Title: Wilmington Trust National Association v. Sun Life Assurance Company of Canada

State: delaware

Issuer: Delaware Supreme Court

Document:

IN THE SUPREME COURT OF THE STATE OF DELAWARE 
WILMINGTON TRUST, 
NATIONAL ASSOCIATION, as 
Securities Intermediary, 
 
 
Defendants/Counterclaim 
Plaintiff Below, 
Appellant/Cross-Appellee, 
 
v. 
 
SUN LIFE ASSURANCE 
COMPANY OF CANADA, 
 
Plaintiff/Counterclaim 
Defendant Below, 
Appellee/Cross-Appellant. 
 
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No.  126, 2022 
 
 
Court Below:  Superior Court 
of the State of Delaware 
 
C.A. Nos:  N18C-07-289 
                  N17C-08-331 
Submitted: January 11, 2023 
Decided: 
March 20, 2023 
 
Before SEITZ, Chief Justice; VALIHURA and TRAYNOR, Justices. 
 
Upon appeal from the Court of Chancery.  AFFIRMED IN PART, REVERSED 
IN PART, AND REMANDED. 
 
Kevin G. Abrams, Esquire, John M. Seaman, Esquire, and Samuel D. Cordle, 
Esquire ABRAMS & BAYLISS LLP, Wilmington, Delaware; Harry S. Davis, 
Esquire (argued), and Robert E. Griffin, Esquire, SCHULTE ROTH & ZABEL 
LLP, New York, New York, for Appellant Wilmington Trust, National Association. 
 
Gregory F. Fischer, Esquire, COZEN O’CONNOR, Wilmington, Delaware; Joseph 
M. Kelleher, Esquire, (argued) and Brian D. Burack, Esquire, COZEN 
O’CONNOR, Philadelphia, Pennsylvania, for Appellee Sun Life Assurance 
Company of Canada. 
2 
TRAYNOR, Justice: 
 
In 2011, in an opinion now known simply as “Price Dawe,”1 this Court 
described the historical background against which a type of life insurance policy 
known as “stranger originated life insurance”—or “STOLI” for short—was 
developed.  We need not rehearse that history here.  It is enough to recall Price 
Dawe’s core holding:  because STOLI policies are created by third parties “for the 
benefit of those who have no relationship to the [person whose life is] insured”2 they 
lack an insurable interest and are considered illegal wagers on human life.  As such, 
STOLI policies are, according to Price Dawe and the majority of courts that have 
considered the question, void ab initio as against public policy. 
 
This conclusion and, more generally, the phenomenon of void ab initio 
contracts have spawned a host of thorny questions regarding the appropriate 
remedial response to the identification of a policy as STOLI.  These questions are 
particularly difficult when the policy has been in force for several years during which 
the owners of the policy have paid sizable premiums and beneficial ownership of the 
policy has changed hands, in some cases several times.  Indeed, over the past two 
years, this Court has confronted such questions on three occasions. 
 
1 PHL Variable Insurance Co. v. Price Dawe 2006 Insurance Trust, ex tel. Christiana Bank & 
Trust Co., 28 A.3d 1059 (Del. 2011) (“Price Dawe”). 
2 Id. at 1070. 
3 
 
In Lavastone Capital LLC v. Estate of Berland,3 we answered three questions 
certified to us by the United States District Court for the District of Delaware, all of 
which concerned the extent to which and under what circumstances an estate may 
recover a STOLI policy’s death benefit.  Six months later, in Wells Fargo Bank, N.A. 
v. Estate of Malkin,4 we once again answered certified questions, this time from the 
United States Court of Appeals for the Eleventh Circuit.  The questions from the 
Eleventh Circuit focused on the rights of a third-party purchaser of a STOLI policy 
who was being sued under 18 Del. C. §2704(b) to raise certain defenses in an effort 
to retain a previously paid death benefit or, alternatively, to seek recovery of 
premiums it paid on the void policy.  Our answers clarified, among other things, that 
STOLI policies are void ab initio and can never be enforced.   
 
Three months after Estate of Malkin, we decided Geronta Funding v. 
Brighthouse Life Ins. Co.5 (referred to by the parties in this case as “Seck,” which 
was the insured’s surname), which was not a STOLI case but instead involved a life 
insurance policy that was declared void ab initio because its purported insured was 
a fictitious individual.  We were asked to determine whether premiums paid on 
insurance policies declared void ab initio for lack of an insurable interest should be 
returned to the payor of the premiums.  We ultimately determined that the question 
 
3 266 A.3d 964 (Del. 2021). 
4 278 A.3d 53 (Del. 2022). 
5 284 A.3d 47 (Del. 2022) (“Seck”). 
4 
whether premiums should be returned to a premium payor who presents a viable 
legal theory, such as unjust enrichment, calls for “a fault-based analysis as framed 
by [Section 198 of] the Restatement [(Second) of Contracts].”6 
In this case, Wilmington Trust National Association, acting as securities 
intermediary for Viva Capital Trust, was the downstream purchaser of two high-
value life insurance policies issued by Sun Life Assurance Company of Canada.  
After the insureds died, Sun Life, believing that the policies were STOLI policies 
that lacked an insurable interest, filed suit in the Superior Court, seeking declaratory 
judgments that the policies were void ab initio.  Sun Life sought to avoid paying the 
death benefits and to retain the premiums that had been paid on the policies.   
Wilmington Trust asserted affirmative defenses and counterclaims, alleging 
that Sun Life had flagged the policies as potential STOLI years before Wilmington 
Trust acquired them.  Wilmington Trust sought to obtain the death benefits or, in the 
alternative, a refund of all the premiums that it and former owners of the policies 
had paid on the policies.  Sun Life countered that allowing Wilmington Trust to 
recover the death benefits would constitute enforcing an illegal STOLI policy and 
that Wilmington Trust could not recover the premiums because, among other 
 
6 Id. at 50. 
5 
arguments, Wilmington Trust knew that it was buying and paying premiums on 
illegal STOLI policies. 
In an order entered before this Court decided Estate of Malkin and Seck, the 
Superior Court ruled that the policies were void ab initio and resolved the parties’ 
competing claims relating to the policies’ death benefits and the premiums paid over 
the life of the policies.7  In short, the court denied Wilmington Trust’s bid to secure 
the death benefits, but ordered Sun Life to reimburse, without prejudgment interest, 
all premiums “to the party that paid them.”8 
The court’s disallowance of Wilmington Trust’s death-benefit claim, 
accomplished in part by an earlier dismissal of Wilmington Trust’s promissory-
estoppel counterclaim and the striking of certain of its equitable defenses, is 
consistent with this Court’s STOLI precedents.  But its application of an “automatic 
premium return” rule—that is, ordering all premiums to be returned without 
conducting the fault-based analysis we adopted in Seck—is not.  Nor is the Superior 
Court’s denial of prejudgment interest.  Therefore, we affirm in part, reverse in part, 
and remand to the Superior Court for reconsideration of its ruling on Wilmington 
Trust’s premium-return claim, including its claim for prejudgment interest.   
 
