STOLI Illegality Cannot Be Avoided by “Group Policy” Labeling; New York Delivery Statute Does Not Control Choice-of-Law Litigation Analysis

Case: Lincoln National Life Insurance Co v. Retirement Value LLC
Court: U.S. Court of Appeals for the Third Circuit
Date: June 10, 2026
Disposition: Nonprecedential; affirmance of summary judgment for insurer and dismissal/defeat of counterclaims (including premium recoupment on waiver grounds).

1. Introduction

This appeal arose from a dispute over payment of death benefits on two large life insurance policies issued on the life of Haya Majerovic. The beneficiary/owner structure was routed through the Haya Majerovic Family Trust, whose situs and operations were centered in Lakewood, New Jersey. Investors (strangers to the insured) financed the premiums and expected to receive the bulk of the proceeds—hallmarks of stranger-originated life insurance (“STOLI”).

After the insured’s death in 2019, Retirement Value, LLC (a downstream purchaser of the policies) submitted a claim. Lincoln National Life Insurance Company (successor to Jefferson Pilot) sued in the District of New Jersey for a declaration that the policies were void ab initio as illegal wagers lacking an insurable interest under New Jersey law. Retirement Value counterclaimed (including breach, fraud-based theories, statutory consumer claims, bad faith, promissory estoppel, and premium recoupment), and argued that New York (or alternatively Rhode Island) law should apply—principally by recasting the instruments as “group policy” certificates tied to a New York resident insured.

The Third Circuit affirmed: (i) New Jersey law governed, (ii) the policies were void ab initio STOLIs under New Jersey public policy and statute, and (iii) Retirement Value waived its premium refund theory by failing to properly argue it below.

2. Summary of the Opinion

• Choice of law: Applying New Jersey choice-of-law rules (as required in diversity), the court held New Jersey had the most significant relationship. The place of contracting and delivery was New Jersey, and the Trust—rather than the insured—functioned as the operative owner/applicant.
• Merits: Under New Jersey law, STOLI arrangements are void ab initio. The court emphasized that New Jersey’s statutory framework after Sun Life Assurance Co. of Canada v. Wells Fargo Bank, N.A. reaches “individual or group policy” forms and related arrangements, including trusts used to simulate insurable interest.
• Premium recoupment: Retirement Value’s premium refund claim was rejected because it did not respond to Lincoln’s arguments below; “passing references” without legal support did not preserve the issue for appeal.

3. Analysis

3.1 Precedents Cited

A. STOLI, insurable interest, and void-ab-initio consequences

• Sun Life Assurance Co. of Canada v. Wells Fargo Bank, N.A., 208 A.3d 839 (N.J. 2019)
  This is the opinion’s substantive anchor. The Third Circuit treated Sun Life as establishing (and the Legislature as codifying) a categorical public policy: when a life policy is procured as a wager by strangers lacking an insurable interest, it is void ab initio—“as though the policy never came into existence.” The court used Sun Life to reject Retirement Value’s attempt to “cure” illegality through a group-policy framing.
• D'Agostino v. Maldonado, 78 A.3d 527 (N.J. 2013)
  Cited (via Sun Life) for the conceptual definition of a void contract: no legal effect; no contract in existence. This supports the remedial posture that courts do not enforce the bargain as written because public policy treats it as never validly formed.

B. Choice-of-law framework in diversity and New Jersey insurance disputes

• Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941)
  The court applied Klaxon to confirm that a federal diversity court uses the forum state’s choice-of-law rules—here, New Jersey’s.
• State Farm Mut. Auto. Ins. Co. v. Est. of Simmons, 417 A.2d 488 (N.J. 1980)
  Used for New Jersey’s general insurance-contract principle: “the law of the place of the contract ordinarily governs.”
• NL Indus., Inc. v. Com. Union Ins. Co., 65 F.3d 314 (3d Cir. 1995)
  Provided the operational test for the “place of contract” (negotiation, execution, performance) and the further inquiry into whether another state has a more significant relationship, including via Restatement (Second) of Conflicts § 188(2).
• Instructional Sys. v. Comput. Curriculum Corp., 614 A.2d 124 (N.J. 1992)
  Cited to show that even when a contract purports to choose another jurisdiction’s law, New Jersey may refuse to apply it if the chosen state lacks a substantial relationship. This undermined Retirement Value’s fallback argument for Rhode Island as “Governing Jurisdiction.”

C. Summary judgment and appellate review standards

• Razak v. Uber Techs., Inc., 951 F.3d 137 (3d Cir. 2020), amended, 979 F.3d 192 (3d Cir. 2020) (plenary review of summary judgment).
• Mellott v. Heemer, 161 F.3d 117 (3d Cir. 1998) (view evidence in light most favorable to nonmovant).
• Chamberlain v. Giampapa, 210 F.3d 154 (3d Cir. 2000) (state substantive law applies in diversity review).

D. Waiver/preservation on appeal

• Garza v. Citigroup Inc., 881 F.3d 277 (3d Cir. 2018) (arguments not raised below are waived on appeal).
• John Wyeth & Bro. Ltd. v. CIGNA Int'l Corp., 119 F.3d 1070 (3d Cir. 1997) (arguments raised only “in passing” are waived).

