Illustration Disclosures Lead to Dismissal of Universal Life Insurance Class Action


On October 13, 2011, the U.S. Court of Appeals for the Tenth Circuit upheld an Oklahoma District Court’s dismissal on summary judgment of a putative class action on behalf of all purchasers of universal life insurance policies issued by New York Life Insurance and Annuity Corporation (NYLIAC). Blumenthal v. New York Life Insurance and Annuity Corporation, 2011 WL 4838941 (10th Cir. Oct. 13, 2011). Sutherland represented NYLIAC before the district court and the Tenth Circuit Court of Appeals.

The plaintiff, Irving Blumenthal, alleged fraud and misrepresentation in the sale of NYLIAC’s universal life policies. Plaintiff’s main contention was that the policy’s duration of coverage was misrepresented to be either until the death of the policyholder or until the maturity date. The maturity date in a universal life policy represents the theoretical maximum duration of the policy. In the case of the NYLIAC policies, the theoretical maximum duration was defined as the policy year in which the owner would be 100 years old, which in Blumenthal’s case would be the year 2032. The actual duration of a universal life policy depends in part on the premium level chosen by the purchaser. The purchaser has the option to increase the actual duration, up to the maximum indicated by the maturity date, by increasing the level of premium funding.

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