Preview
FILED: ROCKLAND COUNTY CLERK 05/15/2024 11:27 PM INDEX NO. 032514/2023
NYSCEF DOC. NO. 87 RECEIVED NYSCEF: 05/15/2024
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF ROCKLAND
ESTER ARONSON, ESTER ARONSON in her
capacity as Trustee for the BEN ARONSON 2020 Index No. 032514/2023
INSURANCE TRUST, BARUCH ARONSON, and
BARUCH ARONSON in his capacity as Trustee for Justice Christie L. D’Alessio
the ESTER ARONSON 2020 INSURANCE TRUST,
Plaintiffs, Oral Argument Requested
-against-
BRAVE STRATEGIES, LLC, PENN MUTUAL LIFE
INSURANCE COMPANY, MASSMUTUAL LIFE
INSURANCE COMPANY, and NEW YORK LIFE
INSURANCE COMPANY,
Defendants.
PLAINTIFFS’ MEMORANDUM OF LAW IN OPPOSITION TO THE
INSURER DEFENDANTS’ MOTION TO DISMISS THE FOURTH CAUSE OF ACTION
SWEETNAM, SCHUSTER &
SCHWARTZ, LLC
200 Vesey Street
Brookfield Place, 24th Floor
New York, New York 10281
Attorneys for Plaintiffs
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TABLE OF CONTENTS
Page
PRELIMINARY STATEMENT .....................................................................................................1
STATEMENT OF FACTS ..............................................................................................................2
ARGUMENT ...................................................................................................................................3
I. PLAINTIFFS PROPERLY ALLEGE A GBL § 349 CLAIM AGAINST
THE INSURER DEFENDANTS, WHICH CANNOT BE DISMISSED .......................... 4
A. Violations Of Regulation 187 Are Deemed Deceptive Acts Or Practices"
That Are Actionable Under GBL § 349 ................................................................. 5
B. GBL § 349 Claims Are Proper To Redress Deceptive Acts Or Practices
Prohibited By Other Laws That Do Not Have A Private Cause Of Action ............ 7
C. Plaintiffs Have Sufficiently Alleged A GBL § 349 Claim
Against Insurer Defendants Independent Of Regulation 187 ................................. 9
D. Insurer Defendants Erroneously Assert That Plaintiffs Allege
A Private Cause Of Action Under Regulaton 187 ................................................ 13
CONCLUSION ..............................................................................................................................15
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TABLE OF AUTHORITIES
Page(s)
Cases
Abraham v. Tortai,
219 A.D.3d 1275 (2d Dep’t 2023) ...........................................................................................10
Bloom v. Nationstar Mortg.,
73 Misc.3d 327 (Sup. Ct. Orange Cnty. 2021) ..........................................................................6
Cathy Daniels, Ltd. v. Weingast,
91 A.D.3d 431, 432–33 (1st Dep’t 2012) ..........................................................................10, 11
City of New York v. Smokes-Spirits.Com, Inc.,
12 N.Y.3d 616 (2009) ................................................................................................................4
Conboy v. AT&T Corp.,
241 F.3d 242 (2d Cir. 2001).......................................................................................................6
Connolly v. Long Is. Power Auth.,
30 N.Y.3d 719 (2018) ................................................................................................................4
Flax v. Lincoln Nat’l Life Ins. Co.,
54 A.D.3d 992 (2d Dep’t 2008) ...............................................................................................11
Gaidon v. Guardian Life Ins. Co. of America,
94 N.Y.2d 330 (1999) ..........................................................................................................2, 10
Hobish v. AXA Equitable Life Ins. Co.,
171 A.D.3d 494 (1st Dep’t 2019) ..........................................................................................8, 9
Independent Ins. Agents and Brokers of New York, Inc.
v. New York State Dep’t of Fin. Svcs.,
39 N.Y.3d 56 (2022) ............................................................................................................5, 13
JD&K Assocs., LLC v. Selective Ins. Group, Inc.,
143 A.D.3d 1232 (4th Dep’t 2016) ..........................................................................................10
Jackson v. Ffriend,
2019 WL 2156410, at *16–17 (Sup. Ct. N.Y. Cnty. May 17, 2019) .........................................9
Joannou v. Blue Ridge Ins. Co.,
289 A.D.2d 531 (2d Dep’t 2001) ...........................................................................................7, 9
Martinez v. NYC Health and Hospitals Corp.,
223 A.D.3d 731 (2d Dep’t Jan. 17, 2024) ..................................................................................3
ii
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M.V.B. Collision, Inc. v. Allstate Ins. Co.,
728 F.Supp.25 205, 219–20 (E.D.N.Y. 2010) ...........................................................................6
Nat’l Conv. Svcs., L.L.C. v. Applied Underwriters Captive Risk Assur. Co., Inc.,
239 F.Supp.3d 761, 779 (S.D.N.Y. 2017) .................................................................................9
Nick’s Garage, Inc. v. Progressive Cas. Ins. Co.,
875 F.3d 107 (2d Cir. 2017)...................................................................................................1, 7
New York Univ. v. Continental Ins. Co.,
87 N.Y.2d 308 (1995) ..............................................................................................................10
N. State Autobahn, Inc. v. Progressive Ins. Group Co.,
167 A.D.3d 432 (1st Dep’t 2018) ........................................................................................4, 13
Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, N.A.,
85 N.Y.2d 20 (1995) ..................................................................................................................4
Plavin v. Group Health Inc.,
35 N.Y.3d 1 (2020) ..................................................................................................................11
Riordan v. Nationwide Mut. Fire Ins. Co.,
977 F.2d 47 (2d Cir. 1992).........................................................................................................8
Schlessinger v. Valspar Corp.,
21 N.Y.3d 166 (2013) ................................................................................................................6
Seller v. Citimortgage, Inc.,
118 A.D.3d 511 (1st Dep’t 2014) ..............................................................................................6
Skibinksy v. State Farm Fire & Cas. Co.,
6 A.D.3d 975, 976 (3d Dep’t 2004) ...................................................................................10, 11
Watts v. City of New York,
186 A.D.3d 1577 (2d Dep’t 2020) .............................................................................................3
iii
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Other Authorities
11 N.Y.C.R.R. 224.0–224.9 ................................................................................................... passim
CPLR 3211...............................................................................................................................1, 3, 4
General Business Law § 349.................................................................................................. passim
New York Insurance Law § 2402 ....................................................................................................7
New York Insurance Law § 2403 ....................................................................................................7
New York Insurance Law § 2601 ....................................................................................................1
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Plaintiffs Ester Aronson, Ester Aronson in her capacity as the Trustee for the Ben
Aronson 2020 Insurance Trust, Baruch Aronson, and Baruch Aronson in his capacity as the
Trustee for the Ester Aronson 2020 Insurance Trust (collectively, the “Aronsons” or “Plaintiffs”)
respectfully submit this memorandum of law in opposition to Penn Mutual Life Insurance
Company (“Penn Mutual”), MassMutual Life Insurance Company (“MassMutual”), and New
York Life Insurance Company (“New York Life,” and collectively with Penn Mutual and
MassMutual, the “Insurer Defendants”) motion, pursuant to CPLR 3211(a)(7), to dismiss the
Fourth Cause of Action of the Complaint in this Action.1
PRELIMINARY STATEMENT
The Insurer Defendants argue that Plaintiffs’ General Business Law § 349 claims (“GBL
§ 349”) against them must be dismissed because those GBL § 349 claims are based on conduct
that also constitutes a violation of “Regulation 187” (11 N.Y.C.R.R. 224.0–224.9).
According to the Insurer Defendants, they are shielded from Plaintiffs’ GBL § 349 claims
because they assert there is no private cause of action under Regulation 187. However, New
York law is clear that Plaintiffs may pursue GBL § 349 claims based upon other violations of
law that do not themselves provide private cause of action. Indeed, the Second Circuit recently
rejected an insurer’s argument that a private GBL § 349 claim could not be brought where New
York Insurance Law § 2601 prohibited an action by an insurer, but where that Insurance Law did
not provide a private cause of action to the plaintiff. Nick’s Garage, Inc. v. Progressive Cas. Ins.
Co., 875 F.3d 107, 126 (2d Cir. 2017).
1
Plaintiffs’ Second Amended Complaint filed in this Action, dated March 14, 2024, is referred
to herein as “Compl.” Defendant Brave Strategies, LLC is referred to herein as “Brave
Strategies.” The Memorandum of Law in Support of Insurer Defendants’ Joint Motion to
Dismiss Plaintiffs’ Second Amended Complaint, dated April 15, 2024 is referred to herein as
“MTD.”
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Moreover, the Court of Appeals has expressly held that when a party is lured into
purchasing “vanishing” premium life insurance policies based on misrepresentations – precisely
what occurred in this Action – that party has a cause of action under GBL § 349. Gaidon v.
