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Eight days after oral argument, a three-judge panel of the Second Circuit issued a summary order affirming dismissals of all claims against Paul, Weiss client AXA Equitable Life Insurance Company in two cases before Southern District of New York Judges Jesse Furman and Richard Sullivan. The order also affirmed dismissals by Southern District of New York Judge Denise Cote in two similar cases brought against Metropolitan Life Insurance Company. Paul, Weiss partner Elizabeth Sacksteder presented the oral argument on behalf of AXA.
The AXA cases were brought by putative classes of the insurance company’s life insurance and variable annuity policyholders asserting novel claims under a provision of New York insurance law that provides a private right of action for “persons aggrieved” by an insurer’s misrepresentation of its financial condition. The plaintiffs’ claims were prompted by a 2013 report by the New York Department of Financial Services that was critical of “captive reinsurance” (reinsurance purchased from affiliated entities), which is widely used in the life insurance industry to manage capital efficiently, reduce costs and increase capacity. Notwithstanding that the New York Department of Financial Services had itself approved the relevant transactions, the plaintiffs alleged that AXA’s reinsurance of certain risks to an affiliate caused its financial condition to be misrepresented and made its policies less safe. The plaintiffs sought as a penalty the return of all premium paid by the class during the multi-year class period – amounting to many billions of dollars – while maintaining the class members’ coverage in force.
The Second Circuit concluded that the plaintiffs had failed to allege actual or imminent harm sufficient to satisfy the “injury in fact” requirement for standing under the U.S. Constitution. The panel adopted AXA’s argument that even a severe economic downturn of the kind hypothesized by the plaintiffs “is not only speculative itself, but also simply the first of many necessary conditions that must be fulfilled” before plaintiffs’ policies could be at risk. The panel also rejected the plaintiffs’ arguments that a mere violation of the statute, without more, could satisfy the constitutional requirement of injury-in-fact, and that the plaintiffs were harmed because the alleged increased risk of nonpayment made the policies they purchased less valuable than they thought.February 23, 2017