In a 5-2 opinion in a closely watched case, the highest court in New York has found a stranger-owned life insurance (“STOLI”) policy to be valid under the state’s insurable interest law. Kramer v. Phoenix Life Ins. Co., 2010 N.Y. Slip Op. 8376 (Nov. 17, 2010). The decision was based on a prior version of the insurable interest statute, which was amended in 2009.

Arthur Kramer, a prominent New York attorney, obtained several insurance policies on his own life. The policies collectively provided $56,200,000 in coverage. Through a series of complex transactions involving his adult children, family trusts, and third parties, the ownership and beneficial interests in the insurance policies were promptly transferred to third-party investors, who paid the premiums.