Preview
FILED: NEW YORK COUNTY CLERK 01/10/2019 02:51 PM INDEX NO. 652830/2017
NYSCEF DOC. NO. 73 RECEIVED NYSCEF: 01/10/2019
SUPREME COURT FOR THE STATE OF NEW YORK
COUNTY OF NEW YORK
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ROCHELLE MENCHE and PINCHUS MENCHE
as trustees of the SOLOMON MENCHE ILIT,
Index Number: 652830/2017
Plaintiff,
v.
THE UNITED STATES LIFE INSURANCE CO.
IN THE CITY OF NEW YORK
Defendant.
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PLAINTIFF’S MEMORANDUM OF LAW IN REPLY AND FURTHER SUPPORT OF
ITS MOTION FOR SUMMARY JUDGMENT AND IN OPPOSITION TO THE MOTION
BY DEFENDANT FOR SUMMARY JUDGMENT
LIPSIUS – BENHAIM, LLP
Attorneys for Plaintiff
80-02 Kew Gardens Road, Suite 1030
Kew Gardens, New York 11415
212 - 981- 8442
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PRELIMINARY STATEMENT
Plaintiff Rochelle Menche and Pinchus Menche as trustees of the Solomon Menche Ilit,
(“the Menche Trust”) respectfully submit this memorandum of law in reply and further support
of the Menche Trust’s motion for summary judgment and in opposition to defendant’s motion for
summary judgment.
AIG seeks to punish the Menche Trust for doing exactly as it was told to do by this
Court. No one denies that in August of 2015, the prior Court ordered the Menche Trust to pay the
premiums moving forward and that the Menche Trust was not obligated, yet, to pay premiums
between 2011 and the Court order. No one denies that from that point forward, the Menche
Trust did exactly as it was told to do and paid AIG the premiums moving forward. Even though
the Menche Trust did exactly as itwas told to do by this Court, AIG declared that the policies
lapsed. Apparently, after AIG lost in its bid to rescind the policies, AIG sought to circumvent the
Court’s judgment in favor of the Menche Trust by simply declared the policies lapsed.
AIG makes much of the fact that after the AIG declared the policies lapsed, the Menche
Trust reached out to the New York Department of Financial Services to file a complaint. After
AIG wrongfully sued the Menche Trust to rescind the policies and lost, the Menche Trust simply
sought to avoid having to incur even more legal fees in order to keep the policies and so the
Menche Trust, hoping to avoid the expense of a litigation, filed a complaint with the insurance
department at the Department of Financial Services. The insurance department responded that its
jurisdiction was limited and that it could do no more than forward to the complaint to AIG. As a
result, the Menche Trust was again forced to expend unnecessary legal fees in maintaining this
action.
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There is therefore no question that after following the prior Court’s earlier instructions to
pay premiums moving forward, under the well-established principles of collateral estoppel, AIG
cannot declare the policies lapsed. The only issue which the prior court did not resolve and is left
to be decided presently is whether or not the Menche Trust is entitled to offset the premiums
between years 2011-2015 against the premiums paid to Guardian for the replacement insurance.
In defending its right to collect premiums for the years 2011-2015, AIG repeatedly recites
the simple fact that insurance is not free. AIG conveniently ignores the fact that after AIG
commenced the prior action in 2011 to rescind the policies AIG left the Menche family exposed
to the risk of calamity thereby forcing the Menche Trust to expend tremendous resources on
replacement coverage. There is no question that had AIG not commenced the frivolous action to
rescind the policies, the Menche Trust would not have needed to purchase replacement coverage
with Guardian. Not only that, but AIG cannot be entitled to premiums if it did not assume the
risk of paying the death benefit. During the years 2011 and 2015 AIG did not assume any risk so
it is not entitled to premiums.
ARGUMENT
Point I
THE POLICIES DID NOT LAPSE BECAUSE THE MENCHE TRUST FOLLOWED
THIS COURT ORDER IN THE PRIOR ACTION TO ONLY PAY FORWARD
PREMIUMS
AIG cannot explain why the policies would lapse for failure to pay premiums between
2011 and 2015 when the Court ruled that it should not until further determination is made. When
AIG sought premiums for 2011-2015, the Menche Trust did not act unilaterally but sought
direction from the Court. The Court ruled not to pay the back premium for now, only pay
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forward premium and the question of whether AIG is entitled to back premium was left to be
resolved at a later date. Having done exactly what the Court ordered it to do, it is inconceivable
that the Menche Trust should be punished for doing so.
