A Connecticut man won in part in a federal appeals court because he claimed that AXA Equitable let his life insurance policies lapse without a reminder to pay.
The Court of Appeals for the Second Circuit affirmed summary judgment in favor of AXA regarding the decision to cancel the policies sold to Malcolm Wiener. However, the trial court sided with Wiener and remanded the case to the district court for a question of reinstatement.
Wiener is a historian, lawyer and retired founder of Millburn Corp., a financial services firm based in New York City. In 1986, Wiener retired from Milburn and purchased three life insurance policies from AXA totaling $16 million, court documents say.
The universal life insurance policies did not require regular premium payments. Wiener could skip or change premium payments as long as he had enough funds in each insurance account to cover his monthly deductions for the cost of insurance and other fees.
“If the insurance account did not have sufficient funds to cover these deductions, Wiener was given a 61-day grace period to pay a sufficient amount to cover three months of monthly deductions,” the appeals court decision states. “If Wiener did not pay the required amount within the grace period, the policies terminated ‘worthless.'”
AXA agreed to send Wiener two reminders a year to remind him of the premium payments due. When he took out the policies, Wiener was 51 years old and decided to delegate the administration of the policies to Millburn, who reviewed AXA’s reminders and made the required payments.
“Wiener or Millburn employees in New York acting on his behalf established a practice of not paying semi-annual premiums – even after receiving premium notices from AXA,” the decision states. “Only when Wiener received a payment notice did Millburn make payments. And even then, the payments would hardly bring Wiener’s accounts into balance.”
AXA Equitable dropped the word AXA from its name in 2020.
Warning issued
In fact, the financial professional who sold Wiener the policies sent a memo to Millburn in 2005 recommending paying more than the minimum amount required to cure a default to avoid defaulting every three months.
“Wiener and his agents at Millburn failed to follow that advice,” the Second Circuit’s decision states.
AXA’s records show that the policies lapsed a total of 209 times between 1994 and 2013. In at least three cases — 1999, 2007 and 2008 — Millburn failed to cure the lapse, and AXA canceled the policies, court documents say. When Wiener sought reinstatement in those cases, AXA approved his requests.
In March 2009, AXA changed the address from Millburn to Wiener’s Connecticut residence and provided written notice to both the New York and Connecticut addresses. Wiener did not authorize the change, court documents say.
“Ultimately, Wiener’s risky approach backfired,” the Second Circuit’s ruling states. “On October 1, 2013, the policies lapsed again, triggering a 61-day grace period. Consistent with its usual practice, AXA did not send Wiener premium notices after the policies lapsed.”
AXA claimed it had sent cancellation notices, but Wiener denied receiving any. With no payment made by December 1, 2013, AXA canceled the policies, costing Wiener a loss of $16 million in potential death benefits.
Wiener applied for reinstatement, but this time AXA rejected the request.
Court wants more information
The Second Circuit took a “buyer beware” approach to canceling the policies, rejecting any claims that either AXA or the financial professional who sold the policies had any obligation to contact Wiener about paying the premiums. The failure to provide notice of cancellation in late 2013 was not material, the court ruled.
“No reasonable expert could establish that Wiener suffered damages as a result of the breach,” the decision states. “The undisputed evidence shows that Millburn employees in New York never made any payments in response to award notices from 1994 to 2013 (19 years).”
On the issue of reinstatement, however, the appeals court found that AXA’s denial was not entirely valid. According to court documents, the insurer’s lead underwriter did not call Wiener’s primary care doctor despite being asked to do so by two AXA employees.
Furthermore, the insurer’s denial codes and a letter sent to Wiener never mention protein deficiency. Later, during a two-part deposition, the insurer specifically listed protein deficiency as a reason for denying reinstatement.
The court found that AXA’s policies did not provide for automatic rejection due to protein deficiency.
“In short, some evidence suggests that (the insurer) improperly assigned charges to Wiener for health problems he did not have and that it declined the opportunity to resolve these issues with Wiener’s doctor,” the decision said.
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