September 08, 2021

Second Time’s the Charm: Court Dismisses (Again) Putative Disability Insurance Class Action

For a second time, the United States District Court for the Southern District of New York dismissed a putative class action alleging insurance companies sold them disability policies that were void under New York law.

The suit arose in connection with the “HealthExtras” insurance program, a program created by HealthExtras, Inc. offering accidental disability and medical expense coverage through marketing agreements with banks and companies offering branded credit cards. Credit card holders were solicited through their monthly credit card statements as well as by phone and direct mail. Some of those marketing materials included the late actor Christopher Reeves.

Plaintiffs alleged the policies were void ab initio because the HealthExtras Program violated New York insurance law in various ways. Specifically, they claimed the policies were group and/or blanket policies that were not issued to eligible entities under New York law, were not filed and approved with the New York Department of Financial Services and did not contain standard provisions required by law. Additionally, plaintiffs claimed the policies were drafted to make coverage illusory. As such, they argued the policies were illegal, against public policy, and either void ab initio or voidable and brought claims for deceptive trade practices and false advertising under New York General Business Law (GBL) §§ 349-350, fraud, and quasi-contract claims, including unjust enrichment.

In 2016, the district court dismissed the case, finding plaintiffs lacked standing — a decision that was vacated by the Second Circuit on appeal. Recently, the remaining insurer defendants again moved to dismiss, arguing the claims were all time-barred, as plaintiffs were aware of the facts and alleged misrepresentations when coverage was issued in 2000, 15 years before the complaint was filed.

The district court agreed the claims were time-barred. It rejected plaintiffs’ arguments that the continuing wrong doctrine and equitable tolling saved their claims.  As to the former, plaintiffs did not allege a separate wrong that occurred with each premium payment but claimed that the policies were sold with false and misleading advertising. The later continuation of coverage, the Court found, was the continuing effect of the earlier conduct. With regard to the latter, even where a defendant’s purported fraud delays the filing of a lawsuit or conceals the existence of a cause of action, a plaintiff is still required to bring the action within a reasonable time after discovering the relevant facts. Here, plaintiffs were on notice of the facts surrounding their claims by at least 2005, at which point they had received all marketing materials and policy terms but did not exercise due diligence in investigating their claims thereafter. As such, all of the claims were time-barred, and the court again granted the insurers’ motion to dismiss.

Dubuisson v. National Union Fire Ins. of Pittsburgh, PA, No. 15 Civ. 2259 (July 26, 2021)

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