Offit v. U.S. Bank
Estate of Saul Offit, by its Executor, Marc Offit; Estate of Naomi Pressma, by its Executor, Conrad Pressma; Estate of Georgia Towers, by its Executor, Edwin Towers v. U.S. Bank, N.A., as Securities Intermediary; and Wells Fargo Bank, N.A., as Securities Intermediary
- Donovan Frank
- 0:23-cv-00045
- U.S. District Court · District of Minnesota
- 14
In Estate of Saul Offit et al. v. U.S. Bank, N.A. et al., Judge Donovan W. Frank granted summary judgment in favor of U.S. Bank and Wells Fargo, ruling that because both banks acted only as ministerial 'pass-through' conduits when they received and immediately forwarded life insurance proceeds to the policies' true beneficial owners, they cannot be held liable under Delaware's insurable interest statute for proceeds of allegedly illegal stranger-originated life insurance policies.
Estates of deceased individuals whose life insurance policies were allegedly part of illegal stranger-originated life insurance (STOLI) arrangements; banks acting as securities intermediaries (custodians) for life insurance policy investment funds; and potentially other parties in similar STOLI litigation involving securities intermediaries under Delaware's insurable interest statute.
What happened
In Estate of Saul Offit, by its Executor, Marc Offit; Estate of Naomi Pressma, by its Executor, Conrad Pressma; Estate of Georgia Towers, by its Executor, Edwin Towers v. U.S. Bank, N.A., as Securities Intermediary; and Wells Fargo Bank, N.A., as Securities Intermediary, three estates sued two major banks seeking to recover millions of dollars in life insurance death benefits. The estates alleged that the underlying policies were 'stranger-originated life insurance' (STOLI) — a type of arrangement where outside investors, rather than people with a genuine connection to the insured, purchase and hold life insurance policies on another person's life as an investment. The estates argued that these policies were illegal under Delaware law because they lacked an 'insurable interest,' meaning the policyholder had no legitimate stake in the insured person remaining alive, and they sought to recover the proceeds that were paid out when the insured individuals died between 2018 and 2021.
The central legal question was whether U.S. Bank and Wells Fargo — which held the policies in a formal custodial role called 'securities intermediary' — could be sued as 'beneficiaries, assignees, or other payees' who 'received benefits' under Delaware's insurable interest law. The banks argued they never truly received the money for themselves: under their contracts, they were required to collect the insurance checks and immediately deposit the full amounts into accounts belonging to the actual beneficial owners of the policies, institutional investment funds called FCI III and FCI II. The estates pointed to a Delaware Supreme Court case, Wells Fargo Bank v. Estate of Malkin, to argue the banks could still be liable, but the banks countered that the same case actually supports their position by stating that a securities intermediary that 'merely passed [proceeds] on in full' to the beneficial owner faces no liability.
Judge Frank agreed with the banks. He ruled that U.S. Bank and Wells Fargo acted purely as conduits — they held the insurance proceeds only momentarily, never owned them, never retained any portion for themselves, and were contractually required to pass every dollar through to the beneficial owners. Because Delaware's statute only reaches those who actually 'receive benefits' from a policy, and because the banks had no possessory interest in the proceeds, they cannot be held liable. Judge Frank granted summary judgment to U.S. Bank and Wells Fargo on the claims brought by the Offit Estate and the Pressma Estate, dismissed those claims with prejudice (meaning they cannot be refiled), and denied all other pending summary judgment motions as moot. The dispute involving the Towers Estate was separately suspended because the Towers Estate and Wells Fargo announced they had reached a private settlement agreement.
The detailed version
CASE: Estate of Saul Offit et al. v. U.S. Bank, N.A. et al., Civil No. 23-45 (DWF/DJF), U.S. District Court, District of Minnesota. JUDGE: Donovan W. Frank, United States District Judge. DATE: December 15, 2025.
BACKGROUND AND PARTIES: Three estates — the Estate of Saul Offit (executor Marc Offit), the Estate of Naomi Pressma (executor Conrad Pressma), and the Estate of Georgia Towers (executor Edwin Towers) — sued U.S. Bank, N.A. and Wells Fargo Bank, N.A., each acting in the capacity of 'securities intermediary.' A securities intermediary, as defined in Uniform Commercial Code (UCC) § 8-102(a)(14), is a person or institution (such as a bank) that maintains securities accounts for others in the ordinary course of its business. The estates alleged that life insurance policies taken out on the lives of the three insureds were illegal stranger-originated life insurance (STOLI) policies — arrangements in which outside investors with no connection to the insured purchase life insurance on that person's life, pay the premiums, and collect the death benefit as an investment. The estates contended the policies violated Delaware's insurable interest law, Del. Code Ann. tit. 18, § 2704(b), because the policyholders had no legitimate insurable interest in the insureds' lives.
