Summary
finding the insurer did not breach the insurance policy's exchange provision because “surrender of the policy, a prerequisite for the exchange provision, may only occur prior to the Maturity Date,” which was February 17, 2019, but the insured “made no demands . . . concerning the exercise of a policy exchange until May 2019, several months after the maturity date”
Summary of this case from Rosenberg v. Nassau Life & Annuity Co.Opinion
20-CV-2545 (GRB)
2021-09-09
Leonard IACONO, on behalf of himself and all others similarly situated, Plaintiff, v. RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK ; Pat Posts 1-10 and ABC Corps. 1-10 (names being fictitious and unknown), Defendants.
Joshua Scott Bauchner, Seth Michael Rosenstein, Ansell Grimm & Aaron, P.C., Woodland Park, NJ, Steven C. Shuman, Pro Hac Vice, Engstrom, Lipscomb & Lack, Los Angeles, CA, for Plaintiff. David T. McDowell, Pro Hac Vice, Jason Richardson, Pro Hac Vice, Nathan Richardson, Pro Hac Vice, Edison McDowell & Hetherington, Houston, TX, for Defendant ReliaStar Life Insurance Company of New York.
Joshua Scott Bauchner, Seth Michael Rosenstein, Ansell Grimm & Aaron, P.C., Woodland Park, NJ, Steven C. Shuman, Pro Hac Vice, Engstrom, Lipscomb & Lack, Los Angeles, CA, for Plaintiff.
David T. McDowell, Pro Hac Vice, Jason Richardson, Pro Hac Vice, Nathan Richardson, Pro Hac Vice, Edison McDowell & Hetherington, Houston, TX, for Defendant ReliaStar Life Insurance Company of New York.
MEMORANDUM OF DECISION & ORDER
GARY R. BROWN, United States District Judge:
In this putative class action, plaintiff brings claims of breach of the implied covenant of good faith and fair dealing, fraudulent concealment, and improper business practices under New York General Business Law § 349 based upon a disputed exchange provision of a life insurance policy. Defendants seek judgment on the pleadings. DE 19. This otherwise complex determination has been rendered relatively straightforward as the result of a thoughtful and persuasive examination of the very same policy provision by Judge Alison Nathan in the Southern District of New York under slightly different factual circumstances. Wiseman v. ING Groep, N.V. , No. 16-cv-07587 (AJN), 2017 WL 4712417 (S.D.N.Y. 2017).
The Court dismissed a claim for breach of contract at an earlier juncture. Docket Entry ("DE") 18. In Wiseman , Judge Nathan similarly held that the plaintiff had not stated a plausible breach of contract claim. 2017 WL 4712417, at *7 ("The Court concludes that Plaintiff's insurance contract unambiguously required the Insurers to exchange the policy only for another policy that it offered at the time of the exchange, and that the Insurers therefore did not breach the terms of the contract.")
Background
Plaintiff commenced this action in June 2020 via the filing of a complaint alleging that:
Taking the etymological initiative, the complaint refers to "deceptive practices" by defendants, noting "[t]he terms ‘deceptive,’ ‘deceive,’ ‘deceptively,’ and ‘deception’ encompass other descriptive terms, including various forms of the words: mislead, misrepresent, untrue, unfair, false, disparage, and unlawful." Id. at n. 1. Such verbosity can render one speechless.
Plaintiff Iacoco acquired a "Flexible Premium Adjustable Life Policy" from Lincoln Security Life Insurance Company, the predecessor by merger of defendant ReliaStar Life Insurance Company of New York ("ReliaStar"), which provided a "death benefit of $178,000 ("the Policy")." DE 1 ¶ 10. That Policy included the following provision:
EXCHANGE: You may exchange this Policy for a new Policy. Such exchange may be to any plan of whole life or endowment that we issue at the time of the exchange [with certain exceptions].
Written notice for such exchange must be given to us 31 days in advance. Evidence of insurability will not be required; this Policy must be surrendered. The amount of insurance on the new Policy may be for any amount up to, but not more than, (a), plus (b), less (c), where:
(a) is the current amount of the Insured's Death Benefit under this Policy.
(b) is the cash value of the new Policy on the Date of Exchange.
