Preview
FILED: NEW YORK COUNTY CLERK 01/17/2019 04:30 PM INDEX NO. 652830/2017
NYSCEF DOC. NO. 74 RECEIVED NYSCEF: 01/17/2019
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
ROCHELLE MENCHE and PINCHUS Index No. 652830/2017
MENCHE as trustees of the SOLOMON
MENCHE ILIT,
Mot. Seq. No. 002
Plaintiffs,
-against-
THE UNITED STATES LIFE INSURANCE
CO. IN THE CITY OF NEW YORK.
Defendant.
DEFENDANT/COUNTERCLAIM-PLAINTIFF’S MEMORANDUM OF LAW IN
FURTHER SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT
FISHKIN LUCKS LLP
Steven M. Lucks
277 Broadway, Suite 408
New York, NY 10007
(646) 755-9200
slucks@fishkinlucks.com
-and-
MCDOWELL HETHERINGTON LLP
David T. McDowell (to be admitted pro hac vice)
Kendall J. Burr
First City Tower
1001 Fannin Street, Suite 2700
Houston, TX 77002
(713) 337-5580
david.mcdowell@mhllp.com
kendall.burr@mhllp.com
ATTORNEYS FOR DEFENDANT/COUNTERCLAIM-
PLAINTIFF THE UNITED STATES LIFE INSURANCE
COMPANY IN THE CITY OF NEW YORK
00059490.2
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The Trust’s response does not dispute the key material facts, so trial is unnecessary; this
case turns on pure questions of contract interpretation and New York law. The contract required
the Trust to pay premiums to keep the Policies in force, and New York authorities do not excuse
the Trust’s failure to pay back-owed premiums. The Trust asked a prior court to approve its
nonpayment, but never obtained such a ruling. The Trust then complained to state regulators,
who found no legal basis for nonpayment and confirmed that the Policies had lapsed. The Trust
now sues seeking to force the Policies’ reinstatement, but offers no new legal grounds excusing
its failure to pay premiums. Summary judgment in U.S. Life’s favor is warranted.
ARGUMENT
The Trust’s short response to U.S. Life’s summary judgment motion neglects to address
most of U.S Life’s arguments. Its silence speaks volumes. Perhaps the most conspicuous
omission is any response to U.S. Life’s arguments and evidence showing that the Trust’s refusal
to pay five years of premiums caused the Policies to lapse under their terms. See Hite Aff.1 Ex. A
at 6, Ex. B. at 6. It is undisputed that the Policies, which the Trust now seeks to have reinstated,
required payment of $250,000 in premiums, which the Trust concedes it did not pay. Nor does
the Trust dispute that the New York State Department of Financial Services rejected its
complaint and found that because no court order excused nonpayment of premiums, the Policies
had lapsed. See Burr Aff.2 Ex. I at 4. The only debate concerns whether some authority outside
of the contracts permits the Trust to benefit from five years of insurance coverage without having
to pay for it. No such authority exists.
1
References to “Hite Aff.” are to the Affidavit of Karen Hite submitted in support of Defendant/Counterclaim
Plaintiff’s Motion for Summary Judgment, dated December 12, 2018.
2
References to “Burr Aff.” are to the Affirmation of Kendall J. Burr submitted in support of
Defendant/Counterclaim Plaintiff’s Motion for Summary Judgment, dated December 13, 2018.
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A. The court in the Prior Case did not excuse the Trust from paying back-due
premiums, nor grant permanent injunctive relief.
In the Prior Case (see Mot. at 2–4), the Menche Parties only obtained temporary
injunctive relief, which expired when that case terminated. The Trust wrongly suggests that an
August 2015 ruling in a preliminary injunction hearing justifies its nonpayment of premiums
even after the Prior Case concluded. But the court made clear itwas not awarding permanent
relief:
MR. LESKO: Am I correct also that, your Honor, there is no determination made
as to whether or not the policies enforced in light of failure to pay the back
premiums, that is still live issue for trial?
THE COURT: That is something you can certainly raise, yes.