Guardian Life Ins. Co. of America. 94 N.Y.2d 330 (1999).
As Plaintiffs properly plead that the Insurer Defendants engaged in conduct that violated
Regulation 187, and which constitutes a “deceptive act or practice,” Plaintiffs’ claims are plainly
actionable under GBL § 349, which declares unlawful “deceptive acts or practices in the conduct
of any business” and which provides a private right of action to Plaintiffs here.
The Insurer Defendants also make the throw-away argument that Plaintiffs have not pled
consumer-oriented conduct that is actionable under GBL § 349. Here again, New York law is
clear that the conduct at issue -- involving the marketing and issuance of life insurance policies
to consumers like Plaintiffs -- is actionable under GBL § 349.
STATEMENT OF FACTS
Plaintiffs allege that Defendant Brave Strategies, LLC made material misrepresentations
and omissions in connection with its brokering of certain life insurance policies to Plaintiffs in
order to induce Plaintiffs to acquire those life insurance policies. (Compl. ¶ 1.) Plaintiffs allege
that Brave Strategies knew or should have known that the at issue life insurance policies were
not in the best interest of any Plaintiff and would cause Plaintiffs substantial financial harm. (Id.
¶ 2.)
As relevant to the Insurer Defendants’ motion to dismiss, Plaintiffs assert GBL § 349
claims against the Insurer Defendants and allege that the Insurer Defendants engaged in conduct
that violated “Regulation 187” (11 N.Y.C.R.R. 224.6), including the insurer responsibility and
supervision requirements set forth therein for (i) failing to determine whether there was a
2
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reasonable basis to believe the at issue life insurance policies was suitable for Plaintiffs based on
the suitability information provided by Plaintiffs without regard to the availability of products,
services, and transactions of companies other than the Insurer Defendants; (ii) failing to
establish, maintain, and audit a system of supervision of its producers (like Brave Strategies) that
was reasonably designed to achieve each of the insurer’s and producer’s compliance with 11
N.Y.C.R.R. 224.4; and (iii) failing to adequately train each producer to make the
recommendations in accordance with Regulation 187. (Id. ¶ 3.)
Plaintiffs allege that they suffered significant financial harm and damages due to the
conduct of the Insurer Defendants and Brave Strategies. (Id. ¶ 4.)
As Plaintiffs’ investigation continues and additional information is obtained during
discovery in this action, Plaintiffs expect to uncover additional information demonstrating that
Defendants have violated additional duties and responsibilities, including as set forth in
Regulation 187. (Id. ¶¶ 5-6.)
ARGUMENT
For a motion to dismiss a complaint pursuant to CPLR 3211(a)(7) for failure to state a
cause of action, “the complaint is to be afforded a liberal construction, the facts alleged are
presumed to be true, the plaintiff is afforded the benefit of every favorable inference, and the
court is to determine only whether the facts as alleged fit within any cognizable legal theory.”
Martinez v. NYC Health and Hospitals Corp., 223 A.D.3d 731, 732 (2d Dep’t Jan. 17, 2024)
(quoting Watts v. City of New York, 186 A.D.3d 1577, 1578 (2d Dep’t 2020). “At the same time,
3
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defendants bear the burden of establishing that the complaint fails to state a viable cause of
action.” Connolly v. Long Is. Power Auth., 30 N.Y.3d 719, 728 (2018).2
I. PLAINTIFFS PROPERLY ALLEGE A GBL § 349 CLAIM AGAINST
THE INSURER DEFENDANTS, WHICH CANNOT BE DISMISSED
GBL § 349 declares unlawful “deceptive acts or practices in the conduct of any business,
trade or commerce or in the furnishing of any service in this state.” GBL § 349(h) allows private
litigants who suffered damages due to violations of GBL § 349 to bring an action in their own
name for actual damages. See id. (“any person who has been injured by reason of any violation
of this section may bring an action … to recover his actual damages.”)
To assert a GBL § 349 claim, a plaintiff must demonstrate “that a defendant has engaged
in (1) consumer-oriented conduct that is (2) materially misleading and that (3) plaintiff suffered
injury as a result of the allegedly deceptive act or practice.” N. State Autobahn, Inc. v.
Progressive Ins. Group Co., 102 A.D.3d 5, 11 (2d Dep’t 2012) (quoting City of New York v.
Smokes-Spirits.Com, Inc., 12 N.Y.3d 616, 621 (2009). “[C]onsumer-orientated conduct” refers to
actions that are “standard or routine practice that was ‘consumer-orientated in the sense that [it]
potentially affect[ed] similarly situated consumers,” rather than being isolated incidents. Id. at 12
(quoting Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, N.A., 85 N.Y.2d
20, 25 (1995)). Plaintiffs have satisfied their pleading obligations here.
2
Insurer Defendants’ Notice of Motion requests CPLR 3211(a)(7) relief, but their MTD states
that they seek CPLR 3211(a)(1) relief. (See MTD at 1.) Insurer Defendants argue in their MTD
that Plaintiffs failed to state a claim against them. Therefore, in drafting this opposition,
Plaintiffs thus oppose solely the CPLR 3211(a)(7) relief sought by Plaintiffs.
4
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A. Violations Of Regulation 187 Are Deemed “Deceptive Acts Or Practices”
That Are Actionable Under GBL § 349
“Regulation 187” (11 N.Y.C.R.R. 224.0–224.9), which was issued by the Department of
Financial Services (“DFS”) and became effective for life insurance policies in February 2020,
specifies certain obligations of insurance brokers and insurance companies when making
recommendations to consumers like Plaintiffs here. See 11 N.Y.C.R.R. 224.9. In general,
Regulation 187 “explains in detail what a producer3 or insurer4 must do to discharge [their] duty
when making a recommendation with respect to sales transactions[,]” including:
The producer or insurer must, among other things: make ‘reasonable
efforts’ to obtain the consumer’s ‘suitability information’; base any
recommendation ‘on an evaluation of the relevant suitability
information’ that ‘reflects the care, skill, prudence, and diligence
that a prudent person acting in a like capacity and familiar with such
matters would use under the circumstances then prevailing’; ‘[o]nly
[consider] the interests of the consumer … in making the
recommendation’ and not be influenced by compensation or other
incentives; recommend only ‘suitable’ transactions; and have a
‘reasonable basis’ to believe that the consumer has been reasonably
informed the features of the policy, the potential consequences of
the transactions, both favorable and unfavorable, and that the
consumer would benefit from certain features of the policy and the
particular policy as a whole.
Ind. Ins. Agents and Brokers of New York, Inc. v. New York State Dep’t of Fin. Svcs., 39 N.Y.3d
56, 61-62 (2022) (citing 11 N.Y.C.R.R. 224.4(b)).
3
“Producer” means an insurance agent or broker. See 11 N.Y.C.R.R. 224.3. Defendant Brave
Strategies, as broker, is the producer regarding the facts at issue in this Action. (See Compl.
¶¶ 107–08, 113.)
4
“Insurer” means an insurance company such as the Life Insurance Companies. See
11 N.Y.C.R.R. 224.3; (see also Compl. ¶ 140.)
5
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Further, the conduct that constitutes a violation of Regulation 187 plainly constitutes
unfair or deceptive acts and practices that are actionable in a GBL § 349 claim. See
11 N.Y.C.R.R. 224.8 and GBL § 349(a).5
Indeed, the language of GBL § 349(a) and “Violations” Section 224.8 of Regulation 187
is nearly identical, confirming that a contravention of Insurance Regulation 187’s 11 N.Y.C.R.R.
224.8 constitutes “unlawful” conduct in violation of GBL § 349(a) and is thus actionable under a
GBL§ 349 claim:
N.Y. Gen. Bus. § 349(a): “Deceptive acts or practices in the conduct of any
business, trade or commerce or in the furnishing of
any service in this state are hereby declared
unlawful.”
Id. (emphasis added).
11 N.Y.C.R.R. 224.8: “A contravention of this Part [Regulation 187] shall
be deemed to be an unfair method of competition or an
unfair or deceptive act and practice in the conduct
of the business of insurance in this state and shall be
deemed to be a trade practice constituting a
determined violation, as defined in Insurance Law
section 2402(c), except where such act or practice
shall be a defined violation, as defined in Insurance
Law section 2402(b), and in either such case shall be
a violation of Insurance section 2403.”
Id. (emphasis added).
