The hottest topic of conversation among lawmakers throughout the country concerning life settlements continues to be Stranger Originated Life Insurance, or "STOLI." Among various alternatives, recently enacted legislation has included:
Insurable interest and anti-STOLI laws: Several states have now enacted statutes that expressly declare STOLI programs to be illegal. Minnesota recently amended its insurable interest laws with respect to policies issued after the May 2009 effective date of the law, to provide that any settlement within four years after the issue date is presumed to be a STOLI transaction. That presumption may be countered, however, and the policy can be settled within that four-year period if it can be affirmatively proven that the policy was not a STOLI product. Specific requirements are set forth in the statute to define what is satisfactory proof on this point. Even in the absence of an expressly anti-STOLI statute, some experts believe that STOLI could potentially be deemed to be a form of fraud or a violation of insurable interest laws based on inferences drawn from current statutes and common law principles.