7 Sun Life Assurance Co. of Canada v. Wilmington Trust, Nat’l Ass’n, 2022 WL 179008 (Del. 
Super. Ct. Jan. 12, 2022). 
8 Id. at *14. 
6 
I 
A 
 
In April 2005, Sun Life—a self-described “leading member[] of the life 
insurance industry”—distributed a memorandum to “All Agents,” expressing 
concerns about the increased volume of STOLI in the life insurance market.  
Describing STOLI, “investor owned,” and “lending of life” sales as “detrimental to 
our policyholders and procedures, as well as Sun Life Financial and the entire life 
insurance industry,”9 Sun Life informed its agents that “Sun Life will not participate 
in these types of transactions.”10 
 
In early 2006, concerned about “the potential exposure Sun Life may have to 
Life Settlement and Investor or Stranger Owned Life Insurance Sales[,]” Sun Life 
initiated an analysis of its policies designed to identify Sun Life policies that “exhibit 
one or more ‘red flag’ characteristics matching known attributes or warning signs of 
potential IOLI11 or S[T]OLI business.”12 
 
In September 2006, amid this fraught atmosphere, Sun Life issued a $10 
million policy insuring the life of Bernard De Bourbon, who was then 78 years old.  
In December 2006, Sun Life issued a $9 million policy insuring the life of Samuel 
 
9 App. to Opening Br. at A893–94. 
10 Id. at A894. 
11 “IOLI” in this context stands for “investor owned life insurance.” 
12 App. to Opening Br. at A909. 
7 
H. Frankel, then 73 years old.  As discussed further below, Sun Life later asserted—
and the Superior Court found13—that the De Bourbon and Frankel policies were 
investor-originated STOLI policies that lacked an insurable interest.  It is 
undisputed, however, that Sun Life did not know when it issued the policies that they 
were STOLI.   
 
Although neither De Bourbon nor Frankel wanted or needed life insurance, 
they applied for the policies upon the urging of intermediaries affiliated with a 
constellation of entities known generally as Life Product Clearing Program or 
“LPC.”  LPC, created in 2005 by Steven Lockwood and Martin Fleisher, originated 
and acquired high-face-value STOLI policies, underwritten by certain desirable 
insurers, including Sun Life, on the lives of handpicked seniors.  Purchasing the 
STOLI policies as investments, LPC’s goal was either to collect the death benefit or 
sell the policies on the secondary market for a profit.  LPC employed schemes to 
feign compliance with insurable-interest laws and slip STOLI applications past 
insurers, including by having the policy issued to a trust and making it appear as 
though the insured paid the initial premium. 
 
The De Bourbon and Frankel policies followed this pattern.  The policies were 
issued to the Bernard De Bourbon Life Insurance Trust and Samuel Frankel Trust, 
 
13 Wilmington Trust did not appeal the Superior Court’s determination that the policies were 
STOLI.   
8 
respectively.  And notably, neither De Bourbon nor Frankel paid the initial 
premium.14  Although Frankel fronted the initial premium in reliance on LPC’s 
promise to reimburse him and pay 3% of the face value, De Bourbon lacked the 
funds to pay for his policy, and therefore his initial premium was fronted by an 
attorney with whom he had no preexisting relationship.   
 
Shortly after the policies became effective, both were sold to LPC through 
sales of the trusts’ beneficial interests.  At least three different LPC-affiliated 
entities—LPC Holdings I LP, Villa Capital, and ESF QIF Trust—held the policies 
between 2006 and 2014.  In August 2014, Wilmington Trust, as securities 
intermediary for Viva Capital Trust (“Viva”), acquired the De Bourbon and Frankel 
policies from ESF QIF Trust as part of a portfolio of 158 life insurance policies.  Sun 
Life asserts that Viva was in the business of buying portfolios of STOLI policies at 
a discount and bought the De Bourbon and Frankel policies with “eyes wide open” 
to their insurable-interest problems.15  Sun Life collected approximately $6.9 million 
in premiums on the policies from their inception;16 of that amount, Wilmington Trust 
paid approximately $2.3 million in premiums on Viva’s behalf after acquiring the 
policies in 2014. 
 
 
14 Id. at *10; App. to Answering Br. at B1618, B1621. 
15 Answering Br. at 15–21. 
16 Opening Br. at 19. See Answering Br. at 46 n.22. 
9 
B 
De Bourbon died in 2017, and Frankel died in 2018.  At the time of the 
insureds’ deaths, Wilmington Trust, as securities intermediary for Viva, owned the 
policies.  After receiving notice of De Bourbon’s and Frankel’s deaths, Sun Life 
filed complaints in the Superior Court seeking declaratory judgments that the 
policies were illegal STOLI policies and therefore void ab initio.  Sun Life sought 
to avoid paying the death benefits and to retain the premiums that had been paid on 
the policies.   
Wilmington Trust asserted four counterclaims:  breach of contract, breach of 
the implied covenant of good faith and fair dealing, unfair or deceptive trade 
practices under Massachusetts law, and promissory estoppel.  Wilmington Trust 
sought, among other relief, damages for breach of contract or promissory estoppel 
equal to the policies’ death benefits or, in the alternative, a return of all premiums 
ever paid to Sun Life on the policies; and prejudgment and postjudgment interest.  
Wilmington Trust also asserted various affirmative defenses, including laches, 
waiver and estoppel, and unclean hands.   
In support of its claims that it was entitled to recover the death benefits, 
Wilmington Trust alleged that in 2008, or perhaps earlier, Sun Life flagged the De 
Bourbon and Frankel policies as potential STOLI policies because of their 
association with LPC.  Wilmington Trust asserted that, by December 2009 at the 
10 
latest, Sun Life had no intention of paying the death benefits on the policies.  Indeed 
earlier in 2009, Wilmington Trust points out, Sun Life filed litigation challenging 
the validity of other policies linked to LPC.  But instead of challenging the De 
Bourbon and Frankel policies at that time or otherwise speaking up about its 
suspicions, Sun Life approved three separate ownership/beneficiary changes, 
repeatedly represented that the policies were “in force” and “active” and continued 
collecting millions of dollars in premiums on the policies.17 
C 
Sun Life moved to dismiss Wilmington Trust’s counterclaims and to strike its 
affirmative defenses.  The Superior Court dismissed the promissory-estoppel claim 
and denied the motion to dismiss with respect to the other counterclaims.18  It 
observed that Price Dawe “stands for the general principle that there can be no 
contractual prohibition contesting enforceability when the agreement is void ab 
initio” but “does not, however, require dismissal of all counterclaims based on the 
contract.”19  The court determined that Wilmington Trust had sufficiently pleaded 
 