5
Insurer Defendants citations in support of their argument that GBL § 349 cannot be utilized as
an “end-run around the lack of private rights” are irrelevant. (MTD at 14.) None of the cases
cited by the Insurer Defendants involved a contravention of a statute or regulation that resulted in
it being “deemed to be an unfair method of competition or an unfair or deceptive act and practice
in the conduct of the business of insurance.” See Schlessinger v. Valspar Corp., 21 N.Y.3d 166,
172 (2013) (violation of GBL § 395-a); 11 N.Y.C.R.R. 224.8. Seller v. Citimortgage, Inc., 118
A.D.3d 511, 512 (1st Dep’t 2014) (violation of the Federal Home Affordable Modification
Program); Bloom v. Nationstar Mortg., 73 Misc.3d 327, 332 (Sup. Ct. Orange Cnty. 2021)
(violation of 3 N.Y.C.R.R. 419.9); Conboy v. AT&T Corp., 241 F.3d 242, 257–58 (2d Cir. 2001)
(violation of GBL § 601); M.V.B. Collision, Inc. v. Allstate Ins. Co., 728 F.Supp.25 205, 219–20
(E.D.N.Y. 2010) (violation of N.Y. Ins. Law § 2601).
6
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And, GBL § 349(g) allows private litigants – like Plaintiffs here – to obtain relief for “all
deceptive acts or practices declared to be unlawful, whether or not subject to any other law
of this state, and shall not supersede, amend, or repeal any other law of this state under which
the attorney general is authorized to take any action or conduct any inquiry.” Id. (emphasis
added); see also GBL § 349(h) (providing private cause of action).6
B. GBL § 349 Claims Are Proper To Redress Deceptive Acts Or Practices
Prohibited By Other Laws That Do Not Have A Private Cause of Action
Because GBL § 349(g) “shall apply to all deceptive acts or practices,” New York Courts
consistently reject arguments similar to those made by Insurer Defendants here that a private
litigant cannot allege a GBL § 349 claim against an insurance company because the deceptive
and unfair acts and practices are prohibited by laws that do not specifically provide a private
cause of action. Id. (emphasis added). (See MTD at 8 n. 4.)7
6
The Insurer Defendants attempt to ignore that a violation of Regulation 187 “shall be deemed
…an unfair or deceptive act and practice in the conduct of the business of insurance.” (See MTD
at 15.) The Insurer Defendants instead focus on other language in 11 N.Y.C.R.R. 224.8
specifying that violations of that part are also “deemed to be a trade practice constituting a
determined violation as defined in Insurance Law section 2402(c), except where such act or
practice shall be a defined violation, as delivered in Insurance Law section 2402(b), and in either
such case shall be a violation of Insurance Law Section 2403.” (See MTD at 15.)
But as further discussed herein, it is clear under New York law that private litigants may bring
GBL § 349 claims against an insurer for unfair or deceptive acts and practices. See infra at
Argument § I.B; see, e.g., Joannou v. Blue Ridge Ins. Co., 289 A.D.2d 531, 531 (2d Dep’t 2001)
(“An insurance carrier’s failure to pay benefits allegedly due its insured under the terms of a
standard insurance policy can constitute a violation of [N.Y. Gen. Bus. § 349]”).
7
Insurer Defendants’ erroneously assert that only the Superintendent of DFS can determine who
violated Regulation 187. (MTD at 14–15.) But simply because Regulation 187 authorizes the
Superintendent to enforce Regulation 187 does not mean that a private litigant may not utilize
Regulation 187 to demonstrate that the Insurer Defendants engaged in conduct prohibited by
GBL § 349.
7
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The Second Circuit recently rejected an insurer’s argument that a private GBL § 349
claim could not be brought where New York Insurance Law § 2601 prohibited an action by an
insurer but did not provide for a private cause of action:
Insurer argues that where § 2601 of the Insurance Law prohibits a
certain action by insurers, but does not allow for a private right of
action, and GBL § 349, which covers deceptive commercial
practices generally, prohibits the same action and does provide a
private right of action, the Insurance Law takes precedence as to a
claim against an insurer, and no private claim may be brought under
GBL § 349. This misunderstands the law of New York. We therefore
vacate the district court’s ruling.
Nick’s Garage, Inc. v. Progressive Cas. Ins. Co., 875 F.3d 107, 126 (2d Cir. 2017). The Second
Circuit also previously rejected an insurer’s argument that New York’s Insurance Law, which
empowered the Superintendent of Insurance to enforce that statute, somehow precluded a private
GBL § 349 cause of action:
[Insurer] Nationwide contends that [GBL § 349] cannot be used
against insurance companies because the pervasive statutory scheme
regulating unfair and deceptive act and practices by insurance
companies. The Insurance Law empowers and charges the
Superintendent of Insurance to investigate and hold hearings on
allegations of deceptive and unfair claims settlement practices, and
to enforce the statute’s prohibitions by cease and desist orders or,
through the attorney general, judicial action. Nationwide asserts
that this statutory scheme preempts the use of [GBL§ 349] by
private individuals against insurance companies. This argument
fails, however, because it ignores the plain language of
[GBL§ 349] which states that ‘[t]his section shall apply to all
deceptive acts or practices declared to be unlawful, whether or
not subject to any other law of this state.
Riordan v. Nationwide Mut. Fire Ins. Co., 977 F.2d 47, 51-52 (2d Cir. 1992) (affirming jury
verdict that defendant insurance company committed deceptive acts and practices in violation of
GBL § 349) (emphasis added); see also Hobish v. AXA Equitable Life Ins. Co., 171 A.D.3d 494,
494 (1st Dep’t 2019) (complaint sufficiently alleges [a cause of action under GBL § 349] that
8
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defendant insurance company’s purported deceptive conduct, allegedly misleading elderly
consumers into believing that they would not be target for premium increases, and subsequently
substantially increasing such premiums, impacted [plaintiff’s] estate planning by forcing her to
surrender the face value of the policy purchased from defendant”); Joannou, 289 A.D.2d at 531
(“An insurance carrier’s failure to pay benefits allegedly due its insured under the terms of a
standard insurance policy can constitute a violation of [GBL § 349]”).8
C. Plaintiffs Have Sufficiently Alleged A GBL § 349 Claim
Against Insurer Defendants Independent of Regulation 187
Insurer Defendants incorrectly claim that Plaintiffs do not allege “consumer-oriented
conduct” or “deceptive acts.” (MTD at 12–13.) The Insurer Defendants also baselessly argue
that the insurance policies at issue in Plaintiffs’ Complaint are not subject to GBL § 349 claims
because those policies are “expensive,” “complex,” and were sold to Plaintiffs “in transactions
involving no consumers other than the Plaintiffs.” (MTD at 13.) Taken to its logical conclusion,
Insurer Defendants essentially argue that insurance policies sold to individual consumers are not
actionable under GBL § 349, but that is plainly untrue, would gut the protections of GBL § 349,
and is belied by multiple New York cases. (See supra, at 8–9.)
Further, Insurer Defendants’ erroneous claim that “this dispute centers on … complex life
insurance policies” has no basis in Plaintiffs’ Complaint and is, at best, an issue of fact that
8
Insurer Defendants misstate the cases in support that there is no cause of action under Insurance
Regulation 187 (MTD at 11). First, Insurer Defendants erroneously assert that the Court in Nat’l
Conv. Svcs., L.L.C. v. Applied Underwriters Captive Risk Assur. Co., Inc., 239 F.Supp.3d 761,
779 (S.D.N.Y. 2017) dismissed the complaint. (MTD at 11.) The National Court did not dismiss
the complaint and, in fact, held that the plaintiffs had sufficiently alleged a cause of action under
GBL § 349 against the defendant insurer. Nat’l, 239 F.Supp.3d at 790–94. Further the Court in
Jackson v. Ffriend, 2019 WL 2156410, at *16–17 (Sup. Ct. N.Y. Cnty. May 17, 2019)
interpreted a prior version of Regulation 187 that did not contain the language in the “Violation”
section stating that a contravention shall be deemed an unfair or deceptive act and practice in
the conduct of the business of insurance in this state.
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cannot be resolved at the motion to dismiss stage. Insurer Defendants’ unsubstantiated assertions
that “alleged misrepresentations were made largely at a single meeting” likewise has no basis in
Plaintiffs’ Complaint and also presents an issue of fact. (MTD at 13.)
“The battle over whether plaintiff can meet her obligation of a ‘threshold showing that
[her] claim was predicated upon a deceptive act or practice that was consumer oriented’ is best
reserved for a motion for summary judgment after discovery.” Skibinksy v. State Farm Fire &
Cas. Co., 6 A.D.3d 975, 976 (3d Dep’t 2004) (citation omitted).
