Vida Longevity Fund, LP v. Lincoln Life & Annuity Company of New York

Background

Vida Longevity Fund, LP brought a class action against Lincoln Life & Annuity Company of New York (LLANY) for breach of contract under New York law. Vida is the beneficial owner of two life insurance policies issued by LLANY. The certified class consists of policyholders whose universal life insurance policies contained provisions addressing monthly cost-of-insurance (COI) charges.

The policies defined COI as the amount charged to provide death-benefit coverage. They stated that monthly COI rates would be determined based on LLANY’s expectations about future mortality experience, and that the rates were also based on the insured person’s sex, attained age, and premium class. LLANY developed annual mortality-rate assumptions and used initial COI rates that were higher than those assumptions. Although LLANY’s mortality assumptions later declined overall, it did not lower the COI rate scales for the class policies.

Vida argued that the contracts required LLANY to adjust COI rates as its future mortality assumptions changed. LLANY argued that the contracts allowed it to consider other actuarial factors, did not require it to maintain the original difference between the COI rates and mortality assumptions, and did not require it to lower COI rates when mortality assumptions improved.

Summary-Judgment Ruling

Summary judgment is a decision without a trial when the evidence shows that no genuine dispute about an important fact requires a jury’s decision. The court held that the phrase requiring COI rates to be “based on” expected future mortality experience did not mean that mortality experience was the only factor LLANY could consider. The policies identified other factors, and the court concluded that the contract did not require exclusive reliance on mortality assumptions.

The court nevertheless held that mortality assumptions had to remain a main or significant ingredient in LLANY’s calculations. LLANY could not disregard substantial changes in those assumptions while continuing to charge the same COI rates. Vida had presented enough evidence for a reasonable jury to find that LLANY improperly maintained its COI rates despite substantial decreases in mortality assumptions for at least one policy.

The court also rejected LLANY’s argument that the policies never required it to lower COI rates. The policies did not require a monthly redetermination, but they did require LLANY to adjust rates when the mortality assumptions on which the rates were based substantially changed.

Damages

Vida’s proposed damages method generally calculated overcharges by comparing the COI actually charged with the amount that should have been charged if LLANY had adjusted rates in response to improved mortality assumptions. The court found that approach generally provided a reasonable way to measure harm.

The court rejected the method for 22 class members whose death claims had been paid and who had made no monthly premium payments during the limitations period. Those policyholders received their full death benefits, and their remaining account values reverted to LLANY. Because they were not charged the allegedly improