Western Reserve Life Assurance Co. v. ADM Associates, LLC , 737 F.3d 135 ( 2013 )


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  •           United States Court of Appeals
    For the First Circuit
    No. 12-2208
    WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO,
    Plaintiff, Appellant,
    v.
    ADM ASSOCIATES, LLC,
    Defendant, Appellee.
    APPEAL FROM THE UNITED STATES DISTRICT COURT
    FOR THE DISTRICT OF RHODE ISLAND
    [Hon. William E. Smith, U.S. District Judge]
    Before
    Lynch, Chief Judge,
    Selya, Circuit Judge,
    and Hillman,* District Judge.
    Michael J. Daly, with whom Catherine R. Connors, Brooks R.
    Magratten, and Pierce Atwood LLP were on brief, for appellant.
    Thomas J. Gallitano, Conn Kavanaugh Rosenthal Peisch & Ford,
    LLP, Jason P. Gosselin, and Drinker Biddle & Reath LLP on brief for
    American Council of Life Insurers, amicus curiae.
    Robert F. Weber, with whom Randy Olen was on brief, for
    appellee.
    December 11, 2013
    *
    Of the District of Massachusetts, sitting by designation.
    SELYA, Circuit Judge.       The outcome of this appeal is
    controlled by important questions of Rhode Island law and public
    policy as to which we have found no dispositive precedent. Because
    the Rhode Island Supreme Court is the ultimate arbiter of matters
    of Rhode Island law, we certify these unsettled questions to that
    court for guidance.    See R.I. Sup. Ct. R. 6.
    I.   BACKGROUND
    Joseph Caramadre believed that he had found the Holy
    Grail of investment strategies: a way to speculate in high-risk
    securities while shielding himself from the adverse effects of
    losses.      To implement this scheme, he exploited a perceived
    loophole in certain annuities issued by, inter alia, plaintiff-
    appellant Western Reserve Life Assurance Company of Ohio.    Because
    certain features of Western Reserve's annuities are integral both
    to Caramadre's contrivance and to the issues on appeal, we start by
    outlining those features.
    The classic annuity offers a person a stream of periodic
    payments during his life that are actuarially calculated and fixed
    in amount.     In exchange, the person makes an up-front, lump-sum
    premium payment to the issuing insurance company.    For example, an
    investor might pay an insurance company a one-time $1,000,000
    premium in exchange for a promise to pay him $5,000 per month for
    the rest of his life.
    -2-
    Over the years, annuity products have evolved, and the
    WRL Freedom Premier III annuity issued by the appellant is a far
    cry from the classic model.             We sketch some of the salient
    differences.
    To begin, the appellant's product is a variable annuity,
    not a fixed annuity.         Instead of ceding control of his premium
    dollars to the insurance company, the investor retains the right to
    direct that those dollars be invested in certain pre-selected
    securities.       Moreover, the annuity does not necessarily entail
    fixed periodic payments to the beneficiary; rather, it presents a
    diverse    menu    of   payment    options,   including   payouts   that   are
    determined by the value, from time to time, of the acquired
    securities.       Consequently, the amounts paid to the beneficiary may
    ebb and flow with the performance of the investment portfolio.
    In addition, the investor in a WRL Freedom Premier III
    annuity can use the lifetime of someone other than himself (the
    annuitant) as a measuring device to determine how long the annuity
    payments will last.       The investor (the owner) provides the premium
    dollars, directs the investment strategy, and selects the recipient
    of   the   periodic      payouts    called    for   by    the   annuity    (the
    beneficiary).       The beneficiary, who may or may not be the owner,
    will receive those payouts as long as the annuitant remains alive.
    Significantly, a WRL Freedom Premier III annuity contains no
    requirement that the owner and the annuitant be one and the same
    -3-
    person;   in   fact,   the   annuity    contract   does   not    require   any
    extrinsic tie between the two.
    Unlike a classic annuity, the WRL Freedom Premier III
    annuity allows the owner to infuse more than a single premium
    payment into the annuity.      Up until a specified date (not relevant
    here), the appellant will accept premium payments, as long as the
    total investment does not exceed $1,000,000.