17 See App. to Opening Br. at A1465.5–A1465.22, A1465.23–A1465.50, A2270–72. 
18 Sun Life Assurance Co. of Canada v. Wilmington Trust, Nat’l Ass’n, 2018 WL 3805740 (Del. 
Super. Ct. Aug. 9, 2018) [hereinafter, Motion to Dismiss Decision].  The Superior Court rendered 
this decision in the case concerning the De Bourbon policy.  It later adopted the same rulings in 
the Frankel litigation. Order Granting in Part and Denying in Part Pl.’s Mot. to Dismiss and 
Granting Pl.’s Mot. to Strike Affirmative Defenses, Sun Life Assurance Co. of Canada v. 
Wilmington Trust Nat’l Ass’n, N18C-07-289 CCLD, 2019 WL 12013248 (Del. Super. Ct. Apr. 3, 
2019), Dkt. 51.  After the motion to dismiss ruling in the Frankel case, the cases were consolidated 
for case-management purposes. 
19 Motion to Dismiss Decision, supra note 18, at *3. 
11 
its breach of contract and good-faith-and-fair-dealing counterclaims and that there 
were too many issues of fact relating to the unfair and deceptive trade practices claim 
to dismiss that claim at the pleading stage.  As for the promissory-estoppel claim, 
the court held that if the contract were found to be valid, estoppel would not be a 
valid counterclaim, because “‘[p]romissory estoppel does not apply . . . where a fully 
integrated, enforceable contract governs the promise at issue.’”20  And if the contract 
were found to be void ab initio, the court reasoned, Price Dawe would prohibit the 
court from enforcing the contract through the promissory-estoppel counterclaim.21   
The Superior Court granted the motion to strike the affirmative defense of 
waiver and estoppel for the same reason that it dismissed the promissory-estoppel 
counterclaim.22  It also dismissed the affirmative defenses of laches and unclean 
hands, holding that it lacked jurisdiction to consider those defenses because they 
were “equitable claims [that] are reserved for the Court of Chancery.”23 
D 
Following discovery, the parties filed cross-motions for summary judgment.  
Sun Life asserted that the policies were investor-originated STOLI policies that 
lacked an insurable interest because they were procured by LPC.  It therefore argued 
 
20 Id. at *3 & n.19 (quoting SIGA Techs., Inc. v. PharmAthene, Inc., 67 A.3d 330, 348 (Del. 2013)). 
21 Id. at *3. 
22 Id. 
23 Id. 
12 
that Wilmington Trust was not entitled to receive the death benefits under any 
theory.  Sun Life also argued that Wilmington Trust was not entitled, as a matter of 
Delaware’s unjust-enrichment law, to a “return” of premiums that it did not itself 
pay.  Wilmington Trust argued that the policies were valid, non-STOLI policies, and 
Sun Life was thus obligated to pay the death benefit.  It argued in the alternative, 
that, if the policies were not valid, it was entitled to a refund of all premiums that 
had been paid over the life of the policies (including by prior owners of the policies), 
based either on an automatic-refund rule or as restitution in accordance with Section 
198 of the Restatement (Second) of Contracts. 
The Superior Court found that both policies were procured by LPC and were 
therefore STOLI policies that lacked an insurable interest.24  Consequently, the court 
held that the policies were void ab initio.25  Wilmington Trust has not appealed that 
aspect of the Superior Court’s ruling.26  The combined effect of the court’s 
determination that the policies were void ab initio and the court’s earlier rejection of 
Wilmington Trust’s promissory-estoppel counterclaim and its equitable defenses 
 
24 Sun Life Assurance Co. of Canada v. Wilmington Trust, Nat’l Ass’n, 2022 WL 179008, at *11 
(Del. Super. Ct. Jan. 12, 2022). 
25 Id. 
26 The Superior Court also rejected Wilmington Trust’s counterclaims alleging that Sun Life had 
engaged in unfair and deceptive trade practices under Massachusetts law and that Sun Life 
breached the implied covenant of good faith and fair dealing.  Id. at *11–12.  Wilmington Trust 
has not appealed those rulings either. 
13 
was to deny Wilmington Trust’s attempt to recover the death benefits under the 
policies. 
Addressing Wilmington Trust’s claim that it was entitled to recover the 
premiums paid on the policies, the Superior Court wrote:   
As a matter of public policy, it would not be fair for Sun Life to 
retain all premiums, while never having to pay death benefits as agreed 
in exchange for premiums.  It also appears unfair for investors to be 
reimbursed for premiums if they knew that they were inducing STOLI 
policies. 
. . . . 
The Court finds that Sun Life cannot be absolved from any 
obligation to pay death benefits and yet retain premiums.  Thus, Sun 
Life must disgorge premiums.  The question remains:  to whom should 
the premiums be given? 
The Court finds that Wilmington Trust’s predecessors knew that 
they were inducing insureds to procure STOLI policies through 
substantial inducements.  Wilmington Trust’s predecessor used 
intermediaries to consummate pre-negotiated agreements and 
arrangements. 
There is an absence of statutory, regulatory, or legal authority 
directly applicable to these facts.  The Court holds that premiums must 
be reimbursed to the party that paid them.  The Court finds no reason 
for that reimbursement to include pre-judgement [sic] interest.27 
The court later entered a final order and judgment that required Sun Life to 
pay specified amounts to the respective entities that had paid premiums in those 
amounts during the times that they owned the policies.  Specifically, the Superior 
Court ordered Sun Life to pay (i) $1,171,400 and $693,979 to LPC Holdings I LP 
 