The specific policies and amounts at issue were: (1) the Offit Policy — $8.5 million Hartford policy, proceeds of $8,519,095.89 deposited by Wells Fargo on January 5, 2021; (2) the Pressma Policy — $1.5 million John Hancock policy, proceeds of $1,502,920.29 deposited by U.S. Bank on October 26, 2018; and (3) the Towers Policy — $5 million American General policy (dispute suspended due to settlement). The actual beneficial owners of the Offit and Pressma Policies at the time of maturity were institutional investment funds (FCI III). Upon receiving insurance proceeds from the life insurers, both banks immediately deposited 100% of the proceeds into accounts belonging to FCI III and retained nothing.
The banks' roles were governed by Securities Account Agreements (SAAs) with the beneficial owners. Key contractual terms established that: (a) the banks were securities intermediaries under the UCC; (b) all property in the securities accounts was identified on the banks' books as owned exclusively by the beneficial owner, not the banks; (c) the banks held property as custodians in safekeeping, separate from their own assets; and (d) upon receipt of policy proceeds, the banks were required to deposit proceeds into the beneficial owner's designated account within three business days.
COVENTRY BACKGROUND: Beginning in 2001, U.S. Bank and Coventry (a family of related Delaware entities) entered into an Origination Agreement for manufacturing and selling life insurance policies. In 2008, Wells Fargo entered a similar agreement involving AIG Life Settlement LLC and Coventry. In 2003–2004, Coventry and AIG developed the Premium Finance Plus (PFP) Program to generate STOLI policies at scale. The Insureds applied for their policies in 2005–2006 and sold them in 2007–2008.
LEGAL STANDARD: Summary judgment (a ruling without a full trial) is proper under Federal Rule of Civil Procedure 56(a) when there are no disputed issues of material fact and the moving party is entitled to judgment as a matter of law. The court must view evidence in the light most favorable to the non-moving party.
CENTRAL LEGAL ISSUE — SECTION 2704(b) LIABILITY: Delaware Code tit. 18, § 2704(b) permits an estate to bring an action against any 'beneficiary, assignee or other payee' who 'receives from the insurer any benefits' of a life insurance policy made in violation of section 2704. The question was whether banks acting solely as securities intermediaries — receiving and immediately passing through 100% of policy proceeds — qualify as 'payees' who 'receive benefits' under the statute.
COURT'S ANALYSIS: Judge Frank held that a securities intermediary acting in a purely ministerial or nominal role does not 'receive a benefit' within the meaning of section 2704(b). The court relied on several bases:
1. UCC Framework: Under UCC § 8-503(a), financial assets held by a securities intermediary are not the property of the securities intermediary. The UCC's own commentary describes securities intermediaries as 'conduits' in the indirect holding system (UCC § 8-115, cmts. 1, 5).
2. The SAAs: The contractual agreements expressly provided that all property was owned exclusively by the beneficial owner and that the banks held it as custodians in safekeeping, separate from their own assets. The banks did not account for the proceeds as income and were not permitted to retain any proceeds.
3. The Malkin Precedent: The estates relied on Wells Fargo Bank, N.A. v. Estate of Malkin, 278 A.3d 53 (Del. 2022) (Malkin II), arguing the Delaware Supreme Court rejected the ministerial-role defense. Judge Frank disagreed. He noted that the Delaware Supreme Court in Malkin II expressly stated that 'a securities intermediary who merely acts on the instructions of the beneficial owner of a STOLI policy and credits the policy proceeds to the beneficial owner's account is unlikely to face ultimate liability under Section 2704(b)' and would 'generally find protection from sources other than Section 8-115, such as general principles of agency law or its contract with its customer.' The court also cited Daher v. LSH Co., Civ. No. 21-3239, 2024 WL 3571642 (C.D. Cal. July 23, 2024), which interpreted Malkin II as holding that when a securities intermediary passes along 100% of a death benefit to another party, it cannot be deemed a payee.
4. Fleeting Possession: The court acknowledged the banks had at most a 'fleeting' possession of the proceeds but held this did not make the proceeds the banks' property, citing COR Clearing, LLC v. Calissio Res. Grp., Inc., 918 F.3d 579, 585 (8th Cir. 2019).
The court noted it did not need to reach defendants' alternative argument that UCC § 8-115 independently shielded them from liability, as the ministerial-role analysis was dispositive.
RULINGS:
- U.S. Bank and Wells Fargo's motion for summary judgment on securities intermediary liability (Doc. No. 204): GRANTED as to the Offit and Pressma Estates.
- U.S. Bank's separate motion for summary judgment on the Pressma Estate's claim (Doc. No. 192): DENIED AS MOOT.
- Offit Estate and Wells Fargo cross-motions for summary judgment (Doc. No. 199): DENIED AS MOOT.
- Pressma Estate's motion for summary judgment against U.S. Bank (Doc. No. 209): DENIED AS MOOT.
- Towers Estate dispute: SUSPENDED pending resolution of private settlement between Wells Fargo and the Towers Estate.
- Offit and Pressma Estates' claims against U.S. Bank and Wells Fargo: DISMISSED WITH PREJUDICE (barring refiling).
Reviewer note from the AI+
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