Court sides with Ameritas in denying $4M STOLI payout to Wells Fargo

A federal appeals court sided with Ameritas Life Insurance Corp. on Thursday in affirming a lower-court ruling that a $4 million life insurance policy purchased on a New Jersey retiree was an illegal stranger-originated life insurance arrangement.

The Court of Appeals for the 8th Circuit affirmed summary judgment in favor of Ameritas, rejecting claims brought by Wells Fargo Bank as securities intermediary for Vida Longevity Fund, which had acquired the policy years after it was issued.

“[Z]ero evidence indicates that the representations Wells Fargo relies on are true,” wrote Judge Bobby E. Shepherd, writing for the three-judge panel.

The decision continues a summer winning streak for life insurers in stranger-originated life insurance, or STOLI, cases. In June, the 3rd Circuit affirmed summary judgment in favor of Lincoln National Life Insurance Co., rejecting investor claims involving two life policies worth a combined $8 million.

Both the Ameritas and Lincoln cases originated in New Jersey. Applying New Jersey law, the courts concluded the policies were classic STOLI arrangements because investors with no insurable interest were the intended beneficiaries from the outset.

New Jersey law and the state's Supreme Court have consistently held that STOLI arrangements violate public policy and are void from inception.

Wells Fargo could not be reached for comment. Ameritas declined to comment.

2008 life policy

The Ameritas-Wells Fargo dispute concerns a $4 million policy issued in 2008 on the life of Jerry Freid, a retired New Jersey resident who died in 2020. Vida sought to collect the death benefit after purchasing the policy as part of a portfolio of life insurance contracts.

Ameritas, which succeeded the original issuer, refused payment, arguing that the policy was void from its inception because it was created as part of a STOLI scheme.

The appeals court agreed that the evidence overwhelmingly showed the coverage was procured not for legitimate estate planning, but to benefit investors lacking an insurable interest in Freid's life.

"The summary judgment record does not permit a reasonable trier of fact to conclude that the Policy was anything other than STOLI," Shepherd wrote.

The policy originated with insurance producer Michael Binday, who operated a brokerage business that federal prosecutors later alleged orchestrated a widespread STOLI scheme. Binday and insurance agent James Kevin Kergil were convicted in 2013 of mail fraud, wire fraud and conspiracy after a jury found they had deceived insurers by arranging policies for seniors that were intended to be sold to investors after contestability periods expired.

According to the opinion, Binday recruited seniors who had little need for large life insurance policies, obtained life expectancy reports for potential investors, and created trusts to own the policies before arranging premium financing through an entity known as HM Ruby.

The financing structure eliminated virtually all financial risk for insureds by allowing the policies to satisfy the loans if they were not repaid. The court said HM Ruby expected the policies to be transferred to investors rather than retained for estate planning purposes.

'Laughed out loud'

Freid was 72 when the policy was issued and had a net worth of no more than about $500,000, court documents say. He rented his home and could not afford the policy's $177,000 annual premium. Yet the insurance application represented that his net worth exceeded $4.4 million.

When  Freid's daughter, who later administered his estate, heard the $4.4 million figure, she "laughed out loud," court documents say.

Vida ultimately acquired the policy despite internal due diligence describing the portfolio as perhaps “the worst overall block [it] had ever looked at,” and characterizing the HM Ruby-financed policies as "premium finance loan-to-own" business, court documents say.

On appeal, Wells Fargo argued that Florida law should apply because the trust's trustee may have signed the application there. The court rejected that argument, ruling that the policy's "conformity with laws" provision was not a choice-of-law clause and that New Jersey had the most significant relationship to the transaction because Freid lived there, the application and policy were prepared on New Jersey forms, and all parties expected New Jersey law to govern.

The decision leaves intact the district court's dismissal of Wells Fargo's breach of contract and bad-faith claims.

© Entire contents copyright 2026 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.