27 Id. at *13–14. 
14 
for premiums that LPC Holdings paid on the De Bourbon and Frankel policies, 
respectively; (ii) $317,340 and $118,672 to Villa Capital, LLC for premiums that 
Villa Capital paid on the De Bourbon and Frankel policies, respectively; (iii) 
$1,737,818.37 and $510,903 to ESF QIF Trust for premiums that ESF QIF Trust 
paid on the De Bourbon and Frankel policies, respectively; and (iv) $1,518,922.11 
and $806,433.96 to Wilmington Trust for premiums that Wilmington Trust paid on 
the De Bourbon and Frankel policies, respectively. 
E 
On appeal, Wilmington Trust challenges the Superior Court’s dismissal of its 
promissory-estoppel claims and equitable defenses and the consequent denial of 
Wilmington Trust’s death-benefit claim.  As it did below, Wilmington Trust also 
argues that, if it is not to receive the death benefits under the policies, then it should 
recover all premiums paid over the life of the policies, including the premiums paid 
by prior owners of the policies, with prejudgment interest. 
Sun Life responds that the Superior Court was correct in rejecting Wilmington 
Trust’s claims to the death benefits under the policies, be they fashioned as claims 
or defenses.  And as for the disposition of premiums paid over the life of the policies, 
Sun Life cross-appeals, contending that the Superior Court applied the wrong 
standard to the question of premium return.  Because Wilmington Trust’s purchase 
15 
of the policies was, according to Sun Life, “a knowing STOLI investment,”28 
awarding restitution of the premiums to Wilmington Trust would frustrate 
Delaware’s public policy against human-life wagering.  Sun Life thus claims that it 
is entitled to retain the premiums.   
II 
This Court reviews questions of law de novo.  The Court reviews a trial court’s 
decision to grant a motion to dismiss under Superior Court Rule 12(b)(6) de novo.29  
Where, as here, a trial court’s decision to strike an affirmative defense decides a 
question of law, this Court also applies a de novo standard of review.30 
This Court reviews “a trial court decision on cross-motions for summary 
judgment de novo ‘both as to the facts and the law to determine whether or not the 
undisputed material facts entitle [either] movant to judgment as a matter of law.’”31  
“If material issues of fact exist or if a court determines that it does not have sufficient 
facts to enable it to apply the law to the facts before it, then summary judgment is 
inappropriate.”32  “In evaluating the record on a motion for summary judgment, a 
 
28 Answering Br. at 8. 
29 Valley Joist BD Holdings, LLC v. EBSCO Indus., Inc., 269 A.3d 984, 988 (Del. 2021). 
30 See Gen. Motors Corp. v. Wolhar, 686 A.2d 170, 172 (Del. 1996) (stating that Superior Court’s 
decision to strike an affirmative defense decided a question of law and that “[t]herefore, the 
applicable standard of review is de novo or plenary”). 
31 Reserves Mgmt. Corp. v. R.T. Properties, LLC, 80 A.3d 952, 955 (Del. 2013) (quoting Arnold 
v. Soc’y for Sav. Bancorp, Inc., 678 A.2d 533, 535 (Del. 1996)) (alteration in original) (citation 
omitted). 
32 Motorola, Inc. v. Amkor Tech., Inc., 849 A.2d 931, 935 (Del. 2004). 
16 
trial judge is not permitted to weigh the evidence or resolve conflicts presented by 
the pretrial discovery.”33  “The trier of fact may weigh the evidence and resolve 
disputes only after hearing all the evidence, including live witness testimony.”34 
III 
A 
Wilmington Trust asserts that, even if a policy is void ab initio, a policy owner 
can assert promissory estoppel or equitable defenses as grounds to recover the death 
benefit.  Thus, it argues that the Superior Court erred by dismissing its promissory-
estoppel counterclaim and by striking its equitable defenses of laches, waiver and 
estoppel, and unclean hands.   Accordingly, Wilmington Trust asks us to reverse this 
dismissal and remand the matter to the Superior Court so that it can decide whether 
Sun Life must pay $19 million in death benefits based on Wilmington Trust’s 
promissory-estoppel counterclaim or its equitable defenses.  Sun Life contends that 
none of Wilmington Trust’s counterclaims or defenses entitles it to receive the 
policies’ death benefits. 
Wilmington Trust’s claim that it is entitled to recover the death benefits turns 
on its claim that, several years after Sun Life issued the policies, Sun Life began to 
suspect that the policies might be STOLI because of their association with LPC but 
 
33 Telxon Corp. v. Meyerson, 802 A.2d 257, 262 (Del. 2002). 
34 Id. 
17 
did not seek to invalidate the policies until the insureds died.  Wilmington Trust 
complains that, instead of informing Wilmington Trust and the policies’ prior 
owners about its suspicions, Sun Life approved three separate ownership/beneficiary 
changes, repeatedly represented that the policies were “in force” and “active,” and 
continued collecting millions of dollars in premiums on the policies.  It argues that 
this Court should endorse the reasoning of courts in various jurisdictions, including 
the District of Delaware, to the effect that courts may afford relief to the more 
innocent party to a contract that is against public policy. 
We agree with the Superior Court’s conclusion that Wilmington Trust is not 
entitled to recover the death benefits on the policies, whether under its counterclaim 
for promissory estoppel or its affirmative defenses.  The Superior Court determined 
that the policies were investor-procured STOLI policies, and Wilmington Trust does 
not contest that ruling on appeal.   As we recently stated, “the insurance company is 
not obligated to pay the death benefit of a STOLI policy and may refuse to do so.”35  
And our recent decisions have been crystal clear that Delaware courts will never 
enforce such a policy.  Harkening back to Price Dawe, we emphasized in Estate of 
 