AIG admits in its brief that it is “undisputed…that on August 27, 2015 Justice Mills
confirmed that the policies were stillin force ordering the Menche Parties to pay premiums to
U.S. Life going forward but she did not resolve the disputed issue of the Menche Parties’
obligation to pay back-owed premiums.” (p. 10, document 29). AIG also admitted in its response
to interrogatories (p. 2, Doc. 25) that from 2015 to 2018, Mr. Menche paid every premium, thus
complying with the court order. Therefore, AIG’s decision to declare the policies lapsed is in
direct violation of the August 27, 2015 order and the policies are not lapsed.
Plaintiffs’ motion for summary judgment can be broken into two parts: (1) that the
policies are not lapsed and (2) that Mr. Menche does not owe premiums for the period 2011-
2015. As the facts necessary to award plaintiffs summary judgment on the first part have been
admitted to by AIG, there is no question that plaintiffs are entitled to summary judgment on the
first part.
Point II
A. AIG FORCED THE MENCHE TRUST TO PURCHASE REPLACEMENT
COVERAGE
AIG’s briefs are littered with repeated referenced to the fact that, in general, insurance is
not free. The point is well taken but totally ignores the unique facts of this case.
When Sol Menche, the insured and grantor of the Menche Trust procured the AIG
policies in 2008, he did so in order to protect his family from unforeseen calamity over the
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twenty three year term of the policies. Since issuing the policies, instead of providing “security,
protection, and peace of mind” Bi-Economy Mkt., Inc. v. Harleysville Ins. Co. of N.Y., 10 N.Y.3d
187, 886 N.E.2d 127, 856 N.Y.S.2d 505 (2008), AIG’s frivolous conduct and litigiousness
bought the Menche family litigation expenses, worry and left them exposed to risk.
As a direct result of AIG’s commencement of the prior rescission action, Sol Menche was
forced to purchase new coverage, which was even more expensive, in order to obtain the
security, protection and peace of mind he thought he purchased from AIG. In its brief, AIG calls
the decision to purchase replacement coverage “unilateral.” (p. 4, Doc. 29) While AIG did not
join in the decision to purchase the coverage, AIG’s failed rescission action was the direct cause
of the decision to purchase the coverage.
Thus, the decisions cited by AIG, Lebovits v. PHL Variable Ins. Co., 199 F.Supp.3d 678
(E.D.N.Y. 2016) and Berkshire Settlements, Inc. v. Ashkenazi, 2011 WL 5974633 (E.D.N.Y.
Nove. 29, 2011) are entirely inapposite. In those decisions, the policy owner did not suffer the
damages of having to pay premiums on replacement insurance because no such insurance was
purchased. Here, however, Mr. Menche obtained his insurance needs between 2011 and 2016
from Guardian and paid Guardian for that coverage. There is no basis to have Mr. Menche pay
AIG for the security, protection and peace of mind that Guardian provided and AIG failed to
provide.
Point III.
THE FACT THAT THE NEW YORK DEPARTMENT OF FINANCIAL
SERVICES COULD NOT ACT TO ENFORCE THE PRIOR COURT’S ORDER IS OF
NO CONSEQUENCE
After the prior court ordered Mr. Menche to pay premiums moving forward, Mr. Menche
did just that. Instead of accepting the premiums as the court ordered AIG to do, AIG declared
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that the policies lapsed for failure to pay the 2011 premiums. Having suffered through an
expensive rescission action commenced by AIG, Mr. Menche, hoping to avoid continued
expenses, filed an insurance department complaint with the New York Department of Financial
Services in the hope that it would spur AIG to abide by the prior court’s order. Unfortunately, all
that the Department of Financial Services was able to do is send the complaint to AIG forcing
Mr. Menche to incur further litigation expenses simply to have AIG abide by the prior Court
order. At very minimum, a triable question of fact exists whether the Guardian policy was
purchased as replacement coverage allowing plaintiffs an offset.
CONCLUSION
For all of the foregoing reasons, the Court is requested to grant this motion in its entirety
and to bring finality and closure to this protracted matter.
