STOLI Life Insurance Ruling 2026: Appeals Court Voids $8M in Policies — What Insurable Interest Means for Policyholders
June 15, 2026 — A federal appeals court has delivered another decisive blow against stranger-originated life insurance (STOLI), upholding a lower court ruling that voided two life insurance policies worth $8 million. The Third Circuit Court of Appeals affirmed that the policies — issued on the life of Haya Majerovic and later sold to investors — were illegal from inception because they lacked a valid insurable interest. The ruling reinforces a growing judicial consensus: life insurance is not an investment vehicle for strangers.
The case, Lincoln National Life Insurance Co. v. Retirement Value LLC, centered on two policies originally issued in 2007 by Jefferson Pilot Life Insurance Co. (a Lincoln predecessor). The policies insured Majerovic’s life for a combined $8 million and were ultimately purchased by Retirement Value LLC after a series of transfers. When Majerovic died in 2019, Retirement Value submitted claims — and Lincoln refused to pay, filing suit in 2021 to have the policies declared void.
What the Court Found: A Classic STOLI Arrangement
Writing for a three-judge panel, Judge Luis Felipe Restrepo concluded that New Jersey law governed the policies — and under New Jersey law, they were textbook STOLI. “The investors had no insurable interest in the life of the insured but yet were the intended beneficiaries of her life insurance policies,” Restrepo wrote. The court found that the policies were “applied for by a New Jersey-based trust, the application was signed in New Jersey, the policies were issued for delivery to the Trust at its New Jersey address, and the Trust received the policies in New Jersey.”
According to court documents, Majerovic’s son entered into an agreement with investors in 2007: the investors — identified as two religious organizations, Congregation Sons of Ateres Joshua and Congregation Beis Shloma — would fund all premium payments. In return, they’d receive 90% of the policy’s value upon sale or maturity, while the family would get 10% after deducting premium costs. The Majerovic family never paid a single premium.
STOLI Case Timeline: From Policy Issue to Court Ruling
| Date | Event |
|---|---|
| 2007 | Two $8M policies issued by Jefferson Pilot Life on Haya Majerovic; investors fund all premiums |
| 2007–2019 | Policies transferred: Trust → James Settlement Services → Retirement Value LLC |
| November 2019 | Haya Majerovic dies; Retirement Value submits death benefit claims |
| 2021 | Lincoln National files suit seeking declaration that policies are void ab initio |
| 2024 | District Judge Robert Kirsch grants summary judgment to Lincoln — policies “undoubtedly” STOLI |
| June 2026 | Third Circuit affirms; Retirement Value’s premium-reimbursement claim waived |
What Is STOLI — and Why Is It Illegal?
Stranger-originated life insurance (STOLI) is an arrangement where a third party with no personal or financial relationship to the insured initiates a life insurance policy with the intent of profiting from the death benefit. The “stranger” funds the premiums, owns or controls the policy, and collects the payout when the insured dies — often leaving the insured’s family with little or nothing.
At the heart of every STOLI case is the doctrine of insurable interest. Life insurance is fundamentally a risk-management tool, not a speculative investment. For a policy to be valid, the person buying it must have a legitimate interest in the continued life of the insured — a spouse, a business partner, a lender with collateral at risk. Without insurable interest, the policy becomes what courts call a “wagering contract” — a bet on someone’s death.
State-by-State: Where STOLI Laws Stand in 2026
| State | STOLI Status | Key Provision |
|---|---|---|
| New Jersey | Explicitly banned | Supreme Court rulings + statutory ban; policies void from inception |
| New York | Explicitly banned | NY Ins. Law § 7815 prohibits STOLI; 5-year contestability window |
| Florida | Explicitly banned | Fla. Stat. § 626.9911; STOLI policies void ab initio |
| California | Explicitly banned | Cal. Ins. Code § 10110.5; insurable interest required at inception |
| Delaware | Explicitly banned | 18 Del. C. § 2704; STOLI declared against public policy |
| Texas | Explicitly banned | Tex. Ins. Code § 1111.002; STOLI practices prohibited |
| Ohio | Explicitly banned | Ohio Rev. Code § 3911.011; insurable interest required |
| Other 43 states | Varies | Most rely on common-law insurable interest doctrine; some have specific STOLI statutes |
Broader Industry Context: Life Insurance Policy Transfers Under Scrutiny
The STOLI ruling arrives amid broader industry scrutiny of life insurance policy transfers and reinsurance arrangements. In late May 2026, Nationwide reached a reinsurance agreement with MassMutual covering a block of fixed universal life insurance policies comprising more than 30,000 policyowners. Unlike STOLI transactions, legitimate reinsurance deals transfer risk between regulated insurers — not to investors with no stake in the insured’s wellbeing. The contrast highlights the fine line between lawful risk transfer and illegal wagering.