3.2 Legal Reasoning

A. Why New York’s “deemed delivered” statute did not control the litigation

Retirement Value’s main jurisdictional lever was N.Y. Ins. Law § 3201(b)(1), which deems certain group certificates insuring New York residents to be delivered in New York and thus required to comply with New York insurance law. The Third Circuit’s critical move was separating regulatory compliance (what an insurance code might require for issuance/delivery) from choice-of-law in later litigation (what substantive law governs contract validity and enforcement in court).

Even if § 3201(b)(1) applied, the court held it did not “mandate” New York law for this lawsuit; it would be “one factor” in the forum’s choice-of-law analysis. Applying New Jersey’s framework, the court found New Jersey was the place of contracting: New Jersey trust ownership, New Jersey execution/signature, New Jersey delivery address, and New Jersey representations in transaction documents describing negotiation/issuance/delivery as New Jersey-based. New York’s primary contact—insured’s residence—was discounted because the insured was treated as an instrumentality in the investor scheme, while the Trust and investor structure drove procurement and ownership.

B. Why a “group policy” characterization could not defeat New Jersey’s anti-STOLI rule

On the merits, Retirement Value argued that New Jersey’s group life insurance provisions allegedly “say nothing about insurable interest,” and thus the insurable-interest requirement should not apply if the policies were part of a group arrangement.

The Third Circuit rejected this as a category mistake: New Jersey’s STOLI prohibition is a public-policy and statutory invalidity doctrine that applies to life insurance procurement arrangements generally, not only to a particular policy form. Relying on Sun Life, the court reiterated that STOLIs are void ab initio.

The court further emphasized the post-Sun Life statutory amendments to the Viatical Settlement’s Act:

• N.J. Stat. Ann. § 17B:30B-18(b) voids at the outset any arrangement or transaction (including financing) that furthers or aids a STOLI.
• N.J. Stat. Ann. § 17B:30B-18(c) specifically targets trusts created to give the appearance of insurable interest and used to procure policies for investors.
• N.J. Stat. Ann. § 17B:30B-2 defines “policy” broadly to include “an individual or group policy, group certificate, contract or arrangement of life insurance,” defeating the notion that group certificates sit outside the statute’s reach.

Thus, even under the appellant’s own assumption (“treat these as group certificates”), the statutory scheme expressly covers group certificates and the kind of trust-based, investor-financed structure used here. The “label” does not change the substance: strangers funded and expected to benefit from the insured’s death without a lawful insurable interest at inception.

C. Premium refund: procedural waiver, not a merits holding

The court’s rejection of premium recoupment turned on preservation doctrine. It did not announce a broad rule about whether downstream premium payors can ever recover in STOLI scenarios; rather, it held Retirement Value forfeited the issue by failing to address Lincoln’s arguments in the district court and by relying on only “passing references” without supporting authority.

3.3 Impact

• Anti-evasion principle in STOLI litigation: The reasoning reinforces that courts will look through formal characterizations (e.g., “group certificate”) to the procurement reality. This is particularly salient where STOLI structures employ trusts and third-party premium financing to simulate insurable interest.
• Choice-of-law discipline: The opinion narrows the strategic value of “deemed delivered” statutes as automatic choice-of-law trump cards in litigation. Parties may still argue such statutes matter, but only as one contact among many under the forum’s choice-of-law method.
• Transactional documentation matters: Statements in applications and verification forms identifying negotiation/issuance/delivery in a particular state can become decisive in later conflicts analysis.
• Litigation hygiene: The waiver holding signals that premium-recoupment theories in void-policy cases must be fully briefed with authority at the trial level; otherwise, appellate review is unlikely.

Note on precedential weight: The Third Circuit designated the disposition “NONPRECEDENTIAL” under I.O.P. 5.7. It is therefore not binding precedent, but it may be persuasive—especially where it closely applies controlling New Jersey authority such as Sun Life and the cited statutes.

4. Complex Concepts Simplified

• Insurable interest: A legally recognized stake in the continued life of the insured (e.g., close family relationships, certain business relationships). Without it at inception, life insurance resembles a wager on a person’s death.
• STOLI (Stranger-Originated Life Insurance): A deal where investors who are strangers to the insured cause a policy to be procured and financed so they can profit from the death benefit.
• Void ab initio: “Void from the beginning.” Legally, the contract is treated as though it never existed, because it violates fundamental law or public policy.
• Choice of law: The rules a court uses to decide which state’s substantive law applies. In federal diversity cases, the court uses the forum state’s choice-of-law rules (Klaxon).
• Group policy certificate: Documentation issued to an individual under a group insurance arrangement. The opinion’s point is that even if the instrument is a “certificate,” New Jersey’s anti-STOLI rules can still apply.
• Waiver (issue preservation): If a party does not properly develop and present an argument in the trial court—especially in response to a motion—it generally cannot raise it on appeal.

5. Conclusion

The Third Circuit’s affirmance in Lincoln National Life Insurance Co v. Retirement Value LLC reinforces two practical rules in STOLI disputes litigated in New Jersey federal courts: (1) New York “deemed delivered” statutes do not automatically dictate the governing law in later litigation when New Jersey choice-of-law rules point elsewhere; and (2) New Jersey’s insurable-interest and anti-STOLI public policy—codified after Sun Life Assurance Co. of Canada v. Wells Fargo Bank, N.A.—reaches the substance of the transaction, including trust-based and potentially “group” forms, rendering STOLI arrangements void ab initio. The decision also underscores that premium-recoupment claims require timely, developed briefing at the district court level to avoid waiver on appeal.