35 Estate of Malkin, 278 A.3d at 60.  Indeed, an order requiring an insurer to pay the death benefit 
to an investor-holder of a STOLI policy might well give rise to a claim by the insureds’ estate to 
recover the death benefit.  See 18 Del. C. § 2704(b) (“If the beneficiary, assignee or other payee 
under any contract made in violation of [the insurable interest requirement] receives from the 
insurer any benefits thereunder accruing upon the death . . . of the individual insured, the individual 
insured or his or her executor or administrator, as the case may be, may maintain an action to 
recover such benefits from the person so receiving them.”). 
18 
Malkin that “STOLI policies are void ab initio, never come into legal existence, are 
a ‘fraud on the court,’ and can never be enforced.”36  And shortly after that, we 
confirmed in Seck that the enforcement of an illegal contract is antithetical to the 
public policy of this State.37   In fact, “when an agreement is void ab initio as against 
public policy, the courts typically will not enforce a remedy to any extent against 
either party.”38   
But a court order requiring Sun Life to pay the policies’ death benefits to 
Wilmington Trust would, in effect, enforce the illegal STOLI policies in violation 
of Article II, Section 17 of the Delaware Constitution and the State’s strong public 
policy against human-life wagering.39  Such a remedy would fly in the face of our 
repeated avowals that enforcement of a STOLI policy is not an option.  Thus, the 
Superior Court did not err by dismissing Wilmington Trust’s promissory-estoppel 
counterclaim and striking its equitable defenses to the extent that they sought 
recovery of the policies’ death benefits.40   
 
36 Estate of Malkin, 278 A.3d at 56 (quoting Price Dawe, 28 A.3d. at 1069 n.25, 1073) (emphasis 
added). 
37 Seck, 284 A.3d at 61. 
38 Id. 
39 See Estate of Malkin, 278 A.3d at 65 (When an investor receives the proceeds of a STOLI policy, 
it “commit[s] . . . a violation of Article II, Section 17 of the Delaware Constitution and of the 
State’s public policy” against human-life wagering.). 
40 See Columbus Life Ins. Co. v. Wilmington Trust Co., 2021 WL 3886370, at *7 (D. Del. Aug. 31, 
2021) (“[U]nder the reasoning of Price Dawe, Wilmington Trust’s challenged affirmative 
defenses, which seek to enforce the Policy should it be deemed void ab initio, are impermissible 
as they seek relief that the Delaware Supreme Court says courts cannot give.”). 
19 
This conclusion is consistent with several federal court decisions applying 
Delaware law and holding that an investor may not assert equitable defenses or a 
promissory-estoppel counterclaim to recover the death benefit on a STOLI policy.41  
As the Delaware District Court has put it, if the promise that Wilmington Trust seeks 
to enforce is Sun Life’s “promise in the life insurance contract that it [would] pay a 
[$19] million death benefit upon [the insureds’] death, the Court cannot enforce that 
promise” because “a promise in a contract that is void ab initio ‘may never’ be 
enforced by the Court.”42  And if the promise that Wilmington Trust is seeking to 
enforce is a “subsequent ‘promise to comply with its promise to pay the . . . death 
benefit[s] when [the insureds] die[d]’ so long as [Wilmington Trust] continued 
making premium payments,” then that promise “would itself constitute an 
unenforceable, illegal wager on the life of [the insureds],” which the courts may 
never enforce.43 
 
41 See, e.g., id. (dismissing promissory-estoppel counterclaim and striking affirmative defenses); 
Wilmington Savs. Fund Soc’y, FSB v. PHL Variable Ins. Co., 2014 WL 1389974, at *12 (D. Del. 
Apr. 9, 2014) (A STOLI policy “may not be enforced equitably through estoppel[.]”); U.S. Bank 
Nat’l Ass’n v. Sun Life Assurance Co. of Canada, 2017 WL 347449, *2 (E.D.N.Y. Jan. 24, 2017) 
(dismissing affirmative defenses as a matter of law). 
42 Columbus Life Ins. Co. v. Wells Fargo Bank, 2021 WL 106919, at *9 (D. Del. Jan. 12, 2021) 
(“Snyder”) (R. & R.) (quoting Price Dawe, 28 A.3d at 1067). 
43 Id. 
20 
Wilmington Trust urges this Court to instead adopt the reasoning applied in 
two District of Delaware decisions, one known as Griggs44 and the other as Sol II.45  
Neither of those decisions persuades us to allow Wilmington Trust to recover the 
policies’ death benefits under its promissory-estoppel and equitable theories. 
In Griggs, an insurer filed a declaratory judgment action seeking to declare a 
$10 million life insurance policy void ab initio as STOLI.46  The policy owner 
asserted various counterclaims, including promissory estoppel and a claim for a 
declaratory judgment that the insurer was estopped from challenging the policy or 
had waived its right to challenge the policy.  The court denied the insurer’s motion 
to dismiss the counterclaims.  It held that the policy owner had adequately alleged 
that the insurer had acted in bad faith, “including by collecting hefty premiums while 
harboring an undisclosed plan to challenge the policies and never pay claims on 
them[.]”47  The court similarly held that the policy owner had adequately pleaded a 
counterclaim for promissory estoppel.48  The Griggs court was careful, however, to 
qualify these holdings; it explicitly noted that it was not determining whether the 
policies were illegal and whether enforcement of them would be against public 
 
44 PHL Variable Ins. Co. v. ESF QIF Trust ex rel Deutsche Bank Trust Co., 2013 WL 6869803 
(D. Del. Dec. 30, 2013) (“Griggs”). 
45 Sun Life Assurance Co. of Canada v. U.S. Bank Nat’l Ass’n, 2019 WL 2151695 (D. Del. May 
17, 2019) (“Sol II”). 
46 Id. at *1. 
47 Id. at *6. 
48 Id. at *8. 
21 
policy.  Seen in this light, the court’s refusal to dismiss the policy owner’s bad-faith 
and promissory-estoppel claims is drained of its relevance here. 
By contrast, in Sol II, the court had previously declared that a life insurance 
policy was STOLI and void ab initio.49  The insurer, Sun Life, then moved for 
summary judgment on the counterclaims brought by the downstream policy owner, 
U.S. Bank, including a promissory-estoppel claim.  The court denied the motion, 
reasoning that it was “not enforcing a void [p]olicy, but [was], instead, estopping an 
allegedly bad faith actor who made promises in connection with the [p]olicy from 
escaping the just consequences of such promises.”50  But although the Sol court 
allowed the promissory-estoppel claim to proceed to trial,  it ultimately rejected U.S. 
Bank’s claim for expectation damages in the amount of the death benefit.51  In a 
post-trial decision following “a six-day jury trial that resulted in a verdict in favor of 
U.S. Bank . . . on its promissory estoppel counterclaim,” the court held that U.S. 
Bank would be awarded restitution damages equal to the total amount of premiums 
 