Meanwhile, the life insurance industry continues to see strong sales growth. According to Wink’s Q1 2026 data, variable universal life (VUL) sales surged significantly in the first quarter, signaling growing consumer demand for flexible, market-linked products. Globe Life Inc. (NYSE: GL) hit a 52-week high of $164.64 on June 11, 2026, reflecting investor confidence in the sector’s trajectory.
Why This Ruling Matters to Policyholders
For the average consumer buying life insurance to protect their family, the STOLI ruling may seem like an abstract legal dispute. But it carries three important implications:
- Your policy’s validity depends on insurable interest at inception. When you buy life insurance, the insurer verifies that you have a legitimate reason to insure the person named. If that insurable interest is fabricated — or if the real beneficiary is a stranger funding the premiums — the policy can be voided years later, leaving your family with nothing.
- Selling your policy to investors carries risk. Life settlements — selling an existing policy to a third party — are legal in many states, but the line between a legitimate life settlement and an illegal STOLI arrangement can be thin. If the policy was originally structured with investor involvement, courts may void it entirely.
- Insurers are increasingly aggressive about challenging suspicious policies. Lincoln National’s willingness to litigate for five years rather than pay an $8 million claim signals that carriers will fight STOLI cases to the end — and courts are backing them.
How to Protect Your Life Insurance Policy
- Buy from a licensed agent or reputable direct carrier. Avoid any arrangement where a third party offers to “help” you get coverage by funding your premiums in exchange for a share of the death benefit.
- Understand who the real beneficiary is. If someone other than your family or business partner stands to gain most from your death, that’s a red flag.
- Keep premium payments in your name. If someone else is paying your premiums, document the arrangement clearly — and make sure it doesn’t give them ownership rights over the policy.
- Check your carrier’s financial strength. Use AM Best’s rating search to verify your insurer’s ability to pay claims. Lincoln National’s A+ (Superior) rating from AM Best underscores why it had the resources to fight this case through multiple appeals.
Related Resources
- AM Best Insurance Ratings — Check Your Carrier’s Financial Strength
- NAIC Consumer Resources — Insurance Regulation & Policyholder Rights
- IRS Publication 525 — Taxable and Nontaxable Income (Life Insurance Proceeds)
If you’re evaluating life insurance options for the first time, understanding the fundamentals helps you avoid pitfalls. Our guide to the best life insurance companies of 2026 ranks top carriers by financial strength and customer satisfaction. For cost comparisons across policy types, see our term vs. whole life cost comparison. And if you’re considering a policy with investment features, our analysis of whole life as an investment breaks down the pros and cons.
Frequently Asked Questions
What is stranger-originated life insurance (STOLI)?
STOLI is an arrangement where a third party with no personal or financial relationship to the insured initiates a life insurance policy with the intent of profiting from the death benefit. The stranger funds the premiums and collects the payout when the insured dies. Courts have consistently ruled STOLI policies void because they lack insurable interest — the legal requirement that the policy owner has a legitimate stake in the insured’s continued life.
What is insurable interest in life insurance?
Insurable interest is the legal requirement that the person buying a life insurance policy must have a legitimate financial or emotional interest in the continued life of the insured. Spouses, business partners, and lenders with collateral at risk all have insurable interest. Without it, a life insurance policy becomes an illegal “wagering contract” — essentially a bet on someone’s death — and can be voided by courts.
Can I sell my life insurance policy to a third party?
Yes, life settlements — selling an existing policy to a third party — are legal in most states. However, the policy must have been originally purchased with a valid insurable interest. If the policy was structured from the start with investor involvement (STOLI), courts may void it entirely, even years later. Always consult a licensed professional before entering a life settlement transaction.
Which states have banned STOLI?
As of 2026, at least seven states have explicit statutory bans on STOLI: New Jersey, New York, Florida, California, Delaware, Texas, and Ohio. Most other states rely on common-law insurable interest doctrine to void STOLI arrangements. The National Association of Insurance Commissioners (NAIC) has encouraged all states to adopt specific STOLI prohibitions.
What happens if my life insurance policy is declared void?
If a court declares a life insurance policy void ab initio (void from inception), the insurer is not obligated to pay the death benefit. In some cases, premiums paid may be returned — but in the recent Third Circuit ruling, the investor’s claim for premium reimbursement was denied because the argument wasn’t properly raised in lower court proceedings. The insured’s family receives nothing.
How can I verify my life insurance company’s financial strength?
You can check your insurer’s financial strength rating for free at ratings.ambest.com. AM Best assigns letter grades from A++ (Superior) to D (Poor). Lincoln National, the insurer that successfully challenged the STOLI policies in this case, holds an A+ (Superior) rating. Always choose carriers rated A- or higher for long-term security.
Is life insurance a good investment?
Life insurance is primarily a risk-management tool, not an investment. While permanent policies like whole life and universal life build cash value over time, their primary purpose is to provide a death benefit to your beneficiaries. The STOLI cases illustrate what happens when life insurance is treated purely as an investment vehicle by strangers — courts void the policies. For most families, term life insurance provides the most cost-effective protection.
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