Dated: Kew Gardens, New York
January 10, 2019
LIPSIUS-BENHAIM LAW, LLP
Attorneys for Plaintiffs
By: _____________________
David BenHaim
80-02 Kew Gardens Road, Suite 1030
Kew Gardens, New York 11415
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Preview
FILED: NEW YORK COUNTY CLERK 01/10/2019 02:51 PM INDEX NO. 652830/2017 NYSCEF DOC. NO. 73 RECEIVED NYSCEF: 01/10/2019 SUPREME COURT FOR THE STATE OF NEW YORK COUNTY OF NEW YORK ----------------------------------------------------------------------X ROCHELLE MENCHE and PINCHUS MENCHE as trustees of the SOLOMON MENCHE ILIT, Index Number: 652830/2017 Plaintiff, v. THE UNITED STATES LIFE INSURANCE CO. IN THE CITY OF NEW YORK Defendant. ---------------------------------------------------------------------X PLAINTIFF’S MEMORANDUM OF LAW IN REPLY AND FURTHER SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT AND IN OPPOSITION TO THE MOTION BY DEFENDANT FOR SUMMARY JUDGMENT LIPSIUS – BENHAIM, LLP Attorneys for Plaintiff 80-02 Kew Gardens Road, Suite 1030 Kew Gardens, New York 11415 212 - 981- 8442 1 of 6 FILED: NEW YORK COUNTY CLERK 01/10/2019 02:51 PM INDEX NO. 652830/2017 NYSCEF DOC. NO. 73 RECEIVED NYSCEF: 01/10/2019 PRELIMINARY STATEMENT Plaintiff Rochelle Menche and Pinchus Menche as trustees of the Solomon Menche Ilit, (“the Menche Trust”) respectfully submit this memorandum of law in reply and further support of the Menche Trust’s motion for summary judgment and in opposition to defendant’s motion for summary judgment. AIG seeks to punish the Menche Trust for doing exactly as it was told to do by this Court. No one denies that in August of 2015, the prior Court ordered the Menche Trust to pay the premiums moving forward and that the Menche Trust was not obligated, yet, to pay premiums between 2011 and the Court order. No one denies that from that point forward, the Menche Trust did exactly as it was told to do and paid AIG the premiums moving forward. Even though the Menche Trust did exactly as itwas told to do by this Court, AIG declared that the policies lapsed. Apparently, after AIG lost in its bid to rescind the policies, AIG sought to circumvent the Court’s judgment in favor of the Menche Trust by simply declared the policies lapsed. AIG makes much of the fact that after the AIG declared the policies lapsed, the Menche Trust reached out to the New York Department of Financial Services to file a complaint. After AIG wrongfully sued the Menche Trust to rescind the policies and lost, the Menche Trust simply sought to avoid having to incur even more legal fees in order to keep the policies and so the Menche Trust, hoping to avoid the expense of a litigation, filed a complaint with the insurance department at the Department of Financial Services. The insurance department responded that its jurisdiction was limited and that it could do no more than forward to the complaint to AIG. As a result, the Menche Trust was again forced to expend unnecessary legal fees in maintaining this action. -2- 2 of 6 FILED: NEW YORK COUNTY CLERK 01/10/2019 02:51 PM INDEX NO. 652830/2017 NYSCEF DOC. NO. 73 RECEIVED NYSCEF: 01/10/2019 There is therefore no question that after following the prior Court’s earlier instructions to pay premiums moving forward, under the well-established principles of collateral estoppel, AIG cannot declare the policies lapsed. The only issue which the prior court did not resolve and is left to be decided presently is whether or not the Menche Trust is entitled to offset the premiums between years 2011-2015 against the premiums paid to Guardian for the replacement insurance. In defending its right to collect premiums for the years 2011-2015, AIG repeatedly recites the simple fact that insurance is not free. AIG conveniently ignores the fact that after AIG commenced the prior action in 2011 to rescind the policies AIG left the Menche family exposed to the risk of calamity thereby forcing the Menche Trust to expend tremendous resources on replacement coverage. There is no question that had AIG not commenced the frivolous action to rescind the policies, the Menche Trust would not have needed to purchase replacement coverage with Guardian. Not only that, but AIG cannot be entitled to premiums if it did not assume the risk of paying the death benefit. During the years 2011 and 2015 AIG did not assume any risk so it is not entitled to premiums. ARGUMENT Point I THE POLICIES DID NOT LAPSE BECAUSE THE MENCHE TRUST FOLLOWED THIS COURT ORDER IN THE PRIOR ACTION TO ONLY PAY FORWARD PREMIUMS AIG cannot explain why the policies would lapse for failure to pay premiums between 2011 and 2015 when the Court ruled that it should not until further determination is made. When AIG sought premiums for 2011-2015, the Menche Trust did not act unilaterally but sought direction from the Court. The Court ruled not to pay the back premium for now, only pay -3- 3 of 6 FILED: NEW YORK COUNTY CLERK 01/10/2019 