Estate of Ann Boggess v. U.S. Bank, N.A.

Background

The plaintiffs are the estates of Ann Boggess, Frank Bolle, Lena Longo, Saul Offit, Naomi Pressma, Roberta Silbar, Georgia Towers, and Anna Zufelt, acting through their executors. They seek death-benefit proceeds from life-insurance policies covering those individuals. The complaint alleges that the policies were stranger-originated life insurance policies, meaning policies obtained and funded by investors who lacked a personal connection to the insureds and later became beneficiaries.

The estates allege that related Delaware entities known generally as Coventry organized an illegal scheme involving these policies. They claim the policies were procured without an insurable interest and were therefore wagers on the insureds’ lives, violating Delaware common law and 18 Del. C. § 2704(b). After the insureds died, the life insurers paid the proceeds to U.S. Bank and Wells Fargo, which allegedly held the policies as securities intermediaries for third-party customers rather than as the beneficial owners.

Motion and Positions

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), arguing that the estates lacked Article III standing. Article III standing requires a plaintiff to allege a concrete and particularized injury, a likely connection between that injury and the defendant’s conduct, and a likelihood that court-ordered relief would address the injury.

The defendants argued that the estates had not identified a concrete injury or shown that the securities intermediaries caused any injury. They contended that the alleged wrongdoers were the Coventry entities and that the defendants merely held the policies in securities accounts for customers who acquired them later.

The estates argued that they were not asserting a generalized public grievance. They maintained that the insureds were harmed by being made subjects of wagers, that the defendants were involved in the alleged scheme, and that Delaware law provides a private right to recover proceeds from policies lacking an insurable interest.

Court’s Analysis

The court treated the motion as a facial challenge to subject-matter jurisdiction, meaning it evaluated whether the complaint adequately alleged jurisdictional facts and accepted well-pleaded factual allegations as true for purposes of the motion.

The court concluded that preexisting common law recognized claims involving the recovery of proceeds from life-insurance policies lacking an insurable interest and that Delaware’s statute codified that legal principle. The court also considered decisions allowing estates to pursue similar claims involving stranger-originated life insurance.

The court found that the complaint alleged more than a mere statutory or regulatory violation. It alleged that the estates and insureds were harmed by illegal human-life wagering, that private health information was used in the alleged scheme, that the insureds and their families were contacted about the insureds’ deaths, and that the defendants unlawfully received and retained proceeds to which the estates claimed entitlement. The court held that these allegations were sufficiently closely related to historically recognized injuries to establish an injury for standing purposes.

The court further held that, if the estates could prove their allegations that the defendants participated in the scheme as securities intermediaries, the alleged injuries could be fairly traceable to the defendants. The court noted that it was deciding only whether standing was adequately alleged at this stage, not whether the estates’ underlying claims were strong or would succeed.

Disposition

The court denied the defendants’ Motion to Dismiss for Lack of Article III Standing under Rule 12(b)(1). The order did not decide the merits of the estates’ claim for recovery of the insurance proceeds.