New York law establishes that a GBL § 349 claim is plainly appropriate given the
circumstances presented here. In Gaidon v. Guardian Life Ins. Co. of America, the Court of
Appeals held that plaintiffs adequately pleaded a GBL § 349 claim because it determined that
the marketing of “vanishing” premium life insurance was deceptive and was also consumer-
orientated conduct. 94 N.Y.2d 330, 343–48 (1999). The Gaidon plaintiffs alleged that the
insurance companies had provided personalized illustrations demonstrating that premiums paid
for the life insurance policy would “vanish” after a certain period, based on dividend projections
that the insurance companies knew or should have known were unrealistic. Id. at 338–39. (See
Compl. ¶¶ 28, 32, 34–35, 38–40, 56, 76–78.) The Court of Appeals ruled that defendants’
conduct was consumer-orientated because it involved a marketing scheme that had an impact on
consumers. Id. at 344.9
9
The cases cited by Insurer Defendants’ regarding consumer-oriented conduct under GBL § 349
are inapposite (MTD at 12–13) because none of them are regarding an insurer’s issuance of
standard insurance policies that were represented to have purported “vanishing premiums,”
which are at issue in this Action. See New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308,
314–15 (1995) (dispute over policy coverage); Abraham v. Tortai, 219 A.D.3d 1275, 1277 (2d
Dep’t 2023) (foreclosure action); JD&K Assocs., LLC v. Selective Ins. Group, Inc., 143 A.D.3d
1232, 1233 (4th Dep’t 2016) (dispute over policy coverage); Cathy Daniels, Ltd. v. Weingast, 91
A.D.3d 431, 432–33 (1st Dep’t 2012) (whether a party may make a tax deduction based on a
10
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Likewise, in this Action, Plaintiffs alleged that Defendant Brave Strategies, while acting
as a producer for Insurer Defendants, represented to Plaintiffs that he had brokered similar
“high-value life insurance policies for many clients over many years.” (Compl. ¶ 25.)
Consequently, the misrepresentations concerning the nature of these life insurance policies affect
not only Plaintiffs but also consumers at large. See Plavin v. Group Health Inc., 35 N.Y.3d 1,
12–13 (2020) (allegations that insurer made misleading representations regarding health plan
insurance sufficient for GBL § 349 claim); Skibinksy, 6 A.D.3d at 976 (3d Dep’t 2004) (GBL
§ 349 claim sufficient based on allegations that insurer misrepresented the nature of coverage
being provided to insured).
The Court of Appeals in Gaidon established that deceptive practices in marketing
“vanishing” premium life insurance policies have far-reaching consequences, impacting
consumers beyond Plaintiffs. 94 N.Y.2d at 344. Therefore, Plaintiffs have alleged a cause of
action under GBL § 349 that Insurer Defendants’ actions were deceptive practices and
consumer-orientated -- regardless of the duties and obligations set forth in Regulation 187 --
because the Insurer Defendants: (i) issued the Life Insurance Policies without having a
reasonable basis that the Life Insurance Policies were suitable based on the information provided
by Plaintiffs (Compl. ¶ 142);10 (ii) failed to establish, maintain, and audit a system of supervision
of its producers ensuring that life insurance policies are being sold in the best interest of the
purchase of life insurance); Flax v. Lincoln Nat’l Life Ins. Co., 54 A.D.3d 992, 994 (2d Dep’t
2008) (insurance agents and insurer had misrepresented the rate of return for investments
selected by plaintiff).
10
“[A]n insurer shall not effectuate a sales transaction with respect to its policies unless there is a
reasonable basis to believe that the sales transaction is suitable based on the suitability
information provided by the consumer and without regard to the availability of products,
services, and transactions of companies other than the insurer.” 11 N.Y.C.R.R. 224.6 (a).
11
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consumer without material misrepresentations (Compl. ¶ 144);11 and (iii) failed to adequately
train each producer that would allow them to make recommendations regarding life insurance
policies in the best interest of the consumer without material misrepresentations (Compl. ¶
145).12
As Regulation 187 was enacted to broadly protect consumers when purchasing insurance
policies generally, including the policies at issue in Plaintiffs Complaint. Specifically, the stated
“Purpose” of Regulation 187 includes:
(b) This Part clarifies the duties and obligations of insurers … by requiring them
to establish standards and procedures for recommendations to consumers
with respect to policies delivered or issued for delivery in this state so that any
transaction with respect to those policies is in the best interest of the consumer
and appropriately addresses the insurance needs and financial objectives of the
consumer at the time of the transaction. This Part also clarifies the nature and
extent of supervisory controls that an insurer must maintain to achieve
11
“An insurer shall establish, maintain, and audit a system of supervision that is reasonable
designed to achieve the insurer’s and producer’s compliance with Section 224.4(a) through (k) of
this Part, including standards and procedures for:
(i) the collection of a consumer’s suitability information with respect to sales transactions
involving the insurer’s policies;
(ii) the documentation and disclosure of the basis for any recommendation with respect to
sales transactions involving the insurer’s policies;
(iii) the review of complaints received by the insurer regarding recommendations
inconsistent with the best interest of the consumer;
(iv) the auditing and/or contemporaneous review of recommendations to monitor
producers’ compliance with section 224.4(a) and (b) of this Part with respect to the
insurer’s policies. An insurer may use a reasonable risk-based approach to audit and/or
contemporaneously review producers’ recommendations to identify recommendations
of the greatest risk of violation of section 224.4(a) and (b) of this Part so long as the
approach does not focus solely on recommendations posing the greatest risk with no
auditing or review of other recommendations.”
11 N.Y.C.R.R. 224.6(b).
12
“An insurer shall be responsible for ensuring that every producer recommending any
transaction with respect to the insurer’s policies is adequately trained to make the
recommendation in accordance with the provisions of this Part . . . .” 11 N.Y.C.R.R. 224.6(e).
12
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compliance with this Part.
(c) This Part further clarifies the duties and obligations of producers when making
recommendations to consumers with respect to policies delivered or issued for
delivery in this state to help ensure that a transaction is in the best interest of
the consumer and appropriately addresses the insurance needs and financial
objectives of the consumer at the time of the transaction. The best interest
standard set forth in this Part requires a producer, or insurer where no producer is
involved, to adhere to a standard of conduct to be enforced by the superintendent,
but does not guarantee or warrant an outcome.
11 N.Y.C.R.R. 224.0 (emphasis added).
As the requirements in Regulation 187 are designed to protect the public, and the
Plaintiffs as consumers, the Insured Defendants’ failure to comply with Regulation 187 as
alleged in the Complaint undeniably impacts consumers and the public.13 And a violation of
GBL § 349 is actionable here, including because “the complaint adequately alleges conduct that
is consumer-oriented inasmuch as it alleges conduct that has a broad impact on consumers at
large.” N. State Autobahn, Inc., 102 A.D.3d at 13 (internal quotations omitted).
D. Insurer Defendants Erroneously Assert That Plaintiffs Allege
A Private Cause Of Action Under Regulation 187
Insurer Defendants primarily make the diversionary argument that Plaintiffs have alleged
a cause of action under Insurance Regulation 187. (See MTD at 6–11.) This red herring argument
is untrue. Instead, Plaintiffs allege that the Insurer Defendants violated GBL § 349 and have
specified that Regulation 187 violations and the conduct of those violations constitute the
13
The New York Court of Appeals made clear that Regulation 187 is not meant to “require
producers and insurers to identify the single best policy for a consumer. It simply requires them
to reasonably recommend a suitable policy that will benefit the consumer, while refraining from
considering their own financial gain.” Ind. Ins. Agents, 39 N.Y.3d at 69. Plaintiffs have
sufficiently alleged that the Insurer Defendants have failed to do that here and therefore are in
violation of GBL § 349(a).
