Dykens Analyzes North Carolina Court Ruling's Impact on Life Settlement Industry

Andrew underscored the importance of the decision for the life settlement industry given the North Carolina plaintiff had used non-recourse premium financing, which has faced criticism in court decisions across the United States.

“The court enforced the policy and determined that it was not a wagering contract because the insured had control over the policy’s disposition,” said Andrew.

Andrew explained that the ruling clarifies the legal requirements for a policy to be considered an unlawful wagering contract.

“This decision is important for life settlement investors because it reaffirms that a prearranged agreement with an investor is required for a policy to qualify as an unlawful wagering contract, even where the insured uses a non-recourse loan. It is not enough for the insured to hope to eventually sell a policy to an investor. This is important because some courts have held in recent years that an insured’s use of a non-recourse loan to purchase a policy that they intend to sell amounts to an unlawful wager, rendering the policy void. Trevathan rejects this conclusion,” said Andrew.

Andrew also noted that “on a practical level, North Carolina is now a favorable jurisdiction for investors.”

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