Ophir Johna

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Ophir Johna is a senior associate in the firm’s Los Angeles office, where his practice focuses on representing life, health, and disability insurers in coverage disputes and “bad faith” lawsuits in state and federal courts. Mr. Johna also has significant experience providing coverage advice to, and defending, commercial and personal lines insurance carriers, as well as defending insurance brokers in professional negligence actions.
Mr. Johna has successfully defended insurers at all phases of litigation including summary judgment and trial, having participated in jury trials in state and federal court.
While in law school, Mr. Johna served as a judicial extern to the Honorable Consuelo B. Marshall, Chief Judge of the United States District Court, Central District of California, as well as to the Honorable Paul Gutman, Presiding Judge of the Los Angeles County Superior Court, Northwest District.


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Department of Insurance Issues Emergency STOLI Regulations

Effective July 29, 2010, less than a month after California’s first Stranger Originated Life Insurance (“STOLI”) legislation, Senate Bill 98, took effect, the California Department of Insurance (“DOI”) issued emergency regulations designed to implement the legislation. 

As previously reported, Senate Bill 98 proscribes STOLI transactions (defined as “act[s], practice[s], or arrangement[s] to initiate the issuance of a life insurance policy in this state for the benefit of a third-party investor who, at the time of policy origination, has no insurable interest, under the laws of this state, in the life of the insured”) and restricts the transfer of life insurance policies during the first two years after their issuance.

The DOI’s proposed regulations delineate procedures for the licensing of life settlement providers and brokers, specify forms for provider and broker applications and set forth procedures for the filing of life settlement forms with the Insurance Commissioner prior to use. 

The proposed regulations also mandate certain disclosures to consumers, including the availability of alternatives to life settlement, the possible tax consequences of a life settlement and the potential limitations on the insured’s ability to obtain additional life insurance following a life settlement.

Other states continue to join California in enacting STOLI legislation; Wisconsin and New Hampshire passed similar STOLI legislation in May and June 2010, respectively.

NAIC to Address Stranger-Owned Annuities in Public Hearing

One month from today, the National Association of Insurance Commissioners (“NAIC”) will hold a meeting to address Stranger Originated/Owned Annuities (“STOA”). Similar to Stranger Originated/Owned Life Insurance (“STOLI”), STOA transactions often involve seniors and terminally ill individuals who were induced to purchase annuities largely for the benefit of an investor. The NAIC is “determined to address how individuals are being affected by these new transactions and whether new or modified current laws or regulations are necessary to protect consumers,” stated Thomas R. Sullivan, NAIC’s Life Insurance and Annuities Committee Chairman and Connecticut’s Insurance Commissioner. The May 20th public hearing in Washington, D.C. is expected to include testimony from consumers, state regulators and industry representatives.

State legislatures across the country have focused in recent years on the enactment of STOLI regulations. For example, California enacted its first legislation in October 2009, classifying the underlying transactions as fraudulent. Experts report that STOA could be the subject of similar legislation in the near future. However, the NAIC’s investigation and possible regulation of STOA would be limited to transactions involving insurance, because transactions involving variable annuities are outside the state insurance commissioners’ regulatory authority; they are instead regulated by the Securities and Exchange Commission and the Financial Industry Regulatory Authority.
 

Better Late Than Never: California Finally Enacts State's First STOLI Legislation

More than a year after vetoing Senate Bill 1543 and vowing to work to pass similar legislation “quickly,” California Governor Arnold Schwarzenegger signed Senate Bill 98 into law on October 11, 2009. As the rejected Senate Bill 1543 sought to do, the new law defines Stranger-Originated Life Insurance (“STOLI”) transactions as “an act, practice, or arrangement to initiate the issuance of a life insurance policy in this state for the benefit of a third-party investor who, at the time of policy origination, has no insurable interest, under the laws of this state, in the life of the insured.” The new law proscribes STOLI transactions as fraudulent, and allows the Department of Insurance to collect information from life settlement providers that will help it to monitor the market and to identify STOLI transactions. It also restricts most transactions within the first two years of a policy.

Finally, the new law adds a component the absence of which reportedly led to the rejection of Senate Bill 1543: It mandates specific disclosures to consumers, including alternatives to life settlements, and requires the licensing of professionals who transact life settlement contracts.

The law – California’s first STOLI legislation – makes California one of 26 states to enact laws regulating STOLI. Similar legislation is pending in 13 other states.

See also STOLI news post

Health & Safety Code Only Required Blue Cross to "Offer" to Provide Infertility Group Coverage

The Court of Appeal recently interpreted the infertility treatment provisions of Health and Safety Code section 1374.55 in Yeager v. Blue Cross of California, __ Cal. Rptr. 3d __, 2009 WL 2033209 (July 15, 2009). Yeager sued Blue Cross, alleging that it violated its duty under section 1374.55 to offer coverage for infertility treatment in the group plan that Blue Cross provided through Yeager’s employer, Westmont College. Blue Cross moved for summary judgment, arguing that it complied with section 1374.55 by offering optional coverage of up to $2,000 a year for half the cost of each group member’s infertility treatment, which Westmont College declined to purchase for cost-related reasons. The trial court granted summary judgment, and Yeager appealed.

The Court of Appeal held that section 1374.55 – which states that “every health care service plan contract . . . shall offer coverage for the treatment of infertility . . . under those terms and conditions as may be agreed upon between the group subscriber and the plan” – merely obligated Blue Cross to offer coverage for infertility treatment, and left the amount and cost of that coverage to agreement between Blue Cross and Westmont College. Thus, the court agreed that Blue Cross complied with the statute.

 

 

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Quarter-Way Through 2009, Still No Signs Of STOLI Legislation For California

Like most other states, California has experienced a spike in stranger-originated life insurance transactions, a relatively recent and emerging phenomenon commonly known as “STOLI.” As the name suggests, STOLI transactions are initiated by a third-party investor who does not have an insurable interest in the insured’s life. The policy’s premiums are funded by the investor, and the insured – usually a wealthy and elderly individual – receives a large cash payment up front in exchange for an agreement to transfer full ownership of the policy to the investor within a short period of time after the policy’s issuance or, in some cases, at the expiration of the policy’s two-year contestability period.

The insureds in a STOLI scheme usually are unaware that the large policy may reduce, if not eliminate, their ability to obtain other life insurance coverage for the benefit of their loved ones. And according to some, one of the problems STOLI transactions present for life insurers is that most insurers’ premium rates are based in part on statistical lapse rates – considerations that do not apply when a policy is secretly funded by an investor, as is the case with STOLI transactions.

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