(c) is the then current cash value of this Policy.
We will issue the new Policy in the same premium rate class as this Policy. We will calculate the premium for the new Policy according to the rates in effect for the age and premium rate class of the Insured at the time of exchange. All plans of insurance available for exchange are subject to plan requirements. Such new Policy will be effective on the date of termination of this Policy.
MATURITY DATE DEFINED: The Maturity Date is the date on which the Policy matures. It is also the latest date on which you may elect to terminate coverage, to stop paying premiums, and to start receiving any remaining cash surrender value. This provision is referred to in this Complaint as the "Exchange Option".
Id. ¶ 11. In or about 2016, ReliaStar ceased its sales of whole life or endowment policies, without providing notice to policyholders, including the plaintiff. Id. ¶ 13. In early 2019, defendants notified plaintiff that the policy would mature on February 17, 2019. Id. ¶ 14. At that point, plaintiff would not pay any additional premiums, and the "death benefit" would essentially revert to the cash value (called "Net Account Value") of approximately $2,500. Id. The complaint alleges that the plaintiff did not receive the letter until after the Maturity Date, but it had been communicated to him by May 2019. Id. ¶ 16.
That same month, a consultant wrote to ReliaStar on plaintiff's behalf, inquiring about the exchange option. Id. Defendants explained in correspondence that the exchange option was not available as ReliaStar had not sold the policies described therein "for many years." Id. ¶¶ 16-19. The complaint describes several letters exchanged between plaintiff's consultant and defendants. Id. However, it does not describe them completely.
Because, like the policy itself, these documents are referenced in the complaint, they may fairly be considered by the Court on a Rule 12(c) motion. See L-7 Designs, Inc. v. Old Navy, LLC , 647 F.3d 419, 422 (2d Cir. 2011) (holding that on a motion for judgment on the pleadings, a court may, in addition to the complaint itself, consider "any written instrument attached to it as an exhibit, materials incorporated in it by reference, and documents that, although not incorporated by reference, are ‘integral to the complaint") (citation omitted).
In their answer, defendants make additional factional allegations which appear supported by exhibits. DE 11. The maturity date of February 17, 2019 was printed in the policy, and documents reflecting this date were periodically sent to plaintiff as early as 2013. DE 11-1 at 5, Exs. 2-4. Plaintiff made no demands of ReliaStar concerning exercise of a policy exchange until May 2019, several months after the maturity date. DE 11 at 8, ¶ 8. This becomes critical because, by the policy terms, surrender of the policy, a prerequisite for the exchange provision, may only occur "prior to the Maturity Date." DE 11-1 at 13. Notwithstanding its position that the exchange option had expired, in September 2019, ReliaStar offered plaintiff a whole life policy that provided $178,000 in coverage up to age 121. DE 11 at 8, ¶ 9 (citing Ex. 6). Plaintiff refused this accommodation. Id. ¶ 10. Thus, defendants assert (and it appears undisputed) that plaintiff failed to exercise the exchange option provision before the Policy's maturity date and refused ReliaStar's offer to honor the exchange provision thereafter. DE 11 at 9. ¶ 11.
Plaintiff's counsel argues that the annual premium of the policy offered - $76,418 – undermines its legitimacy. However, the policy makes no representations concerning the pricing of an exchange policy, and it cannot be said that this premium, while high, is commercially unreasonable for the provision of a $178,000 death benefit to a 95-year old insured.
Discussion
Implied Covenant of Good Faith and Fair Dealing
"Under New York law, a covenant of good faith and fair dealing is implied in all contracts." State Street Bank & Trust Co. v. Inversiones Errazuriz Ltd. , 374 F.3d 158, 169 (2d Cir. 2004) (citation omitted). "Encompassed within the implied obligation of each promisor to exercise good faith are any promises which a reasonable person in the position of the promisee would be justified in understanding were included." Dalton v. Educ. Testing Serv. , 87 N.Y.2d 384, 389, 639 N.Y.S.2d 977, 663 N.E.2d 289 (1995) (citation omitted). "This covenant embraces a pledge that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract." State Street Bank & Trust Co. , 374 F.3d at 169.
