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Florida Supreme Court Decides No STOLI Exception Exists Regarding Florida’s Two-Year Contestability Statute

Florida Supreme Court Seal

by Tim Schoenwalder

The Florida Supreme Court has issued its much-awaited opinion in Wells Fargo Bank. N.A. v. Pruco Life Ins. Co., Case No. SC15-382 (Fla. S. Ct. Sept. 22, 2016).  In its analysis of two questions of Florida law certified by the Eleventh Circuit in Pruco Life Ins. Co. v. Wells Fargo Bank, N.A., 780 F.3d 1327, 1336 (11th Cir. 2015), the Court declined to read either section 627.404 or 627.455, Florida Statutes, to create a stranger-originated life insurance (STOLI) exception to the two-year contestability period of section 627.455, Florida Statutes.  Justice Polston authored the opinion for the Court, which decided to rephrase the Eleventh Circuit’s two certified questions into a single question: “Can a party challenge the validity of a life insurance policy after the two-year contestability period established by section 627.455 because of its creation through a STOLI scheme?”  The Court answered its rephrased question in the negative.

The Court recognized that the decision to create a STOLI exception to section 627.455’s two-year contestability section is left to the Florida Legislature.

Justice Canady concurred with the result of the Court’s opinion.  In a separate opinion, Justice Canady wrote that he did “not concur with the suggestion that the existence of an insurable interest at the inception of a policy is a precondition for operation of the incontestability provisions of section 627.455” and that such issue “remains for resolution in a case where it is presented.”