49 See Sol II, 2019 WL 2151695, at *2 n.2 (noting that the court held in an earlier summary 
judgment opinion that the policy “was void ab initio as an illegal wagering contract”) (citing Sun 
Life Assurance Co. Canada v. U.S. Bank Nat’l Ass’n, 369 F. Supp 3d 601, 617 (D. Del. 2019)). 
50 Sol II, 2019 WL 2151695, at *8 n.8. 
51 The court reasoned that Delaware courts award expectation damages in the promissory-estoppel 
context only in exceptional circumstances, noting that the “more routine role of promissory 
estoppel [is] to assure that those who are reasonably induced to take injurious action in reliance 
upon non-contractual promises receive[] recompense for that harm.” Sun Life Assurance Co. of 
Canada v. U.S. Bank Nat’l Ass’n, 2019 WL 8353393, at *1, 3 (D. Del. Dec. 30, 2019) (quoting 
Ramone v. Lang, 2006 WL 905347, at *14–15 (Del. Ch. Apr. 3, 2006)). 
22 
paid to Sun Life on the policy at issue.52  After determining that “both sides are to 
blame for the situation in which they find themselves” and that U.S. Bank had not 
shown bad faith by Sun Life or other “unusual circumstances,” the court limited U.S. 
Bank’s damages to restitution of premiums.53 
Thus, in neither of the cases from the District of Delaware upon which 
Wilmington Trust principally relies did the court permit the owner to recover a 
STOLI policy’s death benefit.  And we are not inclined to do so here.  As previously 
noted, to award the death benefit to Wilmington Trust would be to, in effect, enforce 
the STOLI policies, causing the illegal human-life wagers to pay off.  The Superior 
Court correctly averted that result by dismissing Wilmington Trust’s promissory-
estoppel counterclaim and striking its equitable affirmative defenses, the ultimate 
objective of which was the recovery of the death benefits under the policies.  In light 
of this holding, we turn next to Wilmington Trust’s claim that Sun Life should be 
ordered to repay all premiums paid under the policy, including those paid by its 
predecessors in interest, to Wilmington Trust. 
IV 
We noted earlier that in Seck, decided several months after the Superior Court 
decided this case, we held that a trial court should be guided by the Restatement’s 
 
52 Id. 
53 Id. at *3–4.  The court also awarded prejudgment interest. 
23 
fault-based analysis when determining whether, and to what extent, premiums 
should be returned when an insurance policy is found to be void ab initio.  In this 
case, without the benefit of that opinion, the Superior Court applied an automatic 
premium-return rule, which we rejected in Seck, and ordered Sun Life to return 
premiums to each entity that paid them.  Because of the conflict between the Superior 
Court’s analysis and our decision in Seck, we reverse the court’s judgment that Sun 
Life must reimburse all premiums “to the party that paid them.”54  But this, of course, 
does not mean that Sun Life is automatically entitled to retain the premiums.  The 
question remains:  To what extent, if any, is Wilmington Trust entitled to the return 
of premiums it and others before it paid?  To that question we now turn. 
A 
In the initial round of briefing, Wilmington Trust argued that an insurer must 
automatically disgorge all premiums that it received on a policy since inception if 
the policy is declared void, but that the Superior Court erred by ordering Sun Life to 
return the premiums to the owners that paid them, rather than requiring that Sun Life 
return all the premiums to Wilmington Trust.  In its supplemental briefing following 
this Court’s decision in Seck, Wilmington Trust submits that the Court should 
remand to the Superior Court to apply the “fact-intensive,” “comparative fault-based 
analysis” adopted by Seck.  Wilmington Trust argues that Sun Life should not be 
 
54 2022 WL 179008, at *14. 
24 
permitted to retain any of the premiums paid on the De Bourbon and Frankel policies 
because Sun Life suspected that the policies were STOLI five years before 
Wilmington Trust acquired the policies (and had inquiry notice of the nature of the 
policies ten years before Wilmington Trust acquired the policies).  But instead of 
attempting to rescind the policies, Wilmington Trust argues, Sun Life continued to 
collect premiums; represented that the policies were “active,” “in force,” and “in 
good standing;” and approved three ownership/beneficiary changes, including the 
one corresponding to Wilmington Trust’s acquisition of the policies. 
Sun Life acknowledges that “[t]his Court’s decision in [Seck] governs the 
premium refund question here” but argues that Wilmington Trust’s attempt to obtain 
a premium refund should end here because Wilmington Trust did “not plead unjust 
enrichment nor did its promissory estoppel claim seek a premium refund.”55  We 
disagree; Wilmington Trust should be permitted to pursue restitution of the 
premiums on remand.   
As an initial matter, Wilmington Trust’s answers and counterclaims made 
clear that it was seeking, as an alternative to the death benefits, return of all 
premiums paid to Sun Life over the life of the policies.  It also made clear, with 
detailed supporting factual allegations, its position that Sun Life should not be 
permitted to keep the premiums because it formed an intent to challenge the policies 
 
55 Sun Life Opening Suppl. Br. at 1–2. 
25 
as STOLI but engaged in conduct designed to induce the policy holders to continue 
paying millions of dollars in premiums.  Moreover, Wilmington Trust argued in its 
summary-judgment briefing that it was entitled to a restitutionary return of 
premiums under the Restatement because Sun Life was more in the wrong than 
Wilmington Trust/Viva.56   
Because the parties actually litigated the restitution issue, and because this 
Court clarified the applicable test for a restitutionary return of premiums after the 
Superior Court had issued its decision in this matter, Wilmington Trust should be 
permitted to proceed with its claim for recovery of the premiums. 
B 
As mentioned above, in Seck we held that claims such as Wilmington Trust’s 
premium-return claim should be subjected to a fault-based analysis as framed under 
the Restatement (Second) of Contracts.  Writing for the Court, Justice Montgomery-
Reeves explained how the analysis should proceed: 
[W]hen analyzing a viable legal theory that seeks as a remedy 
the return of premiums paid on insurance policies declared void ab 
initio for lack of an insurable interest, Delaware courts shall analyze the 
exceptions outlined in Section 197, 198, and 199 of the Restatement 
and determine whether any of those exceptions permit the return of the 
premiums.  A court would need to determine whether: (1) there would 
be a disproportionate forfeiture if the premiums are not returned; (2) the 
claimant is excusably ignorant; (3) the parties are not equally at fault; 
(4) the party seeking restitution did not engage in serious misconduct 
and withdrew before the invalid nature of the policy becomes effective; 
 
