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First Metlife Investors Insurance Co. v. Zilkha


September 21, 2009


The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge


First Metlife Investors Insurance Company ("Metlife") commenced this interpleader action in connection withthe proceeds of a $2 million life insurance policy taken out on the life of Dr. Stephen Bosniak ("Bosniak"), who died intestate in February 2007, just a few months after the policy was issued. Having determined that the claim was payable, the company deposited the proceeds with the Court and Metlife has been dismissed from this action. See Order, dated February 17, 2009 (Docket No. 12). The instant dispute arises between Marian Zilkha ("Zilkha"), the owner and designated beneficiary of the policy and, at a minimum, a business associate of Bosniak, and Karen Patou ("Patou"), Bosniak's sister and administratrix of his estate.*fn1 Zilkha and Patou cross move for summary judgment on Patou's first cross-claim seeking disgorgement and recovery of theproceeds of the Metlife policy. Because Zilkha adduces competent evidence that she had an "insurable interest" in Bosniak's life pursuant to N.Y. Ins. Law § 3205(a)(1) that Patou fails to rebut, and for the reasons further set forth below, Zilkha's motion for summary judgment is GRANTED, and Patou's motion for summary judgment is DENIED.*fn2


The central and dispositive issue in this litigation is whether Zilkha had an "insurable interest" in the life of Bosniak in October 2006 when the life insurance policy was issued. As discussed below, under applicable New York law, an "insurable interest" includes "a lawful and substantial economic interest in the continued life, health or bodily safety of the person insured, as distinguished from an interest which would arise only by, or would be enhanced in value by, the death, disablement or injury of the insured." N.Y. Ins. Law §3502(a)(1). Zilkha contends that she had an "insurable interest" in Bosniak's continued life because she and Bosniak were partners in a joint business venture to develop cosmetic products and develop new medical techniques. Patou maintains, on the other hand, that "in an effort to satisfy the 'insurable interest' requirement of the New York Insurance Law, Zilkha knowingly, intentionally and unlawfully represented [on the insurance application] that she was a partner in Dr. Bosniak's medical practice." Patou's Mem. In Supp. of Mot. at 5.

Zilkha is an ophthalmic surgeon who was educated and is licensed to practice medicine in Brazil.*fn3 Aff. of Marian Zilkha, dated June 27, 2009 ("Zilkha Aff.') ¶ 6. Bosniak, too, was an ophthalmic surgeon, although he was licensed to practice in New York. Bosniak and Zilkha first met at a medical conference in 1993. Id. The two apparently hit it off and would visit each other's offices in Brazil and New York respectively to observe and learn from each others' surgical techniques. Id. ¶7. According to Zilkha's affidavit, the two doctors decided to pursue their joint business interests as a partnership to create cosmetic beauty products and to develop new surgical techniques and non-surgical rejuvenation techniques. Zilkha Aff. ¶ 19-24. The partnership operated informally under the name Bosniak Zilkha.*fn4 Id. ¶27-29.

In support of her instant motion Zilkha proffers extensive documentary and testimonial evidence that supports the existence of a business enterprise between the two doctors. For example, in an article in a periodical, Dermatology Times, that discusses the "BZ Lift," an eye-lift procedure developed by Bosniak and Zilkha, Bosniak states that the procedure was named after him and "his business partner Marian Cantisano-Zilkha." Spodek Aff. Ex. F. Zilkha also submits affidavits from a medical-business consultant (Anne Akers), an accountant (Barry Berg), and an insurance broker (Jay Hochfelsen) each of which corroborates the existence of a business enterprise between Bosniak and Zilkha that predated October 2006 issuance of insurance policy. Spodek Aff. Exs. B, C, D. The two doctors also jointly retained a lawyer (Wendy Miller) to advise Bosniak Zilkha on intellectual property matters. Spodek Aff. Ex. I. The business activities of Bosniak Zilkha are also well documented. For example, in addition to jointly developing the new surgical procedure the "BZ Lift," the two doctors developed a machine to administer carbon dioxide gas to rejuvenate the appearance of skin and eyelids that they called the CO2 Cellulair, conducted a medical study of 2,241 patients in Brazil pertaining to theuse of a drug named Restylane, created and produced a line of cosmetic products under the name "Beautif-eye" with packaging that bore the name of the partnership, and contracted to establish beauty spas in Equinox Gyms in New York City under the Bosniak Zilkha mark. Zilkha Aff. ¶ 14, 24; Akers Aff. ¶10; Spodek Aff. Exs. H, J, GG. In December 2006, Bosniak and Zilkha published, as co-authors and joint copyright owners, a book titled Beautifeye, to promote their business enterprise and its products. Akers Aff. ¶14-15; Spodek Aff. Ex. M. In early 2007, shortly before Bosniak's death, the two doctors had scheduled meetings with Oprah, Glamour, and Allure magazines to promote the book. Akers Aff. ¶ 17.