MR. BENHAIM: Your Honor, what he’s seeking to do is get order to say if we
don’t pay premiums now, the policy is lapsed. That is why we’re here.
THE COURT: I’m not going to make a ruling at this time - -
MR. BENHAIM: Right.
THE COURT: - - as to whether or not the back premiums would, failure to pay
the back premiums would cause a lapse in the policy.
MR. LESKO: Understood. So the court is not saying that it will not cause a lapse
either.
THE COURT: That’s correct.
See Burr Aff. Ex. E at 12–13. The court’s “NON-FINAL DISPOSITION” at the end of the
hearing confirmed that the lapse issue was reserved for trial. See Burr Aff. Ex. F. The court never
revisited the issue, and the Menche Parties never obtained permanent injunctive relief.
Notably, the Trust appears to have dropped its collateral estoppel argument. The Trust’s
summary judgment motion had argued that given the prior court’s August 2015 ruling, U.S. Life
is collaterally estopped from “relitigating” the lapse issue. But as U.S. Life detailed in its
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response and in its own summary judgment motion, the Prior Court never issued any adjudicated
decision regarding past-due premiums. The Trust no longer argues estoppel, apparently
conceding that the prior court never resolved the issue.
Instead, the Trust reframes its argument but still grossly mischaracterizes the court’s
ruling, arguing that U.S. Life acted “in direct violation of the August 27, 2015 order” by
declaring the Policies lapsed in March 2016. But that is not true. It was only a temporary
injunction; while in effect, the Policies remained in force, and U.S. Life never claimed otherwise.
That changed when the Prior Case ended in February 2016. The temporary injunction expired,
and Plaintiff obtained no final ruling or permanent injunction surviving the case. So, as of
February 2016, the parties’ legal obligations were governed by the contracts and New York law,
and back premiums came due. See Lebovits v. PHL Variable Ins. Co., No. 12-CV-6397 (FB)
(RML), 2017 WL 5495797, at *1 (E.D.N.Y. Jan. 13, 2017); Berkshire Settlements, Inc. v.
Ashkenazi, No. 09-CV-0006 (FB)(JO), 2011 WL 5974633, at *7 (E.D.N.Y. Nov. 29, 2011).
B. New York law required payment of back-due premiums to prevent lapse,
and the Trust offers no authority that pardons it from that obligation.
The Trust disregards these authorities and fails to cite a single New York case suggesting
that a policyholder can enforce continued insurance coverage without paying back-due
premiums. The Trust’s attempt to distinguish the cases cited by U.S. Life—claiming that the
Trust incurred the expense of purchasing “replacement” insurance coverage—is unavailing. The
Lebovits and Berkshire Settlements decisions applied basic New York contract law and dictate
that regardless of the insured’s attempted justification, the contract requires back-due payment in
exchange for continued coverage. Lebovits, 2017 WL 5495797, at *1; Berkshire Settlements,
2011 WL 5974633, at *7. The Trust’s unilateral decision to purchase more insurance is a red
herring and irrelevant to the question before the Court.
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Notably, the Trust also has abandoned its argument that it has a common-law right to
offset the back-owed premiums by what it had paid to Guardian Life. As U.S. Life has already
explained, this theory relies on the false premise that a mutual debt exists. See Thai Lao Lignite
(Thailand) Co. v. Gov’t of the Lao People’s Democratic Republic, No. 10-CV-5256 (KMW)
(DCF), 2016 WL 958640, at *2 (S.D.N.Y. Mar. 8, 2016) (setoff theory requires existence of
mutual debts). No contract, law, or judgment requires U.S. Life to pay the Trust damages, and
the Trust seeks no damages in this suit. See Burr Aff. Ex. J (seeking a declaration only). Nor
could it obtain such damages because all parties agree that the Policies remained in force during
the entire pendency of the Prior Case. So, in reality, the Trust obtained additional coverage from
Guardian Life, not replacement coverage, and enjoyed the benefit of the bargain on both
policies. The Trust cites no authority showing that it may unilaterally buy additional coverage to
protect against the mere threat of invalidation and force U.S. Life to pay for it. Lacking such
support, the Trust drops its setoff argument altogether.
