ALBANY, N.Y. (AP) — New York's top court says state law doesn't prohibit people from buying life insurance policies and immediately selling them to investors who make money when the insured person dies.
The Court of Appeals says the practice is legal in New York, even where the policy was obtained solely for that purpose.
The law was recently amended by the Legislature to regulate so-called "stranger originated life insurance," or STOLIs.
The question was whether someone can buy a policy with no intention of protecting the usual beneficiaries -- loved ones with a personal or economic stake in their welfare.
Dissenting judges in the 5-2 ruling Wednesday said similar transactions, wagers on death, have been condemned by courts for more than a century.
http://www.usatoday.com/money/perfi/insurance/2010-11-17-life-insurance-sale_N.htm
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This could open up a big can of worms, it’ll be interesting to see if it spreads to other states or whether the federal government steps in to ban or regulate these actions. Depending how it takes off in New York State, it could even spread to Europe and Britain, though I wouldn’t be surprised to see it banned in the European countries, as for Britain, who knows?
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