56 E.g., A525–26, A604–07, A650–60. 
26 
or (5) the party seeking restitution did not engage in serious 
misconduct, and restitution would put an end to the situation that is 
contrary to the public interest. 
A court analyzing the exceptions outlined in Section 198 should 
consider the following questions:  whether the party knew the policy 
was void at purchase or later learned the policy was void; whether the 
party had knowledge of facts tending to suggest that the policy is void; 
whether the party procured the illegal policy; whether the party failed 
to notice red flags; and whether the investor’s expertise in the industry 
should have caused him to know or suspect that there was a substantial 
risk that the policy it purchased was void. 
Thus, the fault of the parties and public policy considerations will 
determine which party is entitled to the premiums paid on an insurance 
policy that is void ab initio for lack of an insurable interest.57 
The inquiries mandated by this analysis are manifestly fact-intensive.  But  
because the Superior Court applied an automatic-refund rule, it did not make any 
factual findings—or, more precisely in light of the summary-judgment posture, it 
did not evaluate whether there were any disputed issues of material fact—regarding 
whether and when the parties had actual knowledge or inquiry notice of the policies’ 
illegality, whether the parties were equally at fault, or any of the other considerations 
that this Court identified in Seck as relevant to the fault-based analysis.  
Determining whether Sun Life should retain the premiums or Wilmington 
Trust should recover some or all of them under Seck will require a fact-intensive 
analysis and require the weighing of evidence.  The Superior Court should conduct 
 
57 Id. at 72–73. 
27 
that analysis in the first instance.58  Indeed, in Seck, the Court remanded for the 
Superior Court to “review its [post-trial] factual findings through the lens of our 
newly articulated fault-based test.”59  Here, the Superior Court made no factual 
findings relating to the fault-based test.  
C 
That leaves the question whether Wilmington Trust can recover premiums 
paid by the former owners of the policies between 2006 and 2014 (or, put conversely, 
whether Sun Life can retain premiums paid by the entities that held the policies 
before Wilmington Trust acquired them on Viva’s behalf in 2014).  Wilmington 
Trust does not dispute that at least two of the three former owners of the policies—
LPC Holdings I LP and Villa Capital—were affiliated with LPC.60  We note that the 
Superior Court concluded that LPC procured the policies under a STOLI scheme 
that it created.  Whether Wilmington Trust can prove that all or some of the former 
owners were less at fault than Sun Life is for the Superior Court to determine. 
 
58 See Telxon Corp. v. Meyerson, 802 A.2d 257, 262 (Del. 2002) (“In evaluating the record on a 
motion for summary judgment, a trial judge is not permitted to weigh the evidence or resolve 
conflicts presented by the pretrial discovery.”); see also id. (“The trier of fact may weigh the 
evidence and resolve disputes only after hearing all the evidence, including live witness 
testimony.”). 
59 Seck, 284 A.3d at 74–75. 
60 See Opening Br. at 8 (stating that LPC acquired the policies shortly after their inception); id. at 
17 (describing Villa Capital as an “LPC-affiliate”).  Sun Life asserts that ESF QIF Trust was also 
an LPC-affiliated entity, e.g., Sun Life Answering Br. at 3, and Wilmington Trust does not appear 
to dispute that fact.  Indeed, Wilmington Trust points to Sun Life’s knowledge of ESF QIF Trust’s 
association with the individuals who carried out the LPC STOLI scheme in support of its assertions 
of Sun Life’s fault.  E.g., Wilmington Trust Opening Br. at 21. 
28 
Finally, Wilmington Trust suggests in its supplemental briefing that Sun Life 
is arguing, based on Sun Life Assurance Company of Canada v. Wells Fargo Bank, 
N.A. (“Corwell”),61 that Wilmington Trust does not have standing to litigate a return 
of premiums paid on behalf of its principal, Viva.  In Corwell, which was decided 
under Illinois law, the Seventh Circuit Court of Appeals expressed doubt about 
whether the securities intermediary could claim a refund on behalf of the principal.62  
But we do not read that to be Sun Life’s argument.  Rather, Sun Life points to 
Corwell in support of its arguments that (1) Wilmington Trust cannot recover 
premiums paid by former owners of the policies, especially where those former 
owners were the STOLI perpetrators, and (2) Wilmington Trust cannot recover 
premiums because Viva was a highly sophisticated buyer that was fully aware of all 
the material facts and the significant insurable-interest risk in the policies that it 
purchased but took a calculated risk to try to profit from the policies by buying them 
at a discount and trying to cash in at the insureds’ death.63    In any event, we are not 
inclined to address Corwell’s significance, if any, in this appeal.  Corwell, like Seck, 
was decided after the Superior Court decided this case.  Whether Corwell and its 
 
61 44 F.4th 1024 (7th Cir. 2022). 
62 See id. at 1040 (“First, Wells Fargo has not offered evidence or argument to establish its right 
to collect this refund if it were otherwise appropriate.  Vida itself is not a party to this case and has 
not asserted a right to such a refund.”). 
63 Id. 
29 
reasoning present persuasive reasons for denying Wilmington Trust premium-return 
claim is for the Superior Court to decide in the first instance on remand.   
D 
Wilmington Trust also contends that the Superior Court erred by denying 
Wilmington Trust an award of prejudgment interest.  It argues that Sun Life should 
be required to pay prejudgment interest from the date of each premium payment.  
Sun Life argues, as an initial matter, that no prejudgment interest is due because the 
Superior Court erred by ordering it to refund the premiums.  But it also contends 
that, even if this Court affirms the Superior Court’s decision regarding premiums, it 
should also affirm the court’s decision not to award prejudgment interest.  According 
to Sun Life, prejudgment interest does not begin to accrue until a payment is “due”—
in the case of a refund, when the claimant makes a demand for the refund—and no 
refund was due here until, at the earliest, the Superior Court determined that the 
policies were void ab initio. 
In Seck, we recognized the role prejudgment interest plays in incentivizing the 
parties to potentially illegal agreements to behave in good faith.64  Moreover, “[i]n 
 