In sum, a contract party cannot sue to recover the benefit of a bargain without performing
its duties under that bargain. An insurance policyholder seeking coverage under the contracted
terms must therefore bring premiums up to date. Lebovits, 2017 WL 5495797, at *1; Berkshire
Settlements, 2011 WL 5974633, at *7. The Trust did not so here, so the Policies lapsed. The
Trust has no legal basis for forcing the Policies’ reinstatement, and especially not for enforcing
coverage without paying past-due premiums. As such, U.S. Life is entitled to judgment as a
matter of law.
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CONCLUSION
For these reasons, U.S. Life respectfully requests summary judgment finding that (1) the
policies lapsed for nonpayment of premiums, (2) no coverage exists under the policies, and
(3) no recovery exists under the policies at law or in equity.
Respectfully submitted,
/s/ Steven M. Lucks
FISHKIN LUCKS LLP
Steven M. Lucks
277 Broadway, Suite 408
New York, NY 10007
(646) 755-9200
slucks@fishkinlucks.com
-and-
MCDOWELL HETHERINGTON LLP
David T. McDowell (to be admitted pro hac vice)
Kendall J. Burr
First City Tower
1001 Fannin Street, Suite 2700
Houston, TX 77002
(713) 337-5580
david.mcdowell@mhllp.com
kendall.burr@mhllp.com
ATTORNEYS FOR DEFENDANT/COUNTERCLAIM-
PLAINTIFF THE UNITED STATES LIFE INSURANCE
COMPANY IN THE CITY OF NEW YORK
00059490.2 6
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Preview
FILED: NEW YORK COUNTY CLERK 01/17/2019 04:30 PM INDEX NO. 652830/2017 NYSCEF DOC. NO. 74 RECEIVED NYSCEF: 01/17/2019 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ROCHELLE MENCHE and PINCHUS Index No. 652830/2017 MENCHE as trustees of the SOLOMON MENCHE ILIT, Mot. Seq. No. 002 Plaintiffs, -against- THE UNITED STATES LIFE INSURANCE CO. IN THE CITY OF NEW YORK. Defendant. DEFENDANT/COUNTERCLAIM-PLAINTIFF’S MEMORANDUM OF LAW IN FURTHER SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT FISHKIN LUCKS LLP Steven M. Lucks 277 Broadway, Suite 408 New York, NY 10007 (646) 755-9200 slucks@fishkinlucks.com -and- MCDOWELL HETHERINGTON LLP David T. McDowell (to be admitted pro hac vice) Kendall J. Burr First City Tower 1001 Fannin Street, Suite 2700 Houston, TX 77002 (713) 337-5580 david.mcdowell@mhllp.com kendall.burr@mhllp.com ATTORNEYS FOR DEFENDANT/COUNTERCLAIM- PLAINTIFF THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK 00059490.2 1 of 6 FILED: NEW YORK COUNTY CLERK 01/17/2019 04:30 PM INDEX NO. 652830/2017 NYSCEF DOC. NO. 74 RECEIVED NYSCEF: 01/17/2019 The Trust’s response does not dispute the key material facts, so trial is unnecessary; this case turns on pure questions of contract interpretation and New York law. The contract required the Trust to pay premiums to keep the Policies in force, and New York authorities do not excuse the Trust’s failure to pay back-owed premiums. The Trust asked a prior court to approve its nonpayment, but never obtained such a ruling. The Trust then complained to state regulators, who found no legal basis for nonpayment and confirmed that the Policies had lapsed. The Trust now sues seeking to force the Policies’ reinstatement, but offers no new legal grounds excusing its failure to pay premiums. Summary judgment in U.S. Life’s favor is warranted. ARGUMENT The Trust’s short response to U.S. Life’s summary judgment motion neglects to address most of U.S Life’s arguments. Its silence speaks volumes. Perhaps the most conspicuous omission is any response to U.S. Life’s arguments and evidence showing that the Trust’s refusal to pay five years of premiums caused the Policies to lapse under their terms. See Hite Aff.1 Ex. A at 6, Ex. B. at 6. It is undisputed that the Policies, which the Trust now seeks to have reinstated, required payment of $250,000 in premiums, which the Trust concedes it did not pay. Nor does the Trust dispute that the New York State Department of Financial Services rejected its complaint and found that because no court order excused nonpayment of premiums, the Policies had lapsed. See Burr Aff.2 Ex. I at 4. The only debate concerns whether some authority outside of the contracts permits the Trust to benefit from five years of insurance coverage without having to pay for it. No such authority exists. 