The reciprocal life insurance policies issued in October 2006 were not the first "keyman" insurance policies Bosniak and Zilkha took out on one another. In 1999 the two doctors took out $750,000 reciprocal term life insurance policies.*fn5 Spodek Aff. Ex. K. In a sworn affidavit, the accountant to the partnership, Barry Berg, states that he became concerned that the $750,000 life insurance policy was "inadequate given the large-scale plans they had for the partnership." Affidavit of Barry Berg, dated June 25, 2009, ("Berg Aff.") ¶11. Berg recommended that the two doctors consult Jay Hochfelsen, the insurance broker, to discuss an increase in the amount of their coverage. Id. Hochfelsen met with Bosniak and Zilkha on several occasions in 2006 and personally assisted them in completing the life insurance applications. Affidavit of Jay J. Hochfelsen, dated June 10, 2009 ("Hochfelsen Aff."), ¶ 9. Hochfelsen states that he was aware that Zilkha was not licensed to practice medicine in New York and that accordingly she could not have an equity interest in Bosniak's medical P.C. Id. at ¶10. The insurance application for the policy on Bosniak's life specifies, under the section titled "owner," that Zilkha's relation to the proposed insured Bosniak is "partner in practice." Decl. of Alan C. Glassman, dated May 14, 2009 ("Glassman Decl.") Ex. H. On the signature line, following Zilkha's signature, appears the notation "Business Partner." Id.

As noted, Patou's central theory is that Zilkha "knowingly, intentionally and unlawfully represented [on the insurance application] that she was a partner in Dr. Bosniak's medical practice." Patou's Mem. In Supp. of Mot. at 5. Although she asserts several evidentiary objections to the evidence that corroborates the existence of the Bosniak Zilkha partnership- e.g. violation of the so-called Dead Man's Statute, attorney-client privilege, and the parol evidence rule-Patou does not adduce evidence to counter the substantial evidence of some Bosniak Zilkha enterprise.*fn6 Rather, Patou contends that "Bosniak Zilkha[] is an illegal entity by virtue of the fact that no such entity can exist under New York law, since neither Bosniak nor Zilkha were duly licensed to practice medicine outside of their hometowns." Patou's Mem. in Opp'n. at 6. To support her argument that Zilkha's only interest in Bosniak's life was an "illegal" interest in Bosniak's New York medical practice, Patou points to the notation in the insurance application stating that Zilkha is a "partner in practice" to Bosniak, and tax records that show during the years 2004 and 2005 Zilkha received payments designated as compensation from Bosniak's medical professional corporation (the "P.C."). See Glassman Decl. Ex. L. Patou also contends that certain documentary evidence suggests that Zilkha held herself out as a partner in Bosniak's medical practice. For example, a Patou points to an advertisement for Bosniak Zilkha produced by a public relations firm that describes Bosniak and Zilkha as "well respected New York Eyelid surgeons."*fn7 Decl. of Alan C. Glassman, dated August 7, 2009 ("Supp. Glassman Decl."), Ex. C. Patou also points to statements in the affidavits of Zilkha, Hochfelsen, and Akers that reference the two doctors' "international medical practice." Patou argues, in effect, that because there is "no such thing" as an "international medical practice," Zilkha must have been illegally practicing medicine in New York through the P.C.

Patou further contends that Zilkha has failed to establish the prerequisites of a "de facto partnership," because she adduces no evidence that the partnership maintained separate books and records and Zilkha allegedly disclaimed liability to a purported creditor of the partnership; in an email to a supplier who claimed to have worked on a Bosniak Zilkha eye-cream, Zilkha's counsel stated that Zilkha "does not have personal responsibility or the debts of the late Dr. Bosniak or his professional corporation" and directs the alleged creditor to counsel for the estate. See Supp. Glassman Decl. Ex. G. Finally, Patou contends that even if Zilkha has adduced evidence of a lawful partnership, she has failed to show that the business ever earned any money.


