Hanks v. Voya Retirement Insurance and Annuity Company of New York

Background

Helen Hanks sued Voya Retirement Insurance and Annuity Company on behalf of a certified class of owners of certain universal-life and variable-universal-life insurance policies. The policies were issued by Aetna Life Insurance and Annuity Company, which later became known as Voya. The case asserted one breach-of-contract claim concerning Voya’s 2016 increase to the cost-of-insurance rate.

The policies allowed Voya to adjust the cost-of-insurance rate. Hanks’s policy said adjustments would be made “on a class basis,” “on a uniform basis,” and based on Aetna’s estimates for future cost factors, including mortality, investment income, expenses, and the length of time policies remained in force. Voya implemented the 2016 adjustment by product line, but did not implement it for New York policyholders after the New York Department of Financial Services opened an investigation.

After discovery closed, Voya moved for summary judgment, which asks whether the undisputed evidence requires judgment as a matter of law. Hanks cross-moved for summary judgment.

Governing law and contract interpretation

The court applied Texas substantive law because Hanks purchased the policy in Texas and was domiciled there. The court concluded that the relevant state contract law was materially uniform and that Texas had the most significant relationship to Hanks’s policy.

The court interpreted the policy under Texas law, focusing on the policy’s written language. It concluded that the relevant provisions were sufficiently definite to be interpreted as a matter of law, rather than being submitted to a fact finder for interpretation.

“On a class basis” theory

Hanks argued that “class” was limited to the policy’s listed factors of sex, attained age, and premium class. The court rejected that interpretation because the policy did not expressly connect those factors to the separate phrase “on a class basis.”

The court interpreted “class” according to its generally accepted and insurance-specific meaning: a group of insureds with common characteristics established for rate-making purposes. It held that the policy gave Voya discretion to adjust rates using such groups, including product-line groups. Because the undisputed evidence showed that Voya implemented the 2016 adjustment by product line, the court held that no reasonable fact finder could find a breach on this theory.

The court granted Voya’s motion for summary judgment on the class-basis theory and denied Hanks’s motion on that theory.

“On a uniform basis” theory

The court interpreted the uniform-basis requirement as prohibiting different treatment within a group of policyholders with the same underwriting characteristics, while allowing different treatment between groups with different underwriting characteristics. In other words, the policy prohibited unequal treatment within a rate-making class but permitted differences between rate-making classes.

The court held that the New York Department of Financial Services’ position created a legitimate difference in underwriting characteristics. New York policies faced unique potential regulatory and legal costs, including possible fines, and the policy did not require Voya to wait for final agency action before accounting for those risks. The court also held that the policy did not prohibit Voya from changing the relevant groupings before implementing the adjustment.

The court therefore held that Voya did not breach the uniform-basis requirement. It granted Voya’s motion for summary judgment on this theory and denied Hanks’s motion on this theory.

Future-cost-estimates theory

The court held that the policy required the cost-of-insurance adjustment to be based on Voya’s forward-looking projections of the in-force policies’ cost factors. The court rejected Hanks’s argument that Voya could not use estimates initially developed by Lincoln Life, Voya’s administrative agent. The undisputed evidence showed that Lincoln Life developed and revised the estimates, Voya reviewed them, Voya’s management accepted them, and Voya’s board approved the adjustment with knowledge that it incorporated those estimates. The court concluded that Voya adopted the estimates as its own and satisfied that aspect of the policy.

However, the court found genuine disputes of material fact about whether the adjustment was based on permitted future cost factors or instead on Lincoln Life’s profitability goals. Hanks submitted evidence and expert opinions supporting the profitability-goal theory, while Voya submitted contrary evidence and expert opinions. Because a reasonable fact finder could resolve that dispute either way, the court denied Voya’s motion for summary judgment on that portion of the claim. The court also denied Hanks’s motion for summary judgment.

Disposition

The court denied Hanks’s motion for summary judgment. It granted Voya’s motion for summary judgment in part, ruling against Hanks on the class-basis and uniform-basis theories, and denied Voya’s motion on the disputed future-cost-factors theory. The opinion directed the Clerk to terminate the motions and modify the case caption.