NY Court of Appeals Rules on Universal Life COI Increases and Damages
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A recent New York Court of Appeals decision provides important guidance on cost of insurance (COI) increases and available damages under state consumer protection laws. Insurance compliance professionals should note several key holdings from Hobish v. AXA Equitable Life Insurance Company.
The Case:
- Trust purchased $2M universal life policy from AXA in 2007
- AXA increased COI charges in 2015 for policies over $1M where insured was 70+ at inception
- Trust surrendered policy after 4 months of higher charges
- Trust sued for breach of contract and NY General Business Law § 349 violation
Key Compliance Takeaways:
1. Policy Language Interpretation
The court found "given class" ambiguous when used alongside specific rating classes. Insurers should carefully review policy language defining classes and rate increase provisions.
2. COI Increase Implementation
While the court didn't rule on the propriety of age-based COI increases, it noted AXA's increases remained below policy maximums. Carriers should document actuarial justification for any COI adjustments.
3. Damages Limitations
The court significantly limited available damages:
- Rejected death benefit minus surrender value as measure of damages when policyholder chooses to surrender
- Held punitive damages unavailable under GBL § 349 beyond statutory treble damages cap
- Required highly egregious conduct for contract claim punitive damages
This decision provides helpful guidance for carriers managing universal life COI increases while highlighting the importance of clear policy language and documented decision-making.
For questions about COI compliance or policy language review, contact Currin Compliance today.