    Last — but far from least — the owner can elect a "Double
    Enhanced Death Benefit" by agreeing to pay an additional daily
    charge. An owner who elects this benefit designates a beneficiary,
    who, upon the annuitant's death, will be entitled to receive the
    greater of: (1) the total premiums invested in the policy, plus
    interest accrued at 5% per annum, or (2) the highest value of the
    policy (that is, the highest value of its investment portfolio,
    adjusted for certain deposits and withdrawals) on any annual
    anniversary of the policy.       The owner and the beneficiary may be
    one and the same person.
    Caramadre figured out that if an individual named himself
    (or an entity he controlled) as both the owner and the beneficiary
    of a WRL Freedom Premier III annuity and elected the death benefit,
    that   individual   could    engage    in   high-risk   market   speculation
    without any downside exposure.         Caramadre decided that this scheme
    could best be perpetrated by applying for an annuity with a
    relatively low initial premium, invested conservatively so as to
    -4-
    avoid red flags.   The owner/beneficiary (whether Caramadre himself
    or his nominee) would subsequently deposit a substantially more
    munificent incremental premium and steer the investment of the
    aggregate premium dollars into speculative securities.   The upshot
    was a "heads I win, tails you lose" scenario: if the investment
    gamble paid off, he would reap the fruits of his speculation when
    the annuitant died; and if the speculation backfired, the death
    benefit guaranteed that he would fare no worse than a full return
    of premiums paid (plus interest).       In the latter event, the
    insurance company would be left holding a collection of nearly
    worthless securities.
    Despite the cleverness of Caramadre's scheme, there was
    a rub: one had to be sure that the death benefit would be triggered
    within a relatively short time after the risky investments were
    made.1   That timing would ensure that the owner/beneficiary of the
    annuity (Caramadre or his nominee) would receive either the benefit
    of a strike-it-rich investment gamble or, at worst, the return of
    his bet.     Thus, the linchpin of the scheme was locating and
    recruiting potential annuitants whose lifespans were predictably
    short: the terminally ill.
    1
    After all, if the annuitant lived a long life, the
    owner/beneficiary's funds would be tied up. Even worse, he would
    have no hedge against near-term investment losses and could be
    stuck paying the daily fees for the death benefit for many years.
    -5-
    Caramadre     rose     to   this      challenge.       Among     other
    recruitment tools, he circulated flyers promising up-front cash
    payments to terminally-ill patients for agreeing to let their names
    be used.
    Charles Buckman, a Rhode Island resident suffering from
    chronic obstructive pulmonary disease, received one of Caramadre's
    flyers from a visiting nurse.                 His interest piqued, Buckman
    followed up on the flyer and contacted Estate Planning Resources,
    a Caramadre-controlled company.
    To make a tawdry tale tolerably terse, Buckman accepted
    a   cash   payment   to   identify      himself     as   the   annuitant     on    an
    application for a WRL Freedom Premier III variable annuity.                       The
    application designated a Caramadre nominee, defendant-appellee ADM
    Associates, LLC (ADM), as the prospective owner and beneficiary of
    the annuity.      The application specifically requested inclusion in
    the annuity contract of the Double Enhanced Death Benefit. Buckman
    and ADM were wholly unrelated parties; indeed, up to that point
    Buckman had never heard of ADM.
    The   appellant      received     the   application    on   or   about
    September 11, 2008.       Four days later, it approved the application
    and issued a WRL Freedom Premier III annuity (the Policy).
    Pertinently, the Policy provided that it would be "incontestable
    from the Policy Date."
    -6-
    The    application    had    been   accompanied   by   an   initial
    $250,000 premium payment.         Roughly four months after the Policy
    went into effect, ADM made an additional premium payment of
    $750,000.
    At    some   point,   the   appellant   apparently     learned   of
    Caramadre's scheme and came to believe that the Policy was an
    iteration of it.2        It developed an acute case of seller's remorse
    and, approximately a year after the Policy's inception date,
    notified both Buckman and ADM that it intended to rescind the
    Policy.