A. Summary Judgment Standard

A motion for summary judgment must be granted if the moving party shows "there is no genuine issue as to any material fact" and it "is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). In considering a motion for summary judgment, the Court must view the evidence in the light most favorable to the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Id. 247-48. Summary judgment should be granted "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). "A party opposing summary judgment does not show the existence of a genuine issue of fact to be tried merely by making assertions that are conclusory or based on speculation." Major League Baseball Properties, Inc. v. Salvino, Inc., 542 F.3d 290, 310 (2d Cir. 2008) (internal citation omitted). Rather, he "must come forward with evidence sufficient to allow a reasonable jury to find in [his] favor." Brown, 257 F.3d at 252; see also Fed. R. Civ. P. 56(e) ("When a motion for summary judgment is made and supported as provided in [the] rule, . . . the adverse party's response . . . must set forth specific facts showing that there is a genuine issue for trial.") (emphasis added).

Where, as here, both parties move for summary judgment the court is not required to grant judgment as a matter of law for either. Morales v. Quintel Entm't., Inc., 249 F.3d 115, 121 (2d Cir. 2001). "Rather, each party's motion must be examined on its own merits, and in each case all reasonable inferences must be drawn against the party whose motion is under consideration." Id.

B. Jurisdiction and Applicable Law

This action was originally filed under 28 U.S.C. § 1335, which grants district courts original jurisdiction over suits in interpleader where diversity of citizenship exists between two adverse claimants to the same property, and the amount in controversy exceeds $500. See Complaint at ¶ 4. In such diversity suits, federal courts are bound to apply state law. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 78-79 (1938); see, e.g., Sun Life Assur. Co. of Canada (U.S.) v. Gruber, No. 05 Civ. 10194(NRB), 2007 WL 4457771, *5 (S.D.N.Y. Dec. 17, 2007) (applying New York law to a suit brought under 28 U.S.C. § 1335); Continental Coffee Products Co. v. Banque Lavoro S.A., 852 F.Supp. 1235 (S.D.N.Y.1994) (same). The parties do not dispute that the substantive law of New York law applies to their dispute over entitlement to the life insurance proceeds.


The law does not allow so-called "wager" insurance policies, i.e. insurance that istantamount "to a mere wager, by which the party taking the policy is directly interested in the early death of the assured." Warnock v. Davis, 104 U.S. 775, 779 (1881); Herman v. Provident Mut. Life Ins. Co. of Philadelphia, 886 F.2d 529, 534 (2d Cir. 1989) ("[W]hen the beneficiary's interest is in the insured's death rather than in his life, public policy is contravened."); Grigsby v. Russell, 222 U.S. 149 (1911) (Holmes, J) ("A contract of insurance upon a life in which the insured has no interest is a pure wager that gives the insured a sinister counter interest in having the life come to an end.") In New York, this prohibition is codified at N.Y. Ins. Law §3205, which provides that no person may contract for a policy of insurance on the "person of another" unless the benefits of the policy are payable to "the person insured, or his personal representative or to a person having, at the time when such contract is made, an insurable interest in the person insured." N.Y. Ins. Law §3205(b)(2). The statute defines an "insurable interest" as

(A) in the case of persons closely related by blood or by law, a substantial interest engendered by love and affection; [or] (B) in the case of other persons, a lawful and substantial economic interest in the continued life, health or bodily safety of the person insured, as distinguished from an interest which would arise only by, or would be enhanced in value by, the death, disablement or injury of the insured.

N.Y. Ins. Law §3205(a)(1).

A. Patou has Standing to Assert her Claim

As a preliminary matter, as administratrix of Bosniak's estate, Patou has standing to assert her claim, notwithstanding the general majority rule that the lack of an insurable interest may only be raised by the insurer. See LIFE INSURANCE: RIGHT TO RAISE QUESTION OF LACK OF INSURABLE INTEREST, 175 A.L.R. 1276 (1948) (describing general rule that defense of lack of insurable interest is available only to the insurer and citing cases). As Judge Castel recently noted, New York Insurance Law § 3205(b)(4), permits, "in the case of a dispute over insurable interest under a life insurance policy," "an 'executor or administrator' to bring action 'to recover such benefits from the person receiving them.'" 2004 Stuart Moldaw Trust v. XE L.I.F.E., LLC, No. 08 Civ. 9421(PKC), 2009 WL 2222935, *8 (Jul. 27, 2009) (finding conflict between New York law and California law which provides that questions of insurable interest are properly raised only by the insurer).*fn8 Consequently, Patou has standing to raise the issue of a lack of an insurable interest.