Preview
FILED: ROCKLAND COUNTY CLERK 05/15/2024 11:27 PM INDEX NO. 032514/2023 NYSCEF DOC. NO. 87 RECEIVED NYSCEF: 05/15/2024 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF ROCKLAND ESTER ARONSON, ESTER ARONSON in her capacity as Trustee for the BEN ARONSON 2020 Index No. 032514/2023 INSURANCE TRUST, BARUCH ARONSON, and BARUCH ARONSON in his capacity as Trustee for Justice Christie L. D’Alessio the ESTER ARONSON 2020 INSURANCE TRUST, Plaintiffs, Oral Argument Requested -against- BRAVE STRATEGIES, LLC, PENN MUTUAL LIFE INSURANCE COMPANY, MASSMUTUAL LIFE INSURANCE COMPANY, and NEW YORK LIFE INSURANCE COMPANY, Defendants. PLAINTIFFS’ MEMORANDUM OF LAW IN OPPOSITION TO THE INSURER DEFENDANTS’ MOTION TO DISMISS THE FOURTH CAUSE OF ACTION SWEETNAM, SCHUSTER & SCHWARTZ, LLC 200 Vesey Street Brookfield Place, 24th Floor New York, New York 10281 Attorneys for Plaintiffs 1 of 21 FILED: ROCKLAND COUNTY CLERK 05/15/2024 11:27 PM INDEX NO. 032514/2023 NYSCEF DOC. NO. 87 RECEIVED NYSCEF: 05/15/2024 TABLE OF CONTENTS Page PRELIMINARY STATEMENT .....................................................................................................1 STATEMENT OF FACTS ..............................................................................................................2 ARGUMENT ...................................................................................................................................3 I. PLAINTIFFS PROPERLY ALLEGE A GBL § 349 CLAIM AGAINST THE INSURER DEFENDANTS, WHICH CANNOT BE DISMISSED .......................... 4 A. Violations Of Regulation 187 Are Deemed Deceptive Acts Or Practices" That Are Actionable Under GBL § 349 ................................................................. 5 B. GBL § 349 Claims Are Proper To Redress Deceptive Acts Or Practices Prohibited By Other Laws That Do Not Have A Private Cause Of Action ............ 7 C. Plaintiffs Have Sufficiently Alleged A GBL § 349 Claim Against Insurer Defendants Independent Of Regulation 187 ................................. 9 D. Insurer Defendants Erroneously Assert That Plaintiffs Allege A Private Cause Of Action Under Regulaton 187 ................................................ 13 CONCLUSION ..............................................................................................................................15 2 of 21 FILED: ROCKLAND COUNTY CLERK 05/15/2024 11:27 PM INDEX NO. 032514/2023 NYSCEF DOC. NO. 87 RECEIVED NYSCEF: 05/15/2024 TABLE OF AUTHORITIES Page(s) Cases Abraham v. Tortai, 219 A.D.3d 1275 (2d Dep’t 2023) ...........................................................................................10 Bloom v. Nationstar Mortg., 73 Misc.3d 327 (Sup. Ct. Orange Cnty. 2021) ..........................................................................6 Cathy Daniels, Ltd. v. Weingast, 91 A.D.3d 431, 432–33 (1st Dep’t 2012) ..........................................................................10, 11 City of New York v. Smokes-Spirits.Com, Inc., 12 N.Y.3d 616 (2009) ................................................................................................................4 Conboy v. AT&T Corp., 241 F.3d 242 (2d Cir. 2001).......................................................................................................6 Connolly v. Long Is. Power Auth., 30 N.Y.3d 719 (2018) ................................................................................................................4 Flax v. Lincoln Nat’l Life Ins. Co., 54 A.D.3d 992 (2d Dep’t 2008) ...............................................................................................11 Gaidon v. Guardian Life Ins. Co. of America, 94 N.Y.2d 330 (1999) ..........................................................................................................2, 10 Hobish v. AXA Equitable Life Ins. Co., 171 A.D.3d 494 (1st Dep’t 2019) ..........................................................................................8, 9 Independent Ins. Agents and Brokers of New York, Inc. v. New York State Dep’t of Fin. Svcs., 39 N.Y.3d 56 (2022) ............................................................................................................5, 13 JD&K Assocs., LLC v. Selective Ins. Group, Inc., 143 A.D.3d 1232 (4th Dep’t 2016) ..........................................................................................10 Jackson v. Ffriend, 2019 WL 2156410, at *16–17 (Sup. Ct. N.Y. Cnty. May 17, 2019) .........................................9 Joannou v. Blue Ridge Ins. Co., 289 A.D.2d 531 (2d Dep’t 2001) ...........................................................................................7, 9 Martinez v. NYC Health and Hospitals Corp., 223 A.D.3d 731 (2d Dep’t Jan. 17, 2024) ..................................................................................3 ii 3 of 21 FILED: ROCKLAND COUNTY CLERK 05/15/2024 11:27 PM INDEX NO. 032514/2023 NYSCEF DOC. NO. 87 RECEIVED NYSCEF: 05/15/2024 M.V.B. Collision, Inc. v. Allstate Ins. Co., 728 F.Supp.25 205, 219–20 (E.D.N.Y. 2010) ...........................................................................6 Nat’l Conv. Svcs., L.L.C. v. Applied Underwriters Captive Risk Assur. Co., Inc., 239 F.Supp.3d 761, 779 (S.D.N.Y. 2017) .................................................................................9 Nick’s Garage, Inc. v. Progressive Cas. Ins. Co., 875 F.3d 107 (2d Cir. 2017)...................................................................................................1, 7 New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308 (1995) ..............................................................................................................10 N. State Autobahn, Inc. v. Progressive Ins. Group Co., 167 A.D.3d 432 (1st Dep’t 2018) ........................................................................................4, 13 Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, N.A., 85 N.Y.2d 20 (1995) ..................................................................................................................4 Plavin v. Group Health Inc., 35 N.Y.3d 1 (2020) ..................................................................................................................11 Riordan v. Nationwide Mut. Fire Ins. Co., 977 F.2d 47 (2d Cir. 1992).........................................................................................................8 Schlessinger v. Valspar Corp., 21 N.Y.3d 166 (2013) ................................................................................................................6 Seller v. Citimortgage, Inc., 118 A.D.3d 511 (1st Dep’t 2014) ..............................................................................................6 Skibinksy v. State Farm Fire & Cas. Co., 6 A.D.3d 975, 976 (3d Dep’t 2004) ...................................................................................10, 11 Watts v. City of New York, 186 A.D.3d 1577 (2d Dep’t 2020) .............................................................................................3 iii 4 of 21 FILED: ROCKLAND COUNTY CLERK 05/15/2024 11:27 PM INDEX NO. 032514/2023 NYSCEF DOC. NO. 87 RECEIVED NYSCEF: 05/15/2024 Other Authorities 11 N.Y.C.R.R. 224.0–224.9 ................................................................................................... passim CPLR 3211...............................................................................................................................1, 3, 4 General Business Law § 349.................................................................................................. passim New York Insurance Law § 2402 ....................................................................................................7 New York Insurance Law § 2403 ....................................................................................................7 New York Insurance Law § 2601 ....................................................................................................1 iv 5 of 21 FILED: ROCKLAND COUNTY CLERK 05/15/2024 11:27 PM INDEX NO. 032514/2023 NYSCEF DOC. NO. 87 RECEIVED NYSCEF: 05/15/2024 Plaintiffs Ester Aronson, Ester Aronson in her capacity as the Trustee for the Ben Aronson 2020 Insurance Trust, Baruch Aronson, and Baruch Aronson in his capacity as the Trustee for the Ester Aronson 2020 Insurance Trust (collectively, the “Aronsons” or “Plaintiffs”) respectfully submit this memorandum of law in opposition to Penn Mutual Life Insurance Company (“Penn Mutual”), MassMutual Life Insurance Company (“MassMutual”), and New York Life Insurance Company (“New York Life,” and collectively with Penn Mutual and MassMutual, the “Insurer Defendants”) motion, pursuant to CPLR 3211(a)(7), to dismiss the Fourth Cause of Action of the Complaint in this Action.1 PRELIMINARY STATEMENT The Insurer Defendants argue that Plaintiffs’ General Business Law § 349 claims (“GBL § 349”) against them must be dismissed because those GBL § 349 claims are based on conduct that also constitutes a violation of “Regulation 187” (11 N.Y.C.R.R. 224.0–224.9). According to the Insurer Defendants, they are shielded from Plaintiffs’ GBL § 349 claims because they assert there is no private cause of action under Regulation 187. However, New York law is clear that Plaintiffs may pursue GBL § 349 claims based upon other violations of law that do not themselves provide private cause of action. Indeed, the Second Circuit recently rejected an insurer’s argument that a private GBL § 349 claim could not be brought where New York Insurance Law § 2601 prohibited an action by an insurer, but where that Insurance Law did not provide a private cause of action to the plaintiff. Nick’s Garage, Inc. v. Progressive Cas. Ins. Co., 875 F.3d 107, 126 (2d Cir. 2017). 