    Acting on this stated intention, the appellant sued ADM
    in the United States District Court for the District of Rhode
    Island, seeking rescission of the Policy and a declaration that the
    Policy was either void ab initio or had been properly rescinded.
    It also asserted claims for fraud, civil liability for crimes, and
    civil conspiracy.3
    2
    The scheme apparently began to unravel when the federal
    government launched an investigation into the legitimacy of
    Caramadre's actions.     In due course, the government charged
    Caramadre with sixty-five counts of fraud, conspiracy, identity
    theft, and money laundering. See United States v. Caramadre, 
    882 F. Supp. 2d 302
    , 304 (D.R.I. 2012). The indictment alleged that
    Caramadre had conspired since the 1990s "to make millions of
    dollars by securing the identities of terminally-ill people through
    material misrepresentations and omissions to be used to purchase
    variable annuities and corporate bonds with death-benefit
    features." 
    Id. 3 The
    appellant's complaint named additional defendants as
    well. For ease in exposition, we limit our discussion of the suit
    to the appellant's claims against ADM.
    -7-
    ADM moved to dismiss the complaint.   The district court
    heard this motion along with motions in similar cases.         After
    careful consideration, the court dismissed the claims brought
    against ADM. See W. Reserve Life Assurance Co. v. Conreal LLC, 
    715 F. Supp. 2d 270
    , 276-81 (D.R.I. 2010).         With respect to the
    appellant's prayers for rescission and declaratory relief, it held
    that the presence of the death benefit did not transform the Policy
    into a life insurance contract under Rhode Island law.     See 
    id. at 276-79.
        Hence, the absence of an insurable interest neither
    rendered the Policy void nor justified its rescission.      See 
    id. Although the
    court acknowledged that "the whole point of the
    [scheme] was to capitalize on the death benefits," it concluded
    that the "[d]efendants [had] figured out how to game a flaw in the
    product."    
    Id. at 278.
    The district court based its dismissal of the tort claims
    on the incontestability clause.     See 
    id. at 280-81.
       In holding
    that this provision did not offend public policy, the court
    reasoned that Rhode Island's default two-year incontestability
    period can be supplanted by any shorter period more favorable to
    the insured. See 
    id. at 280
    (citing R.I. Gen. Laws § 27-4-6.2(a)).
    The appellant filed an amended complaint.    The district
    court dismissed this complaint on substantially the same grounds.
    See W. Reserve Life Assurance Co. v. Caramadre, 
    847 F. Supp. 2d 329
    , 349-50 (D.R.I. 2012).    With no claims remaining against ADM,
    -8-
    the court certified the judgment as final as between ADM and the
    appellant.      See Fed. R. Civ. P. 54(b); Nystedt v. Nigro, 
    700 F.3d 25
    , 29-30 (1st Cir. 2012).           This timely appeal followed.
    II.    DISCUSSION
    This case implicates two important issues of state law,
    either    or    both    of   which   may    determine   the   outcome   of   this
    litigation.      We describe these issues and, for what assistance it
    may provide, limn the considerations that have prompted us to
    certify them to Rhode Island's highest court.
    A.    The Insurable Interest Question.
    We begin with the question of whether ADM's status as a
    stranger to its annuitant invalidates the Policy.               Over a century
    ago, the Rhode Island Supreme Court declared that "a purely
    speculative contract on the life of another" procured by one
    without an insurable interest is contrary to public policy and "may
    properly be held to be void."          Cronin v. Vt. Life Ins. Co., 
    40 A. 497
    ,     497   (R.I.    1898).       The    Rhode   Island    General   Assembly
    subsequently endorsed the insurable interest concept, requiring
    relatives named as beneficiaries to have "a substantial interest"
    in an insured's life "engendered by love and affection," and other
    beneficiaries to have "a lawful and substantial economic interest
    in having the life, health, or bodily safety of the individual
    insured continue." R.I. Gen. Laws § 27-4-27(c). ADM concedes that
    it did not have an insurable interest in the life of its annuitant.