B. Zilkha had an Insurable Interest in Bosniak's Life

The dispositive question here is whether Zilkha had an insurable interest in Bosniak's life in October 2006, the date of the inception of the policy. Herman, 886 F.2d at 534. Whether an insurance contract is valid at its inception or void as a wagering policy depends . . . on the intention of the parties at the time it is procured; that intention is a question of fact." Id. (citing Steinback v. Diepenbrock, 158 N.Y. 24, 30 (1899)). Notwithstanding that the relevant question is the same as the central inquiry in contract interpretation, to resolve the question here the Court is not constrained to four corners of the insurance contract. See, e.g., Berger v. Manhattan Life Ins. Co., 805 F.Supp. 1097, 1105 (S.D.N.Y. 1992) (examining evidence of business enterprise to determine existence of insurable interest); Cosentino v. William Penn Life Ins. Co. of New York, 224 A.D.2d 777, 777 (3d Dep't 1996) ("uncontroverted documentary evidence" established defendant's "status as a creditor of decedent and, thus, the existence of a legally recognized insurable interest.") Consequently, even if the reference in the insurance application to "partner in practice" were unambiguous-which it is not, the term itself is susceptible to more than one meaning and the application elsewhere specifies the doctors were "business partners"-the inquiry would not end there.

Here, the evidence adduced by Zilkha amply establishes the existence of a Bosniak Zilkha enterprise and thus an insurable interest. See, e.g., Berger v. Manhattan Life Ins. Co., 805 F.Supp. 1097, 1105 (S.D.N.Y. 1992) (finding evidence of a business certificate, testimony of a friend to two alleged partners that they had a "long-standing business relationship," and testimony of insurance broker that alleged partners represented themselves as a partnership sufficient to create triable issue of fact as to existence of "insurable interest"); see also Herman, 886 F.2d at 534 (partnership had insurable interest in life of key partner); Connecticut Mutual Life Insurance Company v. Luchs, 108 U.S. 1498, 505 (1883) (continuance of partnership and of partner's life "furnished a reasonable expectation of advantage" to co-partner). The well-documented undertakings of the Bosniak Zilkha enterprise discussed above include the joint development of new surgical techniques, a carbon dioxide skin "rejuvenation machine," and a line of cosmetic products marketed under the Bosniak Zilkha mark. Furthermore, the two doctors jointly owned the intellectual property associated with the enterprise including trademarks, the copyright to the book and, allegedly, a patent in the CO2 Cellulair device. Such evidence amply establishes that Zilkha had a "substantial economic interest in the continued life" of Bosniak. N.Y. Ins. Law §3205(a).

Accordingly, to defeat summary judgment, Patou must come forward with evidence that would be sufficient to support a jury verdict in her favor, i.e. that Zilkha did not have a lawful and substantial economic interest in Bosniak's continued life. Brown, 257 F.3d at 252. Patou attempts cast doubt principally upon the lawfulness of the Bosniak Zilkha enterprise and secondarily on the economic value of the venture.*fn9 In both respects, Patou fails to adduce evidence sufficient to create a genuine issue of material fact. In sum and substance, Patou's argument with respect to the alleged unlawfulness of the Bosniak Zilkha enterprise is as follows: Patou maintains that Zilkha fails to establish the existence of a de facto partnership and that consequently the doctors' business must have either (1) operated through Bosniak's P.C. and thus violated N.Y. Partnership Law §2, which, among other things, requires that all partners in a professional partnership that provides medical services be licensed physicians; or (2) constituted an "international medical practice" that was itself illegal.

