A subsidiary of the Phoenix Companies Inc. has sued U.S. Bank and other parties it claims were part of a scheme to create a stranger-originated life insurance policy, known as STOLI.
The lawsuit was filed in Minnesota in April by PHL Variable Insurance Co., a unit of Phoenix, Hartford, naming U.S. Bank, part of U.S. Bancorp, Minneapolis, the Martha Higuera Irrevocable Trust, and the trust's trustee, BNC National Bank, a unit of BNCCorp Inc., Bismarck, N.D.
U.S. Bank ultimately became owner of the policy, according to papers filed by PHL with the U.S. District Court in Minnesota.
Court papers filed in the lawsuit state that Martha Higuera, a resident of California, was approached by a stranger, who informed her that because she was over 70 years old, she qualified for a free life insurance policy. The person then offered Higuera, who spoke little English, $5,000 to apply for the policy, according to Phoenix's court document.
That discussion ultimately led to the establishment of the Higuera Trust, which then applied for a life insurance policy on behalf of Martha Higuera with a face value of $5 million, according to the lawsuit.
During the application process, it was represented to Phoenix that Higuera had a net worth of more than $9 million and an annual income of $410,000, according to PHL. It was also represented to the insurer that the policy was sought as part of Higuera's estate planning, that there was no understanding or agreement that the policy would be sold to a third party and that Higuera had not received any financial inducements to submit the insurance application.
"These representations were all false," PHL stated.
