Life, Annuities, Health, and Disability Products and Plan Litigation

DOCB specializes in nationwide individual life and disability product litigation, with a particular emphasis on New York, New Jersey, Pennsylvania and Texas. With a deep understanding of life insurance companies gained from serving as both inside and outside counsel for over 25 years, we proactively represent our clients in a variety of actions including:

• Rescission actions.
• Interpleader matters.
• Breach of contract claims.
• Bad faith claims.
• Lapse actions.
• Sales practice matters.
• Stranger-Owned Life Insurance (STOLI).
• Life and disability claim litigation, including suicide and other exclusions and disability waiver of premium riders.

Representative Matters:

• Obtained judicial rescissions of life insurance policies based on material misrepresentations through motion, trial and/or appeal:
  • New York appellate victory holding that the insurer must have actual, not constructive, knowledge of misrepresentation during underwriting. New York Court of Appeals denied a motion for leave to appeal to the Court of Appeals based on alleged post claim underwriting.
  • Third Circuit Court of Appeals victory affirming summary judgment rescinding a million-dollar policy based upon material misrepresentations where the plaintiff’s primary argument was that the insured did not understand the English language.
  • New York County trial court granting partial summary judgment finding that the inability to understand the English language was not a defense and dismissing extra-contractual damage claims. The Court directed that the rescission case be heard by the court, not a jury, and the court rendered judgment in the insurer’s favor after trial.
  • New Jersey Superior Court granting summary judgment rescinding a life insurance policy based upon health misrepresentations, holding that where the applicant complained to his doctor of chest pain and the applicant’s physician diagnosed the applicant with a shoulder injury, the applicant’s negative response to a question pertaining to whether he sought treatment for chest pain was nonetheless a material misrepresentation.
  • New Jersey Appellate victory affirming rescission of life policy based on material financial misrepresentations. Trial and appellate courts rejected the claim that tax returns did not reflect earnings, and that misrepresentation as to existing other insurance was not material.
  • New York County trial court granting summary judgment rescinding a life insurance policy, finding that the insured’s misrepresentation in the application for insurance concerning his annual earned income was material and unambiguous.

• Successfully litigated breach of contract claims involving lapsed policies, suicide exclusions, foreign death claims, and fraudulent schemes including:
  • New York Appellate Division affirming trial court holding that the insurer had six years to rescind the policy under the New Jersey Fraud Prevention Act, based on a speculative policy scheme. Trial Court also found that the premium payer’s misrepresentations were contrary to anti-money laundering and Patriot Act requirements.
  • Successfully resolved several litigations regarding the applicability of the suicide exclusion based on New York, Connecticut, and New Jersey presumptions after third-party subpoena discovery.
  • New York Appellate Division decision affirming trial court dismissal of a complaint seeking benefits under a lapsed policy, rejecting the beneficiary’s claim that the grace period to pay premiums was extended by the agent, who did not have the authority to extend the grace period.
  • Successfully litigated lapse cases alleging improper notice of lapse.
  • Successfully litigated foreign death claims, including in the interpleader context.

• Successfully litigated varied individual disability claims including:
  • Cases involving limitation of liability on disability policies concerning disputes regarding the interpretation of contractual terms, billing codes, and medical conditions.
  • A decision in the insurer’s favor after trial in SDNY challenging the decision to rescind a disability policy after the two-year contestability period. Judge Rakoff determined that insured (a physician) acted with fraudulent intent and those misrepresentations continued in her trial testimony. The Second Circuit affirmed.
  • Numerous resolutions of claims for individual disability benefits after discovery, including social media.
  • New York Supreme Court dismissal of multimillion-dollar disability waiver of premium claim and resolution of disability waiver of premium claim where there were allegations of misrepresentations by customer service.
  • Resolution of New York trial court disability action where the plaintiff attempted to extend coverage of the disability policy covering “outpatient surgery,” to include certain types of non-covered injections.

• Successfully litigated matters involving the agent/sales representative:
  • New York Appellate Division affirming summary judgment holding that an agent has no fiduciary duty to a beneficiary of a life insurance policy.
  • New York County trial court dismissing an action brought by an investor alleging the sales representative committed fraud in connection with variable life and annuities products.
  • Eastern District of New York granting summary judgment rescinding a life insurance policy based on financial misrepresentations, holding that an insurer is not estopped based on an agent’s knowledge of the misrepresentation.
  • New York County trial court granting summary judgment rescinding a life insurance policy, finding that the agent’s alleged knowledge of a material misrepresentation cannot be imputed to the company, as the insurer “could not be held responsible for … knowledge of an unfaithful employee.”

Stranger-Owned Life Insurance Policies

DOCB has successfully defended life insurers in claims brought by speculators in life insurance policies (commonly known as stranger-owned life insurance or “STOLI” policies). These matters require analyses of our clients’ policies and guidelines regarding lapses, notices and reinstatements. Litigants typically present complicated technical arguments to avoid the company’s determination that these policies have lapsed for various reasons. Over time and with the exception of a few states, the law has changed in favor of insurers, allowing them to rescind fraudulently obtained policies by speculators after the expiration of the two-year contestability clause.

For example, one of DOCB’s clients was recently sued in a New York multi-party action where various investors in multimillion-dollar life insurance policies had allegedly secured multimillion-dollar loans with life insurance policies. The investors executed various life insurance documents to purportedly assign the policies away from the creditors. The issues also included a $6M SEC Receiver lien on the $15M policy due to the investor schemes of the insured. After the insured died in prison, the SEC Receiver moved in the United States District Court for the Southern District of Florida to enforce its lien, notwithstanding the competing claims to the entire policy made by the other entities. The Federal Judge brought all of the claimants before him and, pursuant to the client’s request, was able to order the consent of the parties to pay the SEC Receiver and file an interpleader action in the United States District Court for the Southern District of New York with respect to the remaining $9M.

While a receiver had been appointed in a related action in New York State Supreme Court, through DOCB’s efforts, the court agreed that the client was not required to deposit the remaining death benefit with the receiver because one of the entities had already avoided the receivership order by wrongfully seizing the death benefits from a policy with another company, leaving that company open to paying twice.

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