Separate and apart from the deficiencies in Patou's evidentiary showing in support of it, addressed infra, Patou's argument suffers from several faulty assumptions. First, to the extent Patou assumes that Zilkha must show the existence of a de facto partnership to establish an insurable interest, she is mistaken.*fn10 See, e.g., Theatre Guild Productions, Inc. v. Insurance Corp. of Ireland, 267 N.Y.S.2d 297, 299 (1966) (insurable interest derived from employment of star in musical); Hota v. Camaj, 750 N.Y.S.2d 119, 119 (2002) (defendant was the decedent's creditor, which gave him an insurable interest in the decedent's life). Second, Patou appears to assume that if two doctors become joint venturers, it can only be to provide medical services in the jurisdiction in which they are licensed. See Patou's Mem. in Opp'n ¶27 ("[T]he fatal flaw in Zilkha's argument is that . . . Bosniak Zilkha is an illegal entity by virtue of the fact that no such entity can exist under New York law since neither Bosniak, nor Zilkha were duly licensed to practice medicine outside their hometowns.") But N.Y. Partnership Law §2 only prohibited Zilkha from becoming a partner in Bosniak's P.C., a fact that Zilkha readily acknowledges. It is far fetchedto contend that New York law prohibits licensed physicians from engaging in an otherwise lawful venture to do something other than practice medicine. Furthermore, Patou points to no authority, and the Court finds none, that outlaws the kind of "international medical practice" outlined in the affidavits and other evidence and which appears uniquely suited to cosmetic surgery connected with Brazil. See n. 2, supra.

This leaves the evidentiary showing by which Zilkha attempts to establish a genuine issue as to the lawfulness of Zilkha's claimed "insured interest," i.e. theBosniak Zilkha enterprise documented in Zilkha's submissions to the Court.*fn11 Patou adduces absolutely no evidence that Zilkha in fact practiced medicine without a license in New York. Instead she relies on evidence that shows that Bosniak sought legal advice about how to avoid the penalties attendant to practicing without a license, that in 2004 and 2005 Zilkha collected wages from Bosniak's P.C., and that a single press release (that may well have been a preliminary draft) described Zilkha as a "New York Eyelid surgeon." To conclude on the basis of such evidence that the illegality of the Bosniak Zilkha enterprise was so pervasive as to render the entirety of Zilkha's pecuniary interest in Bosniak's continued health "unlawful" would be nothing more than conjecture.*fn12 That is not enough. See Major League Baseball, 542 F.3d at 310 (party cannot defeat summary judgment by making assertions based on speculation).

C. Patou's Second and Third Cross-Claims for Relief

In addition to her claim to the proceeds of the MetLife insurance policy discussed above, in her Answer with Cross-Claims Patou separately asserts (i) a second and substantially identical claim for disgorgement and recovery of the proceeds of "other insurance policies" procured by Zilkha on the life of Bosniak (the "Second Cross-Claim"),*fn13 and (ii) a third cross-claim, which seeks to permanently enjoin Zilkha from spending the proceeds from such "other insurance policies (the "Third Cross-Claim"). Neither party moved for summary judgment with respect to Patou's Second or Third Cross-Claims. In a footnote in her opening brief and without citation to authority, Zilkha maintains that the Court lacks jurisdiction over the Second Cross-Claim and that the Third Cross-Claim is moot. Zilkha's jurisdictional claim is presumably made with reference to her third affirmative defense, which asserts that the cross claims are not within the scope of Rule 13(g), which permits cross-claims to the extent that they arise out of the same "transaction or occurrence that is the subject matter of the original action or a counterclaim." Although I have my doubts about the merits of Zilkha's argument, see Jefferson Standard Ins. Co. v. Craven, 365 F.Supp. 861, 866 (D.C. Pa. 1973), I decline to raise and decide the issue sua sponte. Moreover, because the Third Cross-Claim seeks to enjoin Zilkha from spending the proceeds of the "other insurance policies" that are the subject of the Second Cross-Claim, it is not rendered moot by this decision on Patou's First Cross-Claim. Finally, although the legal issue presented by the Second Cross-Claim is identical to that decided here, the factual basis for the claim is not the same. The existence of an "insurable interest" must be judged at the ineption of the policy, Herman, 886 F.2d at 534, and the parties have not adduced evidence as to when the alleged "other insurance policies" were issued or what the business relationship between Bosniak and Zilkha looked like at the time. Consequently, I would have no occasion to grant summary judgment sua sponte on the Second and Third Cross-Claims, were I inclined to do so. Because the date for dispositive motions set by the Pretrial Scheduling Order has passed, this matter will proceed to trial on the Second and Third Cross-Claims in November as scheduled.


For the foregoing reasons, Patou's motion for summary judgment is DENIED and Zilkha's motion for summary judgment is GRANTED. The Clerk of the Court is instructed to close these cross motions (Docket Nos. 17 and 30) and remove them from my docket. A trial date in November 2009 will be set by separate order.


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