Submitted: May 17, 2018
J. Bellew, Esq., Joseph Kelleher, Esq. (argued), Michael J.
Miller, Esq., Charles J. Vinicombe, Esq., Gregory J. Star,
Esq., Cozen O'Connor, Attorneys for Plaintiff Sun Life
Assurance Company of Canada
S. Davis, Esq. (argued), Robert E. Griffin, Esq., Schulte
Roth & Zabel LLP, Kevin G. Abrams, Esq., John M. Seaman,
Esq., E. Wade Houston, Esq., Abrams & Bayliss LLP,
Attorneys for Defendant Wilmington Trust, National
Association, as Securities Intermediary
M. JOHNSTON JUDGE.
AND PROCEDURAL CONTEXT
an action for declaratory judgment involving a life insurance
policy. Plaintiff Sun Life Assurance Company of Canada
("Sun Life") sold a New York businessman a $ 10
million life insurance policy, which was held by the
businessman in a trust. The trust sold the policy in the life
insurance settlements market, where it was eventually
transferred to Wilmington Trust, National Association,
("Wilmington Trust"), one of the defendants in this
case. When the original policy holder died, Wilmington Trust
notified Sun Life of the death and began the steps necessary
to collect the claim. Sun Life then initiated this action.
complaint, Sun Life alleges that the policy was a stranger
oriented life insurance policy, known as a STOLI. It seeks a
declaratory judgment that the policy was void ab
initio as an illegal wager on human life. Sun Life
asserts that the trust was an illegitimate cover for this
wager. Therefore, the trust lacked both an insurable interest
in the policy and the capacity to form a contract. Sun Life
also brings four claims solely against the producer of the
policy, defendant Gregg Gottlieb: fraudulent inducement,
fraud, negligent misrepresentation, and breach of contract.
Defendants argue that the policy is valid. Defendants have
alleged four counterclaims as a result of Sun Life's
nonpayment: breach of contract, breach of the implied
covenant of good faith and fair dealing, a violation of a
Massachusetts law prohibiting unfair and deceptive trade
practices, and promissory estoppel. Defendants also asserted
six affirmative defenses in their answer: failure to state a
claim, statute of limitations and incontestability, laches,
waiver and estoppel, unclean hands, and lack of standing.
Life has moved to dismiss each of the counterclaims and to
strike all of the affirmative defenses except for failure to
state a claim.
TO STRIKE AND MOTION TO DISMISS STANDARD
Court Civil Rule 12(f) permits the Court to strike "any
insufficient defense" or "redundant, immaterial,
impertinent or scandalous matter." The movant must
show "clearly and without doubt that the matter sought
to be stricken has no bearing on the . . .
litigation." Because motions to strike are disfavored
in Delaware, they are "granted sparingly" and only
where "clearly warranted, with [any] doubt... resolved
in favor of the pleadings."
Rule 12(b)(6) motion to dismiss, the Court must determine
whether the claimant "may recover under any reasonably
conceivable set of circumstances susceptible of
proof." The Court must accept as true all
well-pleaded allegations.Every reasonable factual inference will
be drawn in the non-moving party's favor.If the claimant
may recover under that standard of review, the Court must
deny the motion to dismiss.
to Dismiss Counterclaims
Life argues that the Court should dismiss Wilmington
Trust's breach of contract and breach of the duty of good
faith counterclaims because seeking a declaratory judgment as
to whether a death benefit is valid and payable does not
breach either of these obligations. It argues that the Court
should dismiss the counterclaim for a violation of
Massachusetts' law regarding deceptive and unfair trade
practices because the "center of gravity" of the
allegations in the complaint is not in Massachusetts.
Finally, Sun Life argues that the Court should dismiss
Wilmington Trust's promissory estoppel counterclaim
because the policy was void ab initio.
resolution of both motions primarily hinges on the
interpretation and applicability of recent decisions cited by
the parties regarding the effect of a void life insurance
policy on the viability of claims related to the contract.
foundational case in this area is PHL Variable Insurance
Company v. Price Dawe 2006 Insurance Trust, ex rel.
Christiana Bank & Trust Co.Dawe is commonly
cited for its holding that "a life insurance policy
lacking an insurable interest is void against public policy
and thus never comes into force . . . ." More germane to
the motion before the Court is Dawe's holding
that "an insurer can challenge the enforceability of a
life insurance ...