1 References to “Hite Aff.” are to the Affidavit of Karen Hite submitted in support of Defendant/Counterclaim Plaintiff’s Motion for Summary Judgment, dated December 12, 2018. 2 References to “Burr Aff.” are to the Affirmation of Kendall J. Burr submitted in support of Defendant/Counterclaim Plaintiff’s Motion for Summary Judgment, dated December 13, 2018. 00059490.2 2 2 of 6 FILED: NEW YORK COUNTY CLERK 01/17/2019 04:30 PM INDEX NO. 652830/2017 NYSCEF DOC. NO. 74 RECEIVED NYSCEF: 01/17/2019 A. The court in the Prior Case did not excuse the Trust from paying back-due premiums, nor grant permanent injunctive relief. In the Prior Case (see Mot. at 2–4), the Menche Parties only obtained temporary injunctive relief, which expired when that case terminated. The Trust wrongly suggests that an August 2015 ruling in a preliminary injunction hearing justifies its nonpayment of premiums even after the Prior Case concluded. But the court made clear itwas not awarding permanent relief: MR. LESKO: Am I correct also that, your Honor, there is no determination made as to whether or not the policies enforced in light of failure to pay the back premiums, that is still live issue for trial? THE COURT: That is something you can certainly raise, yes. MR. BENHAIM: Your Honor, what he’s seeking to do is get order to say if we don’t pay premiums now, the policy is lapsed. That is why we’re here. THE COURT: I’m not going to make a ruling at this time - - MR. BENHAIM: Right. THE COURT: - - as to whether or not the back premiums would, failure to pay the back premiums would cause a lapse in the policy. MR. LESKO: Understood. So the court is not saying that it will not cause a lapse either. THE COURT: That’s correct. See Burr Aff. Ex. E at 12–13. The court’s “NON-FINAL DISPOSITION” at the end of the hearing confirmed that the lapse issue was reserved for trial. See Burr Aff. Ex. F. The court never revisited the issue, and the Menche Parties never obtained permanent injunctive relief. Notably, the Trust appears to have dropped its collateral estoppel argument. The Trust’s summary judgment motion had argued that given the prior court’s August 2015 ruling, U.S. Life is collaterally estopped from “relitigating” the lapse issue. But as U.S. Life detailed in its 00059490.2 3 3 of 6 FILED: NEW YORK COUNTY CLERK 01/17/2019 04:30 PM INDEX NO. 652830/2017 NYSCEF DOC. NO. 74 RECEIVED NYSCEF: 01/17/2019 response and in its own summary judgment motion, the Prior Court never issued any adjudicated decision regarding past-due premiums. The Trust no longer argues estoppel, apparently conceding that the prior court never resolved the issue. Instead, the Trust reframes its argument but still grossly mischaracterizes the court’s ruling, arguing that U.S. Life acted “in direct violation of the August 27, 2015 order” by declaring the Policies lapsed in March 2016. But that is not true. It was only a temporary injunction; while in effect, the Policies remained in force, and U.S. Life never claimed otherwise. That changed when the Prior Case ended in February 2016. The temporary injunction expired, and Plaintiff obtained no final ruling or permanent injunction surviving the case. So, as of February 2016, the parties’ legal obligations were governed by the contracts and New York law, and back premiums came due. See Lebovits v. PHL Variable Ins. Co., No. 12-CV-6397 (FB) (RML), 2017 WL 5495797, at *1 (E.D.N.Y. Jan. 13, 