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American General Life Insurance Company v. Hana Salamon

March 16, 2011

AMERICAN GENERAL LIFE INSURANCE COMPANY, PLAINTIFF,
v.
HANA SALAMON, JOEL KATZ, INDIVIDUALLY AND AS TRUSTEE FOR THE HANA FAMILY TRUST, AARON KNOPFLER, INDIVIDUALLY AND AS TRUSTEE FOR THE HANA FAMILY TRUST, AND THE HANA FAMILY TRUST, DEFENDANTS.



The opinion of the court was delivered by: Matsumoto, United States District Judge

MEMORANDUM AND ORDER Plaintiff American General Life Insurance Company ("American General" or "AIG") commenced this diversity action against Hana Salamon, Joel Katz, Individually and as Trustee for the Hana Family Trust, Aaron Knopfler, Individually and as Trustee for the Hana Family Trust, and the Hana Family Trust ("defendants") seeking a declaratory judgment of its rights and obligations with respect to Flexible Premium Adjustable Life Insurance Policy No. U10022254L (the "Policy"), rescission of the policy, and attorneys fees and costs. Presently before the court is defendants' motion for summary judgment. For the reasons set forth below, defendants' motion is granted.

BACKGROUND

The following facts are drawn from the parties' statements of material facts pursuant to Local Civil Rule 56.1.

Plaintiff issued a life insurance policy to the Hana Family Trust (the "Trust") on the life of Hana Salamon effective December 28, 2007. (ECF No. 32-2, Defendants' Statement of Material Facts Pursuant to Local Rule 56.1(a) ("Defs. 56.1 Stmt."), at ¶ 1.) Plaintiff issued the Policy on the basis of an application completed and executed by defendant Hana Salamon on December 20, 2007 (the "Application"). (ECF No. 35, Plaintiff's Response to Defendants' Statement of Material Facts Pursuant to Local Civil Rule 56.1 ("Pl. 56.1 Stmt."), at ¶ 19.) On the Application, defendant Hana Salamon reported personal earned income of $150,000-$300,000, household income of $470,000, and net worth of $14 million. (Id. at ¶ 20.) The Application stated that it relied upon "representations regarding the insured's financial status to determine eligibility for coverage and that any misrepresentation contained in the application and relied on by American General may be used to reduce or deny a claim or void the policy if it is within the contestability period and materially affects the acceptance of risk." (Id. at ¶ 23.)

During a preliminary investigation in February 2008, plaintiff discovered material false representations in the Application. (Id. at ¶¶ 3-4.) It is undisputed that in February and May 2008, Stephen Mostecek, principal investigator with AIG World Investigative Resources Northeast Region, sent Ms. Salamon two letters requesting additional information "concerning certain suspect aspects" of the Policy. Additional letters were sent by plaintiff or its counsel in June 2008 and February 2009. (Defs. 56.1 Stmt. at ¶¶ 5-8; ECF No. 32-3, Exs. A, B, and C, Letters dated Feb. 6, 2008, Feb. 26, 2008 and May 5, 2008; Pl. 56.1 Stmt. at ¶ 5-6.) Plaintiff's statement that the investigation "is still ongoing," is not disputed. (Pl.

56.1 Stmt. at ¶ 4.)

On February 5, 2009, plaintiff, through counsel, sent a letter to Hana Salamon purportedly rescinding the Policy, stating that it would return any applicable premium, and requesting the execution of a voluntary rescission agreement to avoid litigation. (Defs. 56.1 Stmt. at ¶ 8; ECF No. 32-3, Ex. D, Letter dated Feb. 5, 2009; Pl. 56.1 Stmt. at ¶ 8.) Plaintiff did not receive a response from Hana Salamon to any of the aforementioned letters sent in February, May and June 2008 and February 2009. (Defs. 56.1 Stmt. at ¶ 8; Pl. 56.1 Stmt. at ¶ 9.) Four days later, the trustee of the Trust issued check 9993 in the amount of $212,500 to American General as a premium payment for the Policy. (Defs. 56.1 Stmt. at ¶ 10.) It is undisputed that on February 9, 2009, American General negotiated premium payment check 9993. (Defs. 56.1 Stmt. at ¶ 11; ECF No. 33, Plaintiff American General Life Insurance Company's Memorandum of Law in Opposition to Defendants' Motion for Summary Judgment ("Pl. Mem.") at 18.) By letter dated February 16, 2010, plaintiff's annual statement of life insurance for the period 2007-2008 indicated that plaintiff received $366,650 from the Hana Family Trust. (Defs. 56.1 Stmt. at ¶ 12; Pl. 56.1 Stmt. at ¶ 12.)

The parties disagree over the status of the Policy in the following months. Defendants state that "[b]y November 30, 2009, there were insufficient balances to keep the policy in force and the policy had gone into grace. (Defs. 56.1 Stmt. at ¶ 15.) Therefore, from February 9, 2009 until November 30, 2009, the trust was charged on a monthly basis for the cost of insurance for a total of close to $300,000 over the period of 10 months." (Defs. 56.1 Stmt. at ¶ 15.) Plaintiff agrees that it sent the Trust a "grace notice" on November 30, 2009, although plaintiff claims it was sent in error. (Defs. 56.1 Stmt. at ¶ 14; Pl. 56.1 Stmt. at ¶ 14.) Plaintiff admits only that it continued to maintain the Policy as "active" during the period of February through November 2009. (Pl. 56.1 Stmt. at ¶ 15.)

It is undisputed that on February 12, 2010, the Trust received a "lapse notice" from plaintiff which plaintiff states was inadvertent. (Defs. 56.1 Stmt. at ¶ 16; Pl. 56.1 Stmt. at ¶ 16.) It is also undisputed that to date, the trust has not received a refund of any premiums paid, but plaintiff states that it continued to maintain the policy as "active" and that "premiums will be returned in accordance with controlling case law." (Defs. 56.1 Stmt. at ¶ 18; Pl. 56.1 Stmt. at ¶¶ 17, 18.)

DISCUSSION

A.Summary Judgment Standard

The court shall grant summary judgment only "if the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "[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." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original). "A fact is material if it might affect the outcome of the suit under the governing law." Fincher v. Depository Trust & Clearing Corp., 604 F.3d 712, 720 (2d Cir. 2010) (citing Roe v. City of Waterbury, 542 F.3d 31, 35 (2d Cir. 2008)). "An issue of fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. (citing Roe, 542 F.3d at 35). Moreover, no genuine issue of material fact exists "unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50 (internal citations omitted).

The moving party carries the burden of demonstrating the absence of a genuine issue of material fact. FDIC v. Great Am. Ins. Co., 607 F.3d 288, 292 (2d Cir. 2010) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). The court must construe the facts in the light most favorable to the nonmoving party and all reasonable inferences and ambiguities must be resolved against the moving party. Id. Nevertheless, the nonmoving party may not rest merely on allegations or denials but must instead set out specific facts showing a genuine issue for trial. See id. ("To defeat a summary judgment motion, the non-moving party must do more than simply ...


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