the “payee” under the Policy. Compl., ECF No. 1, at ¶ 107.
Berkshire received notice of the Estate’s claim within 90 days after the Complaint was filed,
ESOF at ¶ 153, and Berkshire should have known immediately that this lawsuit hit close to
home. Cf. Krupski, 560 U.S. at 554–55 (Rule 15(c) met where the “complaint made clear that
[plaintiff] meant to sue the company that ‘owned[ and] operated’” the ship on which she
was injured, and defendant should have known that it was not named “only because of
[plaintiff’s] misunderstanding about which . . . entity was in charge of the ship”).
Indeed, just two weeks after receiving notice of the Complaint, Berkshire went into
litigation mode, jointly demanding with Wells Fargo that Coventry and LST Holdings Ltd.
indemnify them in connection with the Estate’s claims. ESOF at ¶ 154. True, Berkshire took
these steps on November 17, 2017—just two days outside the 90-day window. Id. But the
fact that Berkshire “knew” it was implicated in this suit just after the window closed lends
further support to the finding that it “should have known” it was implicated while the
window was still open. Fed. R. Civ. P. 15(c)(1)(C)(ii).
In sum, the Estate’s statutory claim against Berkshire relates back to its original
Complaint, which was filed within the three-year limitations period for statutory claims
under Delaware law. Therefore, the statute of limitations poses no bar to the Estate’s claim.
F. The Estate’s claim of unjust enrichment fails because it has a legal remedy
Finally, Berkshire and Wells Fargo both move for summary judgment on the Estate’s
alternative claim of unjust enrichment. They argue that “there is no evidence that the Estate
has conferred any direct benefit” on either Berkshire or Wells Fargo, and that such direct
conferral is an element of unjust enrichment “under any of the potentially applicable state’s
law—i.e., Nebraska (where Berkshire retained the payment), Texas (from where the
payment was issued), and Florida (where the Estate resides).” Berkshire’s Mot. for Summ. J.,
ECF No. 133, at p. 22 n.14; see also Wells Fargo’s 2d Mot. for Summ. J., ECF No. 136, at p. 5.
However, as was the case with Berkshire’s earlier motion to dismiss, Berkshire and
Wells Fargo have failed to identify which state’s law the Court should apply, merely stating
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that there is “no scenario wherein Delaware law applies.” Berkshire’s Mot. for Summ. J., ECF
No. 133, at p. 22 n.14; see also Order Denying Mot. to Dismiss, ECF No. 174, at p. 7. And the
Court has already observed, in denying the motion to dismiss, that “the Texas and Nebraska
cases that Berkshire cite[d did] not support” its claim that direct conferral is an element of
unjust enrichment in those states. Order Denying Mot. to Dismiss, ECF No. 174, at p. 7.
Nevertheless, the Court finds that the Estate’s unjust-enrichment claim should be
dismissed for a different reason than the one urged by Berkshire and Wells Fargo. In at least
three of the four states whose law might govern the Estate’s equitable claim, such a claim is
barred where an adequate legal remedy is available. See Nemec v. Shrader, 991 A.2d 1120,
1130 (Del. 2010) (“[t]he elements of unjust enrichment” include “the absence of a remedy
provided by law”); BMG Direct Mktg., Inc. v. Peake, 178 S.W.3d 763, 770 (Tex. 2005) (“[A]n
adequate legal remedy may render equitable claims of unjust enrichment . . . unavailable.”);
Pilot Inv. Grp. Ltd. v. Hofarth, 550 N.W.2d 27, 33 (Neb. 1996) (“[E]quitable remedies are
generally not available where a statute provides an adequate remedy at law.”).
The same appears to be true in Florida, so long as “the remedy at law is ‘plain,
certain, prompt, speedy, sufficient, complete, practical, and efficient in attaining the ends of
justice[.]’” ThunderWave, Inc. v. Carnival Corp., 954 F. Supp. 1562, 1566 (S.D. Fla. 1997)
(quoting Liza Danielle, Inc. v. Jamko, Inc., 408 So. 2d 735, 738 (Fla. Dist. Ct. App. 1982)); see
also Bowleg v. Bowe, 502 So. 2d 71, 72 (Fla. Dist. Ct. App. 1987) (“[T]he theory of unjust
enrichment is . . . not available where there is an adequate legal remedy[.]”); but see Williams
v. Bear Stearns & Co., 725 So. 2d 397, 400 (Fla. Dist. Ct. App. 1998) (the rule that adequate
legal remedies bar equitable relief “does not apply to unjust enrichment claims”).
Here, the Court has determined that the Estate has a legal remedy available to it
under subsection (b) of Delaware’s insurable interest statute. That remedy is plain, certain,
efficient and adequate. Indeed, subsection (b) does more than establish a remedy for the
Estate—it creates the Estate’s right itself. As has been noted, the Estate can claim no
contractual rights under a Policy that is “void as against public policy and thus never c[ame]
into force.” Price Dawe, 28 A.3d at 1065. And even if the Policy were valid, Ms. Malkin
voluntarily relinquished “all right, title an[d] interest” in the Policy before she passed away.
ESOF at ¶¶ 121–24. Thus, were it not for subsection (b), Ms. Malkin’s Estate would have no
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right to the Policy’s proceeds, in contract, in equity or otherwise. Nevertheless, the Estate
does have subsection (b), and that is enough.
For all of these reasons, the Estate’s alternative claim of unjust enrichment must be
dismissed. Cf. Tillman ex rel. Estate of Tillman v. Camelot Music, Inc., 408 F.3d 1300, 1309
(10th Cir. 2005) (unjust-enrichment claim properly dismissed where plaintiff had a legal
remedy under an analogous provision of Oklahoma’s insurance code).
IV. CONCLUSION
For the reasons set forth above, it is hereby ORDERED and ADJUDGED that
Wells Fargo’s Motions for Summary Judgment (ECF Nos. 77, 136), Berkshire’s Motion for
Summary Judgment (ECF No. 133) and the Estate’s Motion for Summary Judgment (ECF
No. 138) are each GRANTED in part and DENIED in part as follows.
The Court finds as a matter of law that: 1) the Estate’s statutory claim is governed by
Delaware law; 2) the Policy in this case lacked an insurable interest at inception and was
therefore void ab initio under Delaware law; 3) Ms. Malkin did not relinquish her Estate’s
statutory right to the Policy’s proceeds; 4) Berkshire and Wells Fargo’s UCC-based defenses
fail as a matter of law; 5) the Estate’s statutory claim is not time-barred; and 6) the Estate is
entitled to recover the Policy’s proceeds under Del. Code Ann. tit. 18, § 2704(b). Finally, the
Estate’s unjust-enrichment claim is dismissed.
The Court does not make any finding regarding: 1) the apportionment of damages
between Berkshire and Wells Fargo; 2) whether those damages are offset by any premium or
other payments made by Berkshire or Wells Fargo; or 3) any other claims, defenses or
counterclaims asserted since the Parties’ motions for summary judgment were filed.
DONE and ORDERED in Chambers, in Miami, Florida, this 29th day of March
2019.

Copies furnished to:
Lauren Louis, U.S. Magistrate Judge
Counsel of record
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