2017); Berkshire Settlements, Inc. v. Ashkenazi, No. 09-CV-0006 (FB)(JO), 2011 WL 5974633, at *7 (E.D.N.Y. Nov. 29, 2011). B. New York law required payment of back-due premiums to prevent lapse, and the Trust offers no authority that pardons it from that obligation. The Trust disregards these authorities and fails to cite a single New York case suggesting that a policyholder can enforce continued insurance coverage without paying back-due premiums. The Trust’s attempt to distinguish the cases cited by U.S. Life—claiming that the Trust incurred the expense of purchasing “replacement” insurance coverage—is unavailing. The Lebovits and Berkshire Settlements decisions applied basic New York contract law and dictate that regardless of the insured’s attempted justification, the contract requires back-due payment in exchange for continued coverage. Lebovits, 2017 WL 5495797, at *1; Berkshire Settlements, 2011 WL 5974633, at *7. The Trust’s unilateral decision to purchase more insurance is a red herring and irrelevant to the question before the Court. 00059490.2 4 4 of 6 FILED: NEW YORK COUNTY CLERK 01/17/2019 04:30 PM INDEX NO. 652830/2017 NYSCEF DOC. NO. 74 RECEIVED NYSCEF: 01/17/2019 Notably, the Trust also has abandoned its argument that it has a common-law right to offset the back-owed premiums by what it had paid to Guardian Life. As U.S. Life has already explained, this theory relies on the false premise that a mutual debt exists. See Thai Lao Lignite (Thailand) Co. v. Gov’t of the Lao People’s Democratic Republic, No. 10-CV-5256 (KMW) (DCF), 2016 WL 958640, at *2 (S.D.N.Y. Mar. 8, 2016) (setoff theory requires existence of mutual debts). No contract, law, or judgment requires U.S. Life to pay the Trust damages, and the Trust seeks no damages in this suit. See Burr Aff. Ex. J (seeking a declaration only). Nor could it obtain such damages because all parties agree that the Policies remained in force during the entire pendency of the Prior Case. So, in reality, the Trust obtained additional coverage from Guardian Life, not replacement coverage, and enjoyed the benefit of the bargain on both policies. The Trust cites no authority showing that it may unilaterally buy additional coverage to protect against the mere threat of invalidation and force U.S. Life to pay for it. Lacking such support, the Trust drops its setoff argument altogether. In sum, a contract party cannot sue to recover the benefit of a bargain without performing its duties under that bargain. An insurance policyholder seeking coverage under the contracted terms must therefore bring premiums up to date. Lebovits, 2017 WL 5495797, at *1; Berkshire Settlements, 2011 WL 5974633, at *7. The Trust did not so here, so the Policies lapsed. The Trust has no legal basis for forcing the Policies’ reinstatement, and especially not for enforcing coverage without paying past-due premiums. As such, U.S. Life is entitled to judgment as a matter of law. 00059490.2 5 5 of 6 FILED: NEW YORK COUNTY CLERK 01/17/2019 04:30 PM INDEX NO. 652830/2017 NYSCEF DOC. NO. 74 RECEIVED NYSCEF: 01/17/2019 CONCLUSION For these reasons, U.S. Life respectfully requests summary judgment finding that (1) the policies lapsed for nonpayment of premiums, (2) no coverage exists under the policies, and (3) no recovery exists under the policies at law or in equity. Respectfully submitted, /s/ Steven M. Lucks FISHKIN LUCKS LLP Steven M. Lucks 277 Broadway, Suite 408 New York, NY 10007 (646) 755-9200 slucks@fishkinlucks.com -and- MCDOWELL HETHERINGTON LLP David T. McDowell (to be admitted pro hac vice) Kendall J. Burr First City Tower 1001 Fannin Street, Suite 2700 Houston, TX 77002 (713) 337-5580 david.mcdowell@mhllp.com kendall.burr@mhllp.com ATTORNEYS FOR DEFENDANT/COUNTERCLAIM- PLAINTIFF THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK 00059490.2 6 6 of 6