64 See Seck, 284 A.3d at 72 (“A fault-based analysis also incentivizes insurers to speak up when 
the circumstances suggest that a policy is void for lack of an insurable interest because they will 
not be able to retain premiums if they stay silent after being put on inquiry notice, and they might 
also be responsible for interest payments.  In other words, our test incentivizes each player along 
the chain of these insurance policies to behave in good faith.”).  Of course, the prospect of 
prejudgment interest can also affect the policy holders’ calculations.  See Sun Life Answering 
Suppl. Br. at 18 (discussing “a pair of STOLI cases pending in the District of Delaware, [in which] 
Viva has conceded that the at-issues policies are STOLI and—instead of seeking the $10 million 
30 
Delaware, prejudgment interest is awarded as a matter of right.”65  Thus, an award 
of prejudgment interest is warranted if Wilmington Trust prevails on its refund 
claim.  The question is when it should begin to accrue.   
“As a general rule, interest accumulates from the date payment was due to a 
party.”66  When the obligation to make a payment arises from a contract, the court 
will look to the contract itself to determine when interest should begin to accrue.67  
“For insurance claims, interest accumulates from the date a party actually demands 
payment.  Where it is difficult to determine to a reasonable degree of certainty when 
an insured demanded payment, we often rely on the date that the insured filed the 
complaint.”68  In Moskowitz v. Mayor & Council of Wilmington, where a property 
owner made a claim for a refund of a tax payment that the property owner asserted 
was improperly assessed, this Court held that interest should be awarded “from the 
date the taxpayer gave notice to the governmental entity that the taxpayer considered 
 
death benefit—is arguing that it is entitled to a ‘premium refund’ of over $16 million, which it 
calculates by applying prejudgment interest to its alleged entitlement to all of the premiums the 
insurer ever received (including the millions Viva did not pay”)). 
65 Citadel Holding Corp. v. Roven, 603 A.2d 818, 826 (Del. 1992) (citing Moskowitz v. Mayor & 
Council of Wilm., 391 A.2d 209 (Del. 1978)). 
66 Stonewall Ins. Co v. E.I. du Pont de Nemours & Co., 996 A.2d 1254, 1262 (Del. 2010) (citing 
Hercules, Inc. v. AIU Ins. Co., 784 A.2d 481, 507–08 (Del. 2001).  See also Citadel Holding, 603 
A.2d at 826 (“Such interest is to be computed from the date payment is due.”) (citing Moskowitz, 
391 A.2d at 210)). 
67 Citadel Holding, 603 A.2d at 826 (citing Watkins v. Beatrice Companies, Inc., 560 A.2d 1016, 
1020 (Del. 1989)).  In Citadel Holding, the Court held that a plaintiff who was entitled to 
reimbursement of legal expenses under an indemnification agreement was entitled to prejudgment 
interest computed from the date that the plaintiff demanded reimbursement and produced his 
written promise to repay as required under the agreement.  Id. at 826 & n.10. 
68 Stonewall, 996 A.2d at 1262 (citation omitted). 
31 
the tax payment unlawful or improper.”69  “The rationale underlying this rule is that 
money is not due and payable, and thus not in default, until there has been a demand 
therefor.”70  “Thus, a taxpayer may recover interest from the date the tax payment 
was made if the payment was accompanied by adequate notice that the payment is 
considered to be excessive, improper, or unlawful; but if such notice did not 
accompany the tax payment then interest will not begin to accumulate until there has 
been a later act constituting notice to the taxing authority that, in the opinion of the 
taxpayer, the tax is excessive, improper, or illegal.”71 
Applying these principles to the circumstances of this case, Wilmington Trust 
is not entitled to prejudgment interest predating its purchase of the policies in 2014.  
Weighing the incentivizing effects of prejudgment interest on insurers and STOLI 
policy holders, Sun Life should not be responsible for—and Wilmington Trust 
should not receive—interest on premiums paid by LPC affiliates.  If the Superior 
Court ultimately determines that Wilmington Trust is entitled to restitution of any of 
the premiums that it paid, the court should award prejudgment interest from the date 
that Wilmington Trust asserted that a premium refund was due—which likely 
corresponds to the date that Wilmington Trust filed its answer and counterclaims.72 
 
69 Moskowitz, 391 A.2d at 211. 
70 Id. 
71 Id. 
72 Cf. Stonewall, 996 A.2d at 1262 (“We disagree with the chosen accrual date.  Prejudgment 
interest is an extraordinary award that applies when a party unjustifiably refuses to live up to its 
obligation after payment is due.  Although DuPont’s initial 1999 complaint may in the abstract be 
32 
V 
The Superior Court properly dismissed Wilmington Trust’s promissory-
estoppel counterclaim and struck its equitable defenses thereby defeating 
Wilmington Trust’s claim for the recovery of death benefits under the two STOLI 
policies.  The court’s application of an “automatic premium refund” rule clashes 
with this Court’s subsequent rejection of that rule in favor of the Restatement’s fault-
based analysis.  The court also erred by ruling that, to the extent that any premium 
payments are recoverable, prejudgment interest was not available.  For these and the 
other reasons stated above, the judgment of the Superior Court is AFFIRMED in 
part and REVERSED in part.  The case is REMANDED to the Superior Court for 
further proceedings in accordance with this opinion. 
 
construed as a demand for payment, DuPont amended that complaint to make demand against the 
1983 insurers.  After settling with the 1983 insurers, DuPont then changed its strategy and made 
claims against the 1985 insurers, including Stonewall, in an August 4, 2006 demand letter. 
Therefore, Stonewall could not have unjustifiably refused to pay until DuPont demanded payment 
on August 4, 2006.  Accordingly, the motion judge erred by awarding prejudgment interest from 
December 30, 1999.”) (citation omitted).