    -9-
    The question, then, reduces to whether the Policy is the kind of
    contract that Rhode Island's insurable interest requirement renders
    infirm.
    The answer may depend on taxonomy: that is, on whether
    the Policy should be classified either as an "insurance contract"
    or as an "annuity."     If the former rubric applies, the statutory
    iteration of the insurable interest requirement, which prohibits
    the procurement of "any insurance contract upon the life or body of
    another individual" if "the benefits under the contract are payable
    to" someone other than the insured, his personal representatives,
    or "a person having . . . an insurable interest in the individual
    insured," 
    id. § 27-4-27(a),
    may resolve the question.             In other
    words, if the death benefit makes the Policy an insurance contract
    upon the life of the annuitant, the want of an insurable interest
    would defeat the Policy.
    Were an inquiring court to look solely at the label that
    the   appellant    affixed   to   the   Policy,   the   premise   of   that
    proposition would be easily refuted: the document designates itself
    as a variable annuity, not an insurance contract.         But labels can
    be misleading, and the Rhode Island courts have sometimes looked
    beyond the title of a document to deem its substance to be
    insurance.     For example, in Sisson ex rel. Nardolillo v. Prata
    Undertaking Co., 
    141 A. 76
    (R.I. 1928), the Rhode Island Supreme
    Court went beyond the "burial contract[]" designation attached to
    -10-
    certain    agreements   and   held    that   those   agreements   actually
    comprised burial insurance.        
    Id. at 76-77.
    There is some reason to believe that such label-piercing
    might be appropriate here.           The common understanding of life
    insurance encompasses "[a]n agreement between an insurance company
    and the policyholder to pay a specified amount to a designated
    beneficiary on the insured's death."         Black's Law Dictionary 1010
    (9th ed. 2009).    The General Assembly seems to have embraced that
    understanding, declaring that life insurance is simply "every
    insurance upon the lives of human beings and every insurance
    appertaining to that life."        R.I. Gen. Laws § 27-4-0.1(c).
    In this instance, an insurance company (the appellant)
    issued the Policy, which obligated it to pay at least the aggregate
    premiums   invested     in   the   annuity   (plus   interest)    upon    the
    annuitant's death.      To this extent, the Policy is, at least in
    part, the functional equivalent of a life insurance policy.              See
    Kendall J. Burr et al., Stranger-Initiated Annuity Transactions and
    the Case for Insurable Interest, 19 Conn. Ins. L.J. 113, 126
    (2012).
    Here, however, there is more to the story.            Unlike a
    traditional life insurance policy, the death benefit did not
    promise a defined sum upon death but, rather, promised either the
    market value of the Policy or the aggregate premiums paid into it
    (whichever was greater). Moreover, the appellant did not treat the
    -11-
    Policy as if it were life insurance: though cognizant of the
    insurable interest requirement for life insurance, it made no
    effort to verify that the owner of the Policy had any relationship
    with the annuitant.     By the same token, it did not engage in the
    sort   of   medical   underwriting    that   might   have   enabled   it   to
    calculate the annuitant's mortality risk.
    Last, the appellant chose to structure and market the
    transaction as an annuity; and venerable precedent indicates that
    annuities (unlike life insurance contracts) are not normally deemed
    violative of public policy for want of an insurable interest.              See
    
    Cronin, 40 A. at 497
    .     This distinction between life insurance and
    annuities is firmly entrenched in positive law.               The General
    Assembly's definition of annuities explicitly excludes "payments
    made in connection with a life insurance policy."           R.I. Gen. Laws
    § 27-4-0.1(a).
    As the appellant reminds us, though, the Policy is not a
    nineteenth-century annuity.     In that era, the "annuities" to which
    courts referred had "traditionally and customarily . . . been fixed
    annuities, offering the annuitant specified and definite amounts
    beginning with a certain year of his or her life."             SEC v. Var.