1 Plaintiffs’ Second Amended Complaint filed in this Action, dated March 14, 2024, is referred to herein as “Compl.” Defendant Brave Strategies, LLC is referred to herein as “Brave Strategies.” The Memorandum of Law in Support of Insurer Defendants’ Joint Motion to Dismiss Plaintiffs’ Second Amended Complaint, dated April 15, 2024 is referred to herein as “MTD.” 6 of 21 FILED: ROCKLAND COUNTY CLERK 05/15/2024 11:27 PM INDEX NO. 032514/2023 NYSCEF DOC. NO. 87 RECEIVED NYSCEF: 05/15/2024 Moreover, the Court of Appeals has expressly held that when a party is lured into purchasing “vanishing” premium life insurance policies based on misrepresentations – precisely what occurred in this Action – that party has a cause of action under GBL § 349. Gaidon v. Guardian Life Ins. Co. of America. 94 N.Y.2d 330 (1999). As Plaintiffs properly plead that the Insurer Defendants engaged in conduct that violated Regulation 187, and which constitutes a “deceptive act or practice,” Plaintiffs’ claims are plainly actionable under GBL § 349, which declares unlawful “deceptive acts or practices in the conduct of any business” and which provides a private right of action to Plaintiffs here. The Insurer Defendants also make the throw-away argument that Plaintiffs have not pled consumer-oriented conduct that is actionable under GBL § 349. Here again, New York law is clear that the conduct at issue -- involving the marketing and issuance of life insurance policies to consumers like Plaintiffs -- is actionable under GBL § 349. STATEMENT OF FACTS Plaintiffs allege that Defendant Brave Strategies, LLC made material misrepresentations and omissions in connection with its brokering of certain life insurance policies to Plaintiffs in order to induce Plaintiffs to acquire those life insurance policies. (Compl. ¶ 1.) Plaintiffs allege that Brave Strategies knew or should have known that the at issue life insurance policies were not in the best interest of any Plaintiff and would cause Plaintiffs substantial financial harm. (Id. ¶ 2.) As relevant to the Insurer Defendants’ motion to dismiss, Plaintiffs assert GBL § 349 claims against the Insurer Defendants and allege that the Insurer Defendants engaged in conduct that violated “Regulation 187” (11 N.Y.C.R.R. 224.6), including the insurer responsibility and supervision requirements set forth therein for (i) failing to determine whether there was a 2 7 of 21 FILED: ROCKLAND COUNTY CLERK 05/15/2024 11:27 PM INDEX NO. 032514/2023 NYSCEF DOC. NO. 87 RECEIVED NYSCEF: 05/15/2024 reasonable basis to believe the at issue life insurance policies was suitable for Plaintiffs based on the suitability information provided by Plaintiffs without regard to the availability of products, services, and transactions of companies other than the Insurer Defendants; (ii) failing to establish, maintain, and audit a system of supervision of its producers (like Brave Strategies) that was reasonably designed to achieve each of the insurer’s and producer’s compliance with 11 N.Y.C.R.R. 224.4; and (iii) failing to adequately train each producer to make the recommendations in accordance with Regulation 187. (Id. ¶ 3.) Plaintiffs allege that they suffered significant financial harm and damages due to the conduct of the Insurer Defendants and Brave Strategies. (Id. ¶ 4.) As Plaintiffs’ investigation continues and additional information is obtained during discovery in this action, Plaintiffs expect to uncover additional information demonstrating that Defendants have violated additional duties and responsibilities, including as set forth in Regulation 187. (Id. ¶¶ 5-6.) ARGUMENT For a motion to dismiss a complaint pursuant to CPLR 3211(a)(7) for failure to state a cause of action, “the complaint is to be afforded a liberal construction, the facts alleged are presumed to be true, the plaintiff is afforded the benefit of every favorable inference, and the court is to determine only whether the facts as alleged fit within any cognizable legal theory.” Martinez v. NYC Health and Hospitals Corp., 223 A.D.3d 731, 732 (2d Dep’t Jan. 17, 2024) (quoting Watts v. City of New York, 186 A.D.3d 1577, 1578 (2d Dep’t 2020). “At the same time, 3 8 of 21 FILED: ROCKLAND COUNTY CLERK 05/15/2024 11:27 PM INDEX NO. 032514/2023 NYSCEF DOC. NO. 87 RECEIVED NYSCEF: 05/15/2024 defendants bear the burden of establishing that the complaint fails to state a viable cause of action.” Connolly v. Long Is. Power Auth., 30 N.Y.3d 719, 728 (2018).2 I. PLAINTIFFS PROPERLY ALLEGE A GBL § 349 CLAIM AGAINST THE INSURER DEFENDANTS, WHICH CANNOT BE DISMISSED GBL § 349 declares unlawful “deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state.” GBL § 349(h) allows private litigants who suffered damages due to violations of GBL § 349 to bring an action in their own name for actual damages. See id. (“any person who has been injured by reason of any violation of this section may bring an action … to recover his actual damages.”) To assert a GBL § 349 claim, a plaintiff must demonstrate “that a defendant has engaged in (1) consumer-oriented conduct that is (2) materially misleading and that (3) plaintiff suffered injury as a result of the allegedly deceptive act or practice.” N. State Autobahn, Inc. v. Progressive Ins. Group Co., 102 A.D.3d 5, 11 (2d Dep’t 2012) (quoting City of New York v. Smokes-Spirits.Com, Inc., 12 N.Y.3d 616, 621 (2009). “[C]onsumer-orientated conduct” refers to actions that are “standard or routine practice that was ‘consumer-orientated in the sense that [it] potentially affect[ed] similarly situated consumers,” rather than being isolated incidents. Id. at 12 (quoting Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, N.A., 85 N.Y.2d 20, 25 (1995)). Plaintiffs have satisfied their pleading obligations here. 2 Insurer Defendants’ Notice of Motion requests CPLR 3211(a)(7) relief, but their MTD states that they seek CPLR 3211(a)(1) relief. (See MTD at 1.) Insurer Defendants argue in their MTD that Plaintiffs failed to state a claim against them. Therefore, in drafting this opposition, Plaintiffs thus oppose solely the CPLR 3211(a)(7) relief sought by Plaintiffs. 4 9 of 21 FILED: ROCKLAND COUNTY CLERK 05/15/2024 11:27 PM INDEX NO. 032514/2023 NYSCEF DOC. NO. 87 RECEIVED NYSCEF: 05/15/2024 A. Violations Of Regulation 187 Are Deemed “Deceptive Acts Or Practices” That Are Actionable Under GBL § 349 “Regulation 187” (11 N.Y.C.R.R. 224.0–224.9), which was issued by the Department of Financial Services (“DFS”) and became effective for life insurance policies in February 2020, specifies certain obligations of insurance brokers and insurance companies when making recommendations to consumers like Plaintiffs here. See 11 N.Y.C.R.R. 224.9. In general, Regulation 187 “explains in detail what a producer3 or insurer4 must do to discharge [their] duty when making a recommendation with respect to sales transactions[,]” including: The producer or insurer must, among other things: make ‘reasonable efforts’ to obtain the consumer’s ‘suitability information’; base any recommendation ‘on an evaluation of the relevant suitability information’ that ‘reflects the care, skill, prudence, and diligence that a prudent person acting in a like capacity and familiar with such matters would use under the circumstances then prevailing’; ‘[o]nly [consider] the interests of the consumer … in making the recommendation’ and not be influenced by compensation or other incentives; recommend only ‘suitable’ transactions; and have a ‘reasonable basis’ to believe that the consumer has been reasonably informed the features of the policy, the potential consequences of the transactions, both favorable and unfavorable, and that the consumer would benefit from certain features of the policy and the particular policy as a whole. Ind. Ins. Agents and Brokers of New York, Inc. v. New York State Dep’t of Fin. Svcs., 39 N.Y.3d 56, 61-62 (2022) (citing 11 N.Y.C.R.R. 224.4(b)). 3 “Producer” means an insurance agent or broker. See 11 N.Y.C.R.R. 224.3. Defendant Brave Strategies, as broker, is the producer regarding the facts at issue in this Action. (See Compl. ¶¶ 107–08, 113.) 4 “Insurer” means an insurance company such as the Life Insurance Companies. See 11 N.Y.C.R.R. 224.3; (see also Compl. ¶ 140.) 5 10 of 21 FILED: ROCKLAND COUNTY CLERK 05/15/2024 11:27 PM INDEX NO. 032514/2023 NYSCEF DOC. NO. 87 RECEIVED NYSCEF: 05/15/2024 Further, the conduct that constitutes a violation of Regulation 187 plainly constitutes unfair or deceptive acts and practices that are actionable in a GBL § 349 claim. See 11 N.Y.C.R.R. 224.8 and GBL § 349(a).5 Indeed, the language of GBL § 349(a) and “Violations” Section 224.8 of Regulation 187 is nearly identical, confirming that a contravention of Insurance Regulation 187’s 11 N.Y.C.R.R. 224.8 constitutes “unlawful” conduct in violation of GBL § 349(a) and is thus actionable under a GBL§ 349 claim: N.Y. Gen. Bus. § 349(a): “Deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state are hereby declared unlawful.” Id. (emphasis added). 