Life Insurance Trust Deemed to Lack Insurable Interest

In a case sending shock waves across the nation, a United States District Court interpreting Maryland law has determined that a life insurance trust has “no insurable interest in the life of the decedent” and that the policy is consequently void.  Judge Hilton explained that the trust would suffer no detriment from the insured’s death and, in fact, the trust would gain more from the life insurance proceeds than it would if the insured continued to live.

The case is especially interesting because of a highly unusual set of facts which could have easily allowed the judge to reach the same end result by finding that the insured misrepresented his health condition by not disclosing brain tumor surgery and chronic alcoholism treatment.

An appeal is pending.

Special thanks to Prof. John K. Eason for bringing this case to my attention.