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Johnson v. Metropolitan Life Insurance Co.

May 21, 2009


The opinion of the court was delivered by: Michael D. Stallman, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the printed Official Reports.

In this action to recover under two insurance policies, plaintiffs Janet Johnson (Johnson) and Albert Nicklas (Nicklas) move, pursuant to CPLR 3212, for summary judgment on the complaint, and for the dismissal of defendant's counterclaims. Defendant Metropolitan Life Insurance Company (MetLife) cross-moves for leave to amend its answer to include a claim under the New Jersey Insurance Fraud Protection Act (FPA).

These motions raise unusual questions concerning choice of law and the applicability of the USA PATRIOT Act's anti-money laundering provisions.


On June 10, 2003, MetLife issued two policies of life insurance on the life of George Nicklas (decedent), Johnson's uncle, a policy for $700,000, policy number 203-115-909-ET (909 Policy), of which Johnson was the beneficiary, and a policy for $250,000, policy number 203 -115-869 ET (869 Policy), of which Nicklas was the beneficiary. As relevant herein, the decedent, a New Jersey resident, indicated on the applications (Applications) that he would be paying the premiums on the policies. See Ex. 1 to Aff. of Thomas M. Campbell (Complaint), Exs. 1, 2. On July 10, 2003, ownership of the 909 Policy was transferred to Johnson. Notice of Motion, Exs. 3, 4.

Despite the indication on the Applications that decedent would be paying the premiums on the policies, all of the premiums appear to have been paid by Johnson's husband, Tony Stanley (Stanley).*fn1 On three occasions, Stanley overpaid the premiums, and, on each occasion, the refund was returned to decedent, as if he had paid the premium.

In a letter dated November 29, 2004, MetLife unilaterally purported to void both policies ab initio, on the ground that Stanley, as an unidentified third party, had been making the premium payments. MetLife has not returned the premiums already paid, although it claims that it has attempted to do so on at least two occasions, but has received no instructions from plaintiffs as to how that should be accomplished.

Decedent died on August 12, 2005. Plaintiffs provided notices of claim to MetLife on September 23, 2005. Complaint, Ex. 4. MetLife disclaimed in a letter dated November 2, 2005 (id., Ex. 5), on the ground that the policies had been previously voided, as well as on the ground that there were "questions raised as to the possibility that [the insured] may not have even participated in the application process." Id. at 1.

Plaintiffs maintain that they are entitled to summary judgment because MetLife cannot provide a viable excuse for its failure to pay on the policies, in that it had no right to void them. They claim that there is no express provision in the policies which prevents the payments of premiums by any one other than the person named therein. Indeed, the Applications provide a space to identify an "other" payor of the premiums, albeit with questions concerning his or her relationship to decedent, and annual income. Id.

MetLife contends that the payment of the premiums by Stanley may have been a form of illegal speculation in insurance, which is disallowed under its underwriting practices, in conjunction with, and mandated by, the federal "USA PATRIOT Act"*fn2 (PATRIOT Act), in order to avoid potential money laundering in furtherance of terrorism. It claims to have a "strict policy" of not accepting third-party checks without knowledge of the source of the funds, especially where payment of the premiums is made by a party who is not closely related to the insured. MetLife argues that decedent falsely represented that he would be paying the premiums, and that plaintiffs actively concealed the identity of the true payor.*fn3 It claims that it would not have issued the policy had it known that the decedent would not be paying as represented. MetLife maintains that "at minimum, MetLife would have postponed issuing the policy while it conducted an investigation with respect to whether the intended premium payor had an acceptable explanation for paying the premiums" so that it could "properly estimat[e] the degree and character of the risk it was assuming." MetLife's Memo of Law in Opposition, at 2.

MetLife also contends that decedent's medical conditions at the time he died, which included, among other things, cirrhosis of the liver, liver failure, hepatitis, diabetes and hypertension (see Emergency Room Report, dated October 7, 2004, Aff. of James J. McCarthy, Ex. E), indicate illnesses of long standing, suggesting that the decedent's true medical condition at the time that he applied for the policy, less than two years after execution of the Applications, was dire. Yet, in the Applications, decedent denied having any negative medical conditions at all. Reply Aff. of Campbell, Ex. 1. MetLife claims that this situation suggests that decedent misrepresented the state of his health on the Applications, and insists that it needs further discovery to document decedent's medical condition at the time of the Applications, to determine whether his answers to the questions regarding his health were fraudulent.

MetLife also moves for leave to amend its answer to plead a counterclaim under the FPA, so as to avoid the two-year statute of limitations created by New York's "incontestibility provision," which ...

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