11 N.Y.C.R.R. 224.8: “A contravention of this Part [Regulation 187] shall be deemed to be an unfair method of competition or an unfair or deceptive act and practice in the conduct of the business of insurance in this state and shall be deemed to be a trade practice constituting a determined violation, as defined in Insurance Law section 2402(c), except where such act or practice shall be a defined violation, as defined in Insurance Law section 2402(b), and in either such case shall be a violation of Insurance section 2403.” Id. (emphasis added). 5 Insurer Defendants citations in support of their argument that GBL § 349 cannot be utilized as an “end-run around the lack of private rights” are irrelevant. (MTD at 14.) None of the cases cited by the Insurer Defendants involved a contravention of a statute or regulation that resulted in it being “deemed to be an unfair method of competition or an unfair or deceptive act and practice in the conduct of the business of insurance.” See Schlessinger v. Valspar Corp., 21 N.Y.3d 166, 172 (2013) (violation of GBL § 395-a); 11 N.Y.C.R.R. 224.8. Seller v. Citimortgage, Inc., 118 A.D.3d 511, 512 (1st Dep’t 2014) (violation of the Federal Home Affordable Modification Program); Bloom v. Nationstar Mortg., 73 Misc.3d 327, 332 (Sup. Ct. Orange Cnty. 2021) (violation of 3 N.Y.C.R.R. 419.9); Conboy v. AT&T Corp., 241 F.3d 242, 257–58 (2d Cir. 2001) (violation of GBL § 601); M.V.B. Collision, Inc. v. Allstate Ins. Co., 728 F.Supp.25 205, 219–20 (E.D.N.Y. 2010) (violation of N.Y. Ins. Law § 2601). 6 11 of 21 FILED: ROCKLAND COUNTY CLERK 05/15/2024 11:27 PM INDEX NO. 032514/2023 NYSCEF DOC. NO. 87 RECEIVED NYSCEF: 05/15/2024 And, GBL § 349(g) allows private litigants – like Plaintiffs here – to obtain relief for “all deceptive acts or practices declared to be unlawful, whether or not subject to any other law of this state, and shall not supersede, amend, or repeal any other law of this state under which the attorney general is authorized to take any action or conduct any inquiry.” Id. (emphasis added); see also GBL § 349(h) (providing private cause of action).6 B. GBL § 349 Claims Are Proper To Redress Deceptive Acts Or Practices Prohibited By Other Laws That Do Not Have A Private Cause of Action Because GBL § 349(g) “shall apply to all deceptive acts or practices,” New York Courts consistently reject arguments similar to those made by Insurer Defendants here that a private litigant cannot allege a GBL § 349 claim against an insurance company because the deceptive and unfair acts and practices are prohibited by laws that do not specifically provide a private cause of action. Id. (emphasis added). (See MTD at 8 n. 4.)7 6 The Insurer Defendants attempt to ignore that a violation of Regulation 187 “shall be deemed …an unfair or deceptive act and practice in the conduct of the business of insurance.” (See MTD at 15.) The Insurer Defendants instead focus on other language in 11 N.Y.C.R.R. 224.8 specifying that violations of that part are also “deemed to be a trade practice constituting a determined violation as defined in Insurance Law section 2402(c), except where such act or practice shall be a defined violation, as delivered in Insurance Law section 2402(b), and in either such case shall be a violation of Insurance Law Section 2403.” (See MTD at 15.) But as further discussed herein, it is clear under New York law that private litigants may bring GBL § 349 claims against an insurer for unfair or deceptive acts and practices. See infra at Argument § I.B; see, e.g., Joannou v. Blue Ridge Ins. Co., 289 A.D.2d 531, 531 (2d Dep’t 2001) (“An insurance carrier’s failure to pay benefits allegedly due its insured under the terms of a standard insurance policy can constitute a violation of [N.Y. Gen. Bus. § 349]”). 7 Insurer Defendants’ erroneously assert that only the Superintendent of DFS can determine who violated Regulation 187. (MTD at 14–15.) But simply because Regulation 187 authorizes the Superintendent to enforce Regulation 187 does not mean that a private litigant may not utilize Regulation 187 to demonstrate that the Insurer Defendants engaged in conduct prohibited by GBL § 349. 7 12 of 21 FILED: ROCKLAND COUNTY CLERK 05/15/2024 11:27 PM INDEX NO. 032514/2023 NYSCEF DOC. NO. 87 RECEIVED NYSCEF: 05/15/2024 The Second Circuit recently rejected an insurer’s argument that a private GBL § 349 claim could not be brought where New York Insurance Law § 2601 prohibited an action by an insurer but did not provide for a private cause of action: Insurer argues that where § 2601 of the Insurance Law prohibits a certain action by insurers, but does not allow for a private right of action, and GBL § 349, which covers deceptive commercial practices generally, prohibits the same action and does provide a private right of action, the Insurance Law takes precedence as to a claim against an insurer, and no private claim may be brought under GBL § 349. This misunderstands the law of New York. We therefore vacate the district court’s ruling. Nick’s Garage, Inc. v. Progressive Cas. Ins. Co., 875 F.3d 107, 126 (2d Cir. 2017). The Second Circuit also previously rejected an insurer’s argument that New York’s Insurance Law, which empowered the Superintendent of Insurance to enforce that statute, somehow precluded a private GBL § 349 cause of action: [Insurer] Nationwide contends that [GBL § 349] cannot be used against insurance companies because the pervasive statutory scheme regulating unfair and deceptive act and practices by insurance companies. The Insurance Law empowers and charges the Superintendent of Insurance to investigate and hold hearings on allegations of deceptive and unfair claims settlement practices, and to enforce the statute’s prohibitions by cease and desist orders or, through the attorney general, judicial action. Nationwide asserts that this statutory scheme preempts the use of [GBL§ 349] by private individuals against insurance companies. This argument fails, however, because it ignores the plain language of [GBL§ 349] which states that ‘[t]his section shall apply to all deceptive acts or practices declared to be unlawful, whether or not subject to any other law of this state. Riordan v. Nationwide Mut. Fire Ins. Co., 977 F.2d 47, 51-52 (2d Cir. 1992) (affirming jury verdict that defendant insurance company committed deceptive acts and practices in violation of GBL § 349) (emphasis added); see also Hobish v. AXA Equitable Life Ins. Co., 171 A.D.3d 494, 494 (1st Dep’t 2019) (complaint sufficiently alleges [a cause of action under GBL § 349] that 8 13 of 21 FILED: ROCKLAND COUNTY CLERK 05/15/2024 11:27 PM INDEX NO. 032514/2023 NYSCEF DOC. NO. 87 RECEIVED NYSCEF: 05/15/2024 defendant insurance company’s purported deceptive conduct, allegedly misleading elderly consumers into believing that they would not be target for premium increases, and subsequently substantially increasing such premiums, impacted [plaintiff’s] estate planning by forcing her to surrender the face value of the policy purchased from defendant”); Joannou, 289 A.D.2d at 531 (“An insurance carrier’s failure to pay benefits allegedly due its insured under the terms of a standard insurance policy can constitute a violation of [GBL § 349]”).8 C. Plaintiffs Have Sufficiently Alleged A GBL § 349 Claim Against Insurer Defendants Independent of Regulation 187 Insurer Defendants incorrectly claim that Plaintiffs do not allege “consumer-oriented conduct” or “deceptive acts.” (MTD at 12–13.) The Insurer Defendants also baselessly argue that the insurance policies at issue in Plaintiffs’ Complaint are not subject to GBL § 349 claims because those policies are “expensive,” “complex,” and were sold to Plaintiffs “in transactions involving no consumers other than the Plaintiffs.” (MTD at 13.) Taken to its logical conclusion, Insurer Defendants essentially argue that insurance policies sold to individual consumers are not actionable under GBL § 349, but that is plainly untrue, would gut the protections of GBL § 349, and is belied by multiple New York cases. (See supra, at 8–9.) Further, Insurer Defendants’ erroneous claim that “this dispute centers on … complex life insurance policies” has no basis in Plaintiffs’ Complaint and is, at best, an issue of fact that 8 Insurer Defendants misstate the cases in support that there is no cause of action under Insurance Regulation 187 (MTD at 11). First, Insurer Defendants erroneously assert that the Court in Nat’l Conv. Svcs., L.L.C. v. Applied Underwriters Captive Risk Assur. Co., Inc., 239 F.Supp.3d 761, 779 (S.D.N.Y. 2017) dismissed the complaint. (MTD at 11.) The National Court did not dismiss the complaint and, in fact, held that the plaintiffs had sufficiently alleged a cause of action under GBL § 349 against the defendant insurer. Nat’l, 239 F.Supp.3d at 790–94. Further the Court in Jackson v. Ffriend, 2019 WL 2156410, at *16–17 (Sup. Ct. N.Y. Cnty. May 17, 2019) interpreted a prior version of Regulation 187 that did not contain the language in the “Violation” section stating that a contravention shall be deemed an unfair or deceptive act and practice in the conduct of the business of insurance in this state. 