MH Wins Summary Judgment in New York Federal Court
Brooklyn, NY – On May 31, 2023, just weeks before the 6-year anniversary of the commencement of litigation, MH obtained a summary judgment in favor of the firm’s life insurance client in a case asserting breach of contract claims based on a 2011 cost of insurance (COI) rate increase by a plaintiff that opted out of an earlier class settlement and filed suit in the Eastern District of New York.
After amending its complaint, the plaintiff sued on a total of 53 universal life insurance policies with over $315 million of face value. MH successfully pressured the plaintiff to voluntarily drop certain claims, with the remaining dispute centered on a subset of the portfolio subject to a COI rate increase in 2011. The plaintiff specifically challenged the rate increase for allegedly discriminating unfairly within a class of insureds and improperly recouping prior losses. The plaintiff sought to recover damages that included a portion of the death benefits for policies whose insureds died after the rates were increased and the policies lapsed. After obtaining orders excluding the plaintiff’s damages expert and much of the proposed opinions of the plaintiff’s actuarial expert, MH obtained complete summary judgment in favor of its insurance client and defeated the plaintiff’s motion for summary judgment in full.
The plaintiff argued that the 2011 COI rate increase recouped prior losses by considering future projected profits using new assumptions from the date of issuance rather than from the date of the cost of insurance rate increase. The court held that the plaintiff failed to present admissible evidence rebutting the defendant’s evidence that it did not recoup prior losses or in support of its breach theory. The plaintiff also argued the insurer breached by considering factors not permitted by the policies when it determined the rate increases, namely premium funding levels. Although it was disputed whether the plaintiff actually pleaded this breach theory, the court held that the policies expressly permitted the insurer to consider its expectations of future “investment earnings,” which necessarily encompasses expected future premium funding levels because those premiums will be used to achieve investment earnings.
On the central issue of whether the 2011 COI rate increase discriminated unfairly within a class of insureds, the plaintiff argued that the insurer discriminated unfairly by only applying the rate increase to policies at face amounts of $1 million or more and insureds at certain ages, rather than to all policies in the product series regardless of face amount or insured ages. The court rejected the plaintiff’s theory that applying the rate increases only to some policies was necessarily a breach and agreed with the insurer that the phrase “discriminate unfairly” in the insurance context means “discrimination that lacks an actuarial basis.” Using this definition, the court further held that the plaintiff failed to provide admissible evidence disputing the testimony of the defendant’s actuarial expert that the COI rate increases were actuarially justified, and therefore failed to raise a material dispute of fact concerning whether the rate increases complied with relevant actuarial practices.
MH’s Houston office achieved this complete victory, with partner Jarrett Ganer and associates Hutson Smelley and Steven Correa playing key roles.
Read the opinion by following this link: https://www.govinfo.gov/app/details/USCOURTS-nyed-1_17-cv-03527/USCOURTS-nyed-1_17-cv-03527-2
Originally Published on June 8, 2023