On November 20, 2023, the Faegre Drinker insurance and appellate teams got a big win for client Allianz Life in the New York Court of Appeals.
A new buyer of a large, existing life insurance policy sued Allianz Life, arguing that Allianz Life had not provided the correct notice to the prior owner to declare the policy lapsed for non-payment. But neither the new buyer nor the prior owner had informed Allianz Life that the policy had been sold and assigned—even though the policy expressly required notice to Allianz Life as a condition of Allianz Life being bound by an assignment. Such notice requirements related to assignments are commonplace in the industry.
Allianz Life therefore moved to dismiss the new buyer’s claim for lack of contractual standing to enforce the policy against Allianz Life. Plaintiff argued in response that the notice requirement was an unenforceable restraint on assignment under New York law. The United States District Court for the Eastern District of New York, however, agreed with our arguments for Allianz Life and granted the motion to dismiss. Plaintiff appealed to the Second Circuit, which certified a question of New York state law to the New York Court of Appeals. As the question was ultimately formulated, it asked whether the failure to provide written notice of an assignment (to the insurer) meant that the purported assignee lacked contractual standing to bring a claim under the policy against the insurer.
Ruling for Allianz Life, the Court held that Allianz Life’s notice requirement was enforceable. The requirement was not a limitation on assignability because it did not affect whether the assignment was valid as between the assignor (the prior owner) and the assignee (the new buyer). But as to the insurer, the notice requirement served the practical purpose of protecting the insurer against being liable for following the instructions of a record owner without knowing a new owner existed.
This decision establishes favorable precedent for insurers and other commercial entities doing business in New York and shields those entities from owing contractual obligations to parties of which they are unaware.
The team’s briefs were supported by amici the Life Insurance Council of New York and by the American Council of Life Insurers
The Faegre Drinker team included Dawn Williams, Christine Stoddard, Laura Wall, and Aaron Van Oort, who delivered the oral argument.