858 F. Supp. 2d 290
S.D.N.Y.2012Background
- Plaintiffs Fleisher and Berck, trustees of NY insurance trusts, sue Phoenix for PAUL policies (Loeb and Moss) owned by the trusts.
- PAUL policies permit COI rate changes based on enumerated factors and must be applied uniformly across insureds; COI increases were alleged to be based on policy value rather than enumerated factors.
- First COI Increase (March 2010) affected ~700 policies, raising premiums and reducing interest on accumulated value for some policyholders, including Loeb.
- Second COI Increase (October 2011) affected ~1,400 policies, including Moss, with effect on or after certain policy anniversaries; alleged to be not uniformly applied and targeted.
- Plaintiffs allege these COI increases breach the express terms, breach the implied covenant of good faith, violate NY GBL § 349, and seek declaratory relief.
- Phoenix moved to dismiss Counts Two, Three, and Four; Court applies New York law and has CAFA-based jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Implied covenant vs. contract | Plaintiffs claim the covenant rests on distinct marketing/premiums issues not duplicative. | Count Two duplicative of Count One; implied covenant cannot stand where contract breach is pled on the same facts. | Dismissed as duplicative. |
| Declaratory judgment claim viability | Seeks prospective declarations about COI increases to guide future conduct. | Declaratory relief would be duplicative and not provide a better remedy. | Dismissed; no useful purpose for declaratory relief. |
| NY GBL § 349 injury requirement | COI increases injure policyholders by reducing value and forcing higher premiums or lapses. | Injury is not independent of contract; claims duplicate breach. | Dismissed for lack of independent injury. |
| CAFA jurisdiction retained | CAFA authorization exists due to class size and damages. | Not challenged; court to determine adequacy under CAFA. | CAFA jurisdiction acknowledged; not dispositive of the dismissal rulings. |
Key Cases Cited
- Spagnola v. Chubb Corp., 574 F.3d 64 (2d Cir. 2009) (injury under § 349 must be independent of contract)
- Murphy v. American Home Prods. Corp., 58 N.Y.2d 293 (N.Y. 1983) (implied covenant cannot broaden contract terms; redundancy with contract claims)
- Oswego Laborers’ Local 211 Pension Fund v. Marine Midland Bank, 85 N.Y.2d 20 (N.Y. 1995) (factors for consumer-oriented § 349 analysis)
- Texaco A/S (Denmark) v. Commercial Ins. Co. of Newark, N.J., 160 F.3d 124 (2d Cir. 1998) (choice of law when forum law; implicit agreement yields NY law)