    Annuity Life Ins. Co. of Am., 
    359 U.S. 65
    , 69 (1959).             Variable
    annuities (particularly those carrying death benefit riders) are a
    fairly recent innovation.     See 
    id. (noting that
    the first variable
    annuity appeared in or about 1952).           Thus, the Policy is twice
    -12-
    removed from its nineteenth-century ancestors — once by reason of
    its variable nature and once again by reason of its death benefit.
    It is not clear to us whether these innovations are sufficient to
    bring the Policy outside the boundaries of Rhode Island's historic
    exclusion of annuities from the insurable interest requirement.
    We are equally uncertain as to how the relatively recent
    Life Settlements Act, see R.I. Gen. Laws §§ 27-72-1 to 27-72-18,
    affects this inquiry.             Through that legislation, the General
    Assembly made pellucid that "[s]tranger-originated life insurance"
    — that is, "a practice or plan to initiate a life insurance policy
    for the benefit of a third-party investor who, at the time of
    policy origination, has no insurable interest in the insured" — is
    forbidden under Rhode Island law.            
    Id. § 27-72-2(26);
    see 
    id. §§ 27-72-2(9)(i)(A)(X),
           27-72-14(a)(1).        This   proscription
    expresses hostility to certain classes of transactions that are
    different than, but obviously similar to, the transaction in this
    case.4
    There is one further complication.            The appellant's
    attack on the Policy focuses on the unseemly nature of the scheme
    that       Caramadre   devised.     Nevertheless,    an   insurable   interest
    requirement for contracts like the Policy would not only affect
    vulture-like arrangements in which the payoff is geared toward the
    4
    We hasten to add that the Act neither mentions annuities nor
    explicitly pretermits transactions of the kind at issue here.
    -13-
    annuitant's quick demise but also contracts in which the payoff is
    geared to the annuitant's longevity.         For instance, an owner who
    purchases a variable annuity measured by the life of a 22-year-old
    healthy man might do so with a long-lasting income stream in mind
    and without any thought of capitalizing on the opportunity for
    risk-free speculation associated with the annuity's death benefit.
    This type of hypothetical owner would come much closer than an
    owner in the Caramadre model to being a counterpart of the owner of
    a conventional fixed annuity.      And that would be so even though
    both the hypothetical owner and the Caramadre-style owner had
    purchased essentially the same variable annuity.
    The short of it is that the Policy does not seem to fit
    neatly into either the category of life insurance contracts or the
    conception of annuities. And to muddy the waters further, we think
    that it might be plausible to treat the Policy as a hybrid.      If so,
    the analysis would likely turn to whether requiring an insurable
    interest would comport with the broader purpose undergirding the
    insurable interest requirement.
    This possibility prompts us to take a step back in time.
    Historically,   the   insurable   interest    requirement   prevented   a
    contract from becoming a vehicle for gambling.          In Cronin, for
    example, the court traced the insurable interest requirement for
    life insurance to the English Parliament's Life Assurance Act of
    1774, 14 Geo. 3, c. 48, § 1 (Eng.), which "prohibited insurance on
    -14-
    the life of a person in which the beneficiary shall have no
    interest, or by way of gaming or 
    wagering." 40 A. at 497
    .      That
    rule was followed in the United States "as declaratory of the
    common law."      
    Id. By requiring
    owners of life insurance policies
    to have "an interest of some sort in the insured life," courts
    could ensure that these contracts did not become "mere wager
    policies."      Conn. Mut. Life Ins. Co. v. Schaefer, 
    94 U.S. 457
    , 460
    (1876);   see    Winward   v.   Lincoln,    
    51 A. 106
    ,   112    (R.I.    1902)
    ("[P]ublic policy forbids the enforcement of all wagers by our
    courts, and it has been so held by this court.").                Without such an
    interest, a life insurance policy could afford a perverse incentive
    for the "early termination" of the insured's life.                      Warnock v.
    Davis, 
    104 U.S. 775
    , 779 (1881).