9 14 of 21 FILED: ROCKLAND COUNTY CLERK 05/15/2024 11:27 PM INDEX NO. 032514/2023 NYSCEF DOC. NO. 87 RECEIVED NYSCEF: 05/15/2024 cannot be resolved at the motion to dismiss stage. Insurer Defendants’ unsubstantiated assertions that “alleged misrepresentations were made largely at a single meeting” likewise has no basis in Plaintiffs’ Complaint and also presents an issue of fact. (MTD at 13.) “The battle over whether plaintiff can meet her obligation of a ‘threshold showing that [her] claim was predicated upon a deceptive act or practice that was consumer oriented’ is best reserved for a motion for summary judgment after discovery.” Skibinksy v. State Farm Fire & Cas. Co., 6 A.D.3d 975, 976 (3d Dep’t 2004) (citation omitted). New York law establishes that a GBL § 349 claim is plainly appropriate given the circumstances presented here. In Gaidon v. Guardian Life Ins. Co. of America, the Court of Appeals held that plaintiffs adequately pleaded a GBL § 349 claim because it determined that the marketing of “vanishing” premium life insurance was deceptive and was also consumer- orientated conduct. 94 N.Y.2d 330, 343–48 (1999). The Gaidon plaintiffs alleged that the insurance companies had provided personalized illustrations demonstrating that premiums paid for the life insurance policy would “vanish” after a certain period, based on dividend projections that the insurance companies knew or should have known were unrealistic. Id. at 338–39. (See Compl. ¶¶ 28, 32, 34–35, 38–40, 56, 76–78.) The Court of Appeals ruled that defendants’ conduct was consumer-orientated because it involved a marketing scheme that had an impact on consumers. Id. at 344.9 9 The cases cited by Insurer Defendants’ regarding consumer-oriented conduct under GBL § 349 are inapposite (MTD at 12–13) because none of them are regarding an insurer’s issuance of standard insurance policies that were represented to have purported “vanishing premiums,” which are at issue in this Action. See New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308, 314–15 (1995) (dispute over policy coverage); Abraham v. Tortai, 219 A.D.3d 1275, 1277 (2d Dep’t 2023) (foreclosure action); JD&K Assocs., LLC v. Selective Ins. Group, Inc., 143 A.D.3d 1232, 1233 (4th Dep’t 2016) (dispute over policy coverage); Cathy Daniels, Ltd. v. Weingast, 91 A.D.3d 431, 432–33 (1st Dep’t 2012) (whether a party may make a tax deduction based on a 10 15 of 21 FILED: ROCKLAND COUNTY CLERK 05/15/2024 11:27 PM INDEX NO. 032514/2023 NYSCEF DOC. NO. 87 RECEIVED NYSCEF: 05/15/2024 Likewise, in this Action, Plaintiffs alleged that Defendant Brave Strategies, while acting as a producer for Insurer Defendants, represented to Plaintiffs that he had brokered similar “high-value life insurance policies for many clients over many years.” (Compl. ¶ 25.) Consequently, the misrepresentations concerning the nature of these life insurance policies affect not only Plaintiffs but also consumers at large. See Plavin v. Group Health Inc., 35 N.Y.3d 1, 12–13 (2020) (allegations that insurer made misleading representations regarding health plan insurance sufficient for GBL § 349 claim); Skibinksy, 6 A.D.3d at 976 (3d Dep’t 2004) (GBL § 349 claim sufficient based on allegations that insurer misrepresented the nature of coverage being provided to insured). The Court of Appeals in Gaidon established that deceptive practices in marketing “vanishing” premium life insurance policies have far-reaching consequences, impacting consumers beyond Plaintiffs. 94 N.Y.2d at 344. Therefore, Plaintiffs have alleged a cause of action under GBL § 349 that Insurer Defendants’ actions were deceptive practices and consumer-orientated -- regardless of the duties and obligations set forth in Regulation 187 -- because the Insurer Defendants: (i) issued the Life Insurance Policies without having a reasonable basis that the Life Insurance Policies were suitable based on the information provided by Plaintiffs (Compl. ¶ 142);10 (ii) failed to establish, maintain, and audit a system of supervision of its producers ensuring that life insurance policies are being sold in the best interest of the purchase of life insurance); Flax v. Lincoln Nat’l Life Ins. Co., 54 A.D.3d 992, 994 (2d Dep’t 2008) (insurance agents and insurer had misrepresented the rate of return for investments selected by plaintiff). 10 “[A]n insurer shall not effectuate a sales transaction with respect to its policies unless there is a reasonable basis to believe that the sales transaction is suitable based on the suitability information provided by the consumer and without regard to the availability of products, services, and transactions of companies other than the insurer.” 11 N.Y.C.R.R. 224.6 (a). 11 16 of 21 FILED: ROCKLAND COUNTY CLERK 05/15/2024 11:27 PM INDEX NO. 032514/2023 NYSCEF DOC. NO. 87 RECEIVED NYSCEF: 05/15/2024 consumer without material misrepresentations (Compl. ¶ 144);11 and (iii) failed to adequately train each producer that would allow them to make recommendations regarding life insurance policies in the best interest of the consumer without material misrepresentations (Compl. ¶ 145).12 As Regulation 187 was enacted to broadly protect consumers when purchasing insurance policies generally, including the policies at issue in Plaintiffs Complaint. Specifically, the stated “Purpose” of Regulation 187 includes: (b) This Part clarifies the duties and obligations of insurers … by requiring them to establish standards and procedures for recommendations to consumers with respect to policies delivered or issued for delivery in this state so that any transaction with respect to those policies is in the best interest of the consumer and appropriately addresses the insurance needs and financial objectives of the consumer at the time of the transaction. This Part also clarifies the nature and extent of supervisory controls that an insurer must maintain to achieve 11 “An insurer shall establish, maintain, and audit a system of supervision that is reasonable designed to achieve the insurer’s and producer’s compliance with Section 224.4(a) through (k) of this Part, including standards and procedures for: (i) the collection of a consumer’s suitability information with respect to sales transactions involving the insurer’s policies; (ii) the documentation and disclosure of the basis for any recommendation with respect to sales transactions involving the insurer’s policies; (iii) the review of complaints received by the insurer regarding recommendations inconsistent with the best interest of the consumer; (iv) the auditing and/or contemporaneous review of recommendations to monitor producers’ compliance with section 224.4(a) and (b) of this Part with respect to the insurer’s policies. An insurer may use a reasonable risk-based approach to audit and/or contemporaneously review producers’ recommendations to identify recommendations of the greatest risk of violation of section 224.4(a) and (b) of this Part so long as the approach does not focus solely on recommendations posing the greatest risk with no auditing or review of other recommendations.” 11 N.Y.C.R.R. 224.6(b). 12 “An insurer shall be responsible for ensuring that every producer recommending any transaction with respect to the insurer’s policies is adequately trained to make the recommendation in accordance with the provisions of this Part . . . .” 11 N.Y.C.R.R. 224.6(e). 12 17 of 21 FILED: ROCKLAND COUNTY CLERK 05/15/2024 11:27 PM INDEX NO. 032514/2023 NYSCEF DOC. NO. 87 RECEIVED NYSCEF: 05/15/2024 compliance with this Part. (c) This Part further clarifies the duties and obligations of producers when making recommendations to consumers with respect to policies delivered or issued for delivery in this state to help ensure that a transaction is in the best interest of the consumer and appropriately addresses the insurance needs and financial objectives of the consumer at the time of the transaction. The best interest standard set forth in this Part requires a producer, or insurer where no producer is involved, to adhere to a standard of conduct to be enforced by the superintendent, but does not guarantee or warrant an outcome. 11 N.Y.C.R.R. 224.0 (emphasis added). As the requirements in Regulation 187 are designed to protect the public, and the Plaintiffs as consumers, the Insured Defendants’ failure to comply with Regulation 187 as alleged in the Complaint undeniably impacts consumers and the public.13 And a violation of GBL § 349 is actionable here, including because “the complaint adequately alleges conduct that is consumer-oriented inasmuch as it alleges conduct that has a broad impact on consumers at large.” N. State Autobahn, Inc., 102 A.D.3d at 13 (internal quotations omitted). D. Insurer Defendants Erroneously Assert That Plaintiffs Allege A Private Cause Of Action Under Regulation 187 Insurer Defendants primarily make the diversionary argument that Plaintiffs have alleged a cause of action under Insurance Regulation 187. (See MTD at 6–11.) This red herring argument is untrue. Instead, Plaintiffs allege that the Insurer Defendants violated GBL § 349 and have specified that Regulation 187 violations and the conduct of those violations constitute the 13 The New York Court of Appeals made clear that Regulation 187 is not meant to “require producers and insurers to identify the single best policy for a consumer. It simply requires them to reasonably recommend a suitable policy that will benefit the consumer, while refraining from considering their own financial gain.” Ind. Ins. Agents, 39 N.Y.3d at 69. Plaintiffs have sufficiently alleged that the Insurer Defendants have failed to do that here and therefore are in violation of GBL § 349(a).