In Wiseman , Judge Nathanson found that the plaintiff had adequately alleged a breach of the implied covenant of good faith and fair dealing. 2017 WL 4712417 at *8. Specifically, he found that a reasonable policyholder would assume that the insurer would either "maintain a generally available policy for which she could exchange her original policy or ... notify her when she would no longer be able to exchange her policy because [she] was no longer eligible for the remaining whole life policies." Id. The same could be said of the instant case. However, factual differences between this case and Wiseman prove critical.
The allegations in Wiseman established that the policyholder, well before the maturity date of the subject policy, twice called the insurer to exercise the exchange option. Customer service representatives accepted the exercise and waived any written notice. Id. , Nevertheless, plaintiffs followed up with written correspondence, thrice exercising the option; each time representatives accepted the notice. Id. at *2-3. Only after plaintiff exercised the option for a third time did the Company advise her by letter that it sold no appropriate policies. Id. The allegations expressly provided that Wiseman plaintiffs paid premiums for 25 years partially in reliance on the exchange provision, which they had anticipated exercising the option before the policy's maturity date. Id.
The facts here differ significantly. First, there is no allegation that plaintiff had relied upon the exchange option in any meaningful respect and, more importantly, never tried to exercise such option. In fact, the allegations provide that plaintiff did not even make an inquiry about the option until well after the maturity date of the policy. Moreover, here the insurer offered to provide an exchange policy to plaintiff notwithstanding its view of the circumstances, yet plaintiff declined the offer. Thus, it cannot be said that defendants did "anything which will [have had] the effect of destroying or injuring the right of the other party to receive the fruits of the contract." State Street Bank & Trust & Co. , 374 F.3d at 171. Therefore, defendants did not breach a covenant of good faith and fair dealing under New York law.
Fraudulent Concealment
Plaintiff's claim for fraudulent concealment fails for the same reasons. To successfully allege this theory, plaintiff must set forth, among other things, reliance and damages. Brass v. Am. Film Techs., Inc. , 987 F.2d 142, 152 (2d Cir. 1993) ("a claim of fraudulent concealment must allege not only (1) that the defendant failed to meet its duty to disclose, but also (2) that the defendant had an intent to defraud or scienter, (3) there was reliance on the part of the plaintiff, and (4) damages"). Here, where plaintiff claims that ReliaStar failed to make certain disclosure at the time of maturity, plaintiff can demonstrate neither reliance nor damages, as he failed to timely exercise the option and eschewed such option when it was offered to him.
New York General Business Law § 349 Claim
New York General Business Law § 349 prohibits "[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service" within the state. N.Y. Gen. Bus. Law § 349(a). In order to state a claim under this statute, a plaintiff must aver that "the defendant has engaged in conduct that was (1) consumer oriented; (2) deceptive or misleading in a material way; and (3) the plaintiff suffered injury as a result." Nials v. Bank of Am. , No. 13-cv-5720 (AJN), 2014 WL 2465289, at *3 (S.D.N.Y. May 30, 2014).
The Wiseman decision also proves dispositive of plaintiff's claim under § 349. Judge Nathan found that plaintiff's claim – measured from the purchase of the policy – was barred by the statute of limitations and equitable tolling could not revive that claim. 2017 WL 4712417 at *10 (noting that "injury is interpreted as the purchase of a product that does not meet the represented specifications" and that "plaintiffs are not entitled to equitable tolling of the statute of limitations when they do not act with reasonable diligence by investigating the defendant's potential misleading statements"). Plaintiff's attempt to distinguish this case by suggesting that his GBL claim is based on "the secret elimination of the whole life and endowment products without notice to any policyholders" proves unpersuasive. DE 19-3 at 21. The exercise of any diligence by plaintiff at a relevant juncture – such as placing a phone call to the company to inquire about other available policies – would have revealed the so-called secret. Therefore, the claim is time-barred and not subject to equitable tolling.
Even measured from the alleged date of the elimination of the policy lines in 2016, the action still proves untimely.
In light of the findings herein, the Court need not reach the question of declaratory judgment which according to plaintiff, would only effect other members of the putative class.
Conclusion
Based on the foregoing, defendants’ motion for judgment on the pleadings is granted in all respects.