    Whether an insurable interest was required for the Policy
    may therefore depend on whether it can be fairly characterized as
    a contract wagering on life.         The outcome of such an attempt at
    characterization        seems   problematic.          On   the    one    hand,   a
    straightforward argument can be made that, without an insurable
    interest, the Policy is a wager on life.              From that vantage, the
    owner/beneficiary of the Policy, a stranger to the annuitant, will
    receive money when the annuitant dies and, thus, cash in on what
    amounts to a wager.       See 
    Winward, 51 A. at 112
    (defining a wager as
    "an agreement between two or more that a sum of money or some
    valuable thing, in contributing which all agree to take part, shall
    -15-
    become the property of one or some of them on the happening in the
    future of an event at the present uncertain").
    On the other hand, there is a strong counterargument: a
    rule requiring an insurable interest for the Policy could also
    sweep up any contract with a death benefit.                That result would
    propel    the     insurable    interest      requirement    far     beyond      the
    traditional province of life insurance.
    Furthermore, the connection between ADM's wagering gain
    and the life of the annuitant is indirect.                 In a typical life
    insurance wager, there is a direct correlation between the timing
    of the insured's death and the policy owner's reward.                     Here, by
    contrast, the primary source of anticipated gains is apt to come by
    way of market performance; the predictably short life of the
    annuitant simply hedges against the possibility of investment
    losses.    This may be a relevant distinction: one might be hard-
    pressed to say that an owner who pays $1,000,000 in premiums plus
    death benefit fees for an annuity and is assured of receiving no
    less   than     $1,000,000    (plus   interest)   upon     the    death    of   his
    annuitant is much of a gambler.
    In sum, we find three aspects of the insurable interest
    question puzzling.       First, we are uncertain as to how best to
    classify the Policy (as an annuity, a life insurance contract, or
    a hybrid).      Second, we are uncertain as to whether the absence of
    an insurable interest renders the Policy infirm.                  Third, we are
    -16-
    uncertain as to whether the Policy constitutes an unenforceable
    wagering contract.
    B.    The Incontestability Question.
    The second issue with which we are concerned revolves
    around the Policy's incontestability clause.              On its face, that
    clause appears to bar any challenge, including one based on the
    lack of an insurable interest, to the validity of the Policy.            But
    this case presents two potential obstacles to such an unconditional
    reading.
    The threshold obstacle is the possibility that Rhode
    Island     public        policy   would     refuse   to    countenance    an
    incontestability clause — like this one — that wholly eliminates
    any contestability period.        The Rhode Island Supreme Court has not
    spoken definitively to this question, and courts elsewhere are
    divided.    See 16 Richard A. Lord, Williston on Contracts § 49:95
    (4th ed. 2013).
    The Rhode Island cases dealing with incontestability
    clauses have sent mixed messages.           For example, the Rhode Island
    Supreme Court has observed that a two-year incontestability clause
    is "not an absolute stipulation to waive all defenses and to
    condone fraud."      Murray v. State Mut. Life Ins. Co., 
    48 A. 800
    , 800
    (R.I. 1901) (dictum).        This dictum is suggestive, especially since
    the fear of condoning fraud has led some courts to refuse to
    enforce incontestability clauses analogous to the clause at issue
    -17-
    here.    See, e.g., Reagan v. Union Mut. Life Ins. Co., 
    76 N.E. 217
    ,
    218 (Mass. 1905).
    But    Murray   offers    some   solace     to   proponents    of    an
    incontestability         clause     that    does    away    entirely     with      any
    opportunity to contest the bona fides of a policy (what we shall
    call an "immediate" incontestability clause).                    There, the court
    emphasized the importance of holding the underwriter of a policy to
    its     duty    "to    fulfill     its     plain    and    deliberately      assumed
    
    obligation." 48 A. at 801
    .         This emphasis might be seen as
    favoring the literal enforcement of incontestability clauses,
    particularly those that operate in favor of the insured.                   Cf. R.I.
    Gen. Laws § 27-4-6.2(a) (condoning in the life insurance context
    contracts that are "more favorable to policyholders" than that
    required by statute).