02:51 PM INDEX NO. 652830/2017 NYSCEF DOC. NO. 73 RECEIVED NYSCEF: 01/10/2019 forward premium and the question of whether AIG is entitled to back premium was left to be resolved at a later date. Having done exactly what the Court ordered it to do, it is inconceivable that the Menche Trust should be punished for doing so. AIG admits in its brief that it is “undisputed…that on August 27, 2015 Justice Mills confirmed that the policies were stillin force ordering the Menche Parties to pay premiums to U.S. Life going forward but she did not resolve the disputed issue of the Menche Parties’ obligation to pay back-owed premiums.” (p. 10, document 29). AIG also admitted in its response to interrogatories (p. 2, Doc. 25) that from 2015 to 2018, Mr. Menche paid every premium, thus complying with the court order. Therefore, AIG’s decision to declare the policies lapsed is in direct violation of the August 27, 2015 order and the policies are not lapsed. Plaintiffs’ motion for summary judgment can be broken into two parts: (1) that the policies are not lapsed and (2) that Mr. Menche does not owe premiums for the period 2011- 2015. As the facts necessary to award plaintiffs summary judgment on the first part have been admitted to by AIG, there is no question that plaintiffs are entitled to summary judgment on the first part. Point II A. AIG FORCED THE MENCHE TRUST TO PURCHASE REPLACEMENT COVERAGE AIG’s briefs are littered with repeated referenced to the fact that, in general, insurance is not free. The point is well taken but totally ignores the unique facts of this case. When Sol Menche, the insured and grantor of the Menche Trust procured the AIG policies in 2008, he did so in order to protect his family from unforeseen calamity over the -4- 4 of 6 FILED: NEW YORK COUNTY CLERK 01/10/2019 02:51 PM INDEX NO. 652830/2017 NYSCEF DOC. NO. 73 RECEIVED NYSCEF: 01/10/2019 twenty three year term of the policies. Since issuing the policies, instead of providing “security, protection, and peace of mind” Bi-Economy Mkt., Inc. v. Harleysville Ins. Co. of N.Y., 10 N.Y.3d 187, 886 N.E.2d 127, 856 N.Y.S.2d 505 (2008), AIG’s frivolous conduct and litigiousness bought the Menche family litigation expenses, worry and left them exposed to risk. As a direct result of AIG’s commencement of the prior rescission action, Sol Menche was forced to purchase new coverage, which was even more expensive, in order to obtain the security, protection and peace of mind he thought he purchased from AIG. In its brief, AIG calls the decision to purchase replacement coverage “unilateral.” (p. 4, Doc. 29) While AIG did not join in the decision to purchase the coverage, AIG’s failed rescission action was the direct cause of the decision to purchase the coverage. Thus, the decisions cited by AIG, Lebovits v. PHL Variable Ins. Co., 199 F.Supp.3d 678 (E.D.N.Y. 2016) and Berkshire Settlements, Inc. v. Ashkenazi, 2011 WL 5974633 (E.D.N.Y. Nove. 29, 2011) are entirely inapposite. In those decisions, the policy owner did not suffer the damages of having to pay premiums on replacement insurance because no such insurance was purchased. Here, however, Mr. Menche obtained his insurance needs between 2011 and 2016 from Guardian and paid Guardian for that coverage. There is no basis to have Mr. Menche pay AIG for the security, protection and peace of mind that Guardian provided and AIG failed to provide. Point III. THE FACT THAT THE NEW YORK DEPARTMENT OF FINANCIAL SERVICES COULD NOT ACT TO ENFORCE THE PRIOR COURT’S ORDER IS OF NO CONSEQUENCE After the prior court ordered Mr. Menche to pay premiums moving forward, Mr. Menche did just that. Instead of accepting the premiums as the court ordered AIG to do, AIG declared -5- 5 of 6 FILED: NEW YORK COUNTY CLERK 01/10/2019 02:51 PM INDEX NO. 652830/2017 NYSCEF DOC. NO. 73 RECEIVED NYSCEF: 01/10/2019 that the policies lapsed for failure to pay the 2011 premiums. Having suffered through an expensive rescission action commenced by AIG, Mr. Menche, hoping to avoid continued expenses, filed an insurance department complaint with the New York Department of Financial Services in the hope that it would spur AIG to abide by the prior court’s order. Unfortunately, all that the Department of Financial Services was able to do is send the complaint to AIG forcing Mr. Menche to incur further litigation expenses simply to have AIG abide by the prior Court order. At very minimum, a triable question of fact exists whether the Guardian policy was purchased as replacement coverage allowing plaintiffs an offset. CONCLUSION For all of the foregoing reasons, the Court is requested to grant this motion in its entirety and to bring finality and closure to this protracted matter. Dated: Kew Gardens, New York January 10, 2019 LIPSIUS-BENHAIM LAW, LLP Attorneys for Plaintiffs By: _____________________ David BenHaim 80-02 Kew Gardens Road, Suite 1030 Kew Gardens, New York 11415 -6- 6 of 6