Aviva Life and Annuity Co. sued six of its agents earlier this year, claiming the agents were involved in a fraudulent sale of life insurance to 119 church members. The agents recently responded, charging that Aviva was not only complicit in the charity-owned life insurance (CHOLI) scheme, but actively “directed, ordered, approved, and in all other respects, ratified the acts and performance of” the agents.
Aviva filed the lawsuit against the agents in March of this year in the United States District Court Central District of California. According to the lawsuit, the six agents arranged for church parishioners to purchase life insurance that would be held in 119 individual life insurance trusts.
The producers are accused of violating Aviva’s “producer guidelines” by participating in the sales. The scheme outlined by Aviva’s complaint is a variation on stranger-originated life insurance (STOLI), where church members were approached about participating in an endowment program under which life insurance death benefits would be split between the church, beneficiaries and a third party.
Members who allowed policies to be purchased on their lives have told Aviva that they either did not pay premiums on their life insurance policies or paid only the initial premium.
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For previous coverage of STOLI in Advisor’s Journal, see Court Holds that STOLI Law Is Not Retroactive (CC 11-108) & STOLI Scheme Lands Insurance Agent in Jail (CC 11-92).