    In addition, the special risk of fraud associated with
    immediate incontestability clauses may be offset by a built-in
    protection.            Thus,      some     courts    have       upheld    immediate
    incontestability clauses, noting that the insurer had an unlimited
    time, prior to issuing the policy, to investigate the incidence of
    fraud.    See, e.g., Pac. Mut. Life Ins. Co. v. Strange, 
    135 So. 477
    ,
    478 (Ala. 1931).
    Even if the potential obstacle presented by the immediacy
    of an incontestability clause can be overcome, an issue remains as
    to the force of such a clause with regard to a defense premised on
    -18-
    the lack of an insurable interest.        This, too, is an issue that is
    largely unaddressed in Rhode Island case law — and there is no
    consensus across other jurisdictions.
    A majority of courts hold "that a life insurance policy
    lacking an insurable interest is void as against public policy and
    thus never comes into force, making the incontestability provision
    inapplicable."    PHL Var. Ins. Co. v. Price Dawe 2006 Ins. Trust ex
    rel. Christiana Bank and Trust Co., 
    28 A.3d 1059
    , 1065, 1067 n.18
    (Del. 2011) (collecting cases); see also 7 Lord, supra, § 17:5.
    Cronin — a century-old decision that did not specifically address
    the   insurable    interest     requirement      in   the   context   of    an
    incontestability clause — hints that Rhode Island might align
    itself with this view.      See 
    Cronin, 40 A. at 497
    (commenting, in
    dictum, that "a purely speculative contract on the life of another
    . . . may properly be held to be void").
    Some    courts,     however,    have   held   that   an   insurable
    interest defense cannot trump an incontestability clause.                  See,
    e.g., Bogacki v. Great-West Life Assurance Co., 
    234 N.W. 865
    , 865-
    67 (Mich. 1931).    These courts hold that the lack of an insurable
    interest renders an insurance policy merely voidable, not void ab
    initio, so that an insurable interest defense can be defeated by an
    incontestability clause. See, e.g., New Eng. Mut. Life Ins. Co. v.
    Caruso, 
    535 N.E.2d 270
    , 272-73 (N.Y. 1989); cf. Monast v. Manhattan
    Life Ins. Co., 
    79 A. 932
    , 936 (R.I. 1911) (deeming it "clear both
    -19-
    upon principle and authority that a life insurance policy is not
    void because the premiums have been paid . . . by one having no
    insurable interest in the life of the assured").                    This minority
    position has evolved subsequent to the Cronin dictum.
    For all of these reasons, we conclude that it is fairly
    debatable     whether      Rhode    Island    would     permit      an   immediate
    incontestability provision to thwart the assertion of a defense
    predicated on the absence of an insurable interest.
    III.   CERTIFICATION
    Against this chiaroscuro backdrop, we certify to the
    Rhode Island Supreme Court the following questions:
    1.    If the owner and beneficiary of an annuity with a
    death benefit is a stranger to the annuitant, is the annuity infirm
    for want of an insurable interest?
    2. Does a clause in an annuity that purports to make the
    annuity incontestable from the date of its issuance preclude the
    maintenance      of   an   action   based    on   the   lack   of   an   insurable
    interest?
    We wish to make it clear that these questions may be
    considered in whatever sequence the Rhode Island Supreme Court
    prefers and that a particular answer to one question may obviate
    the need for answering the other.             We also wish to make it clear
    that we would welcome the advice of the Rhode Island Supreme Court
    on any other aspect of Rhode Island law that the Justices believe
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    should be clarified in order either to aid in the proper resolution
    of the certified questions or to give context to their response.
    The Clerk of this court is directed to transmit to the
    Rhode Island Supreme Court, under the official seal of this court,
    a copy of the certified questions and this accompanying memorandum,
    along with a copy of the district court record and copies of all
    briefs and appendices heretofore filed in this court.            We stay
    proceedings before us, while retaining jurisdiction, pending the
    Rhode   Island   Supreme   Court's   determination   of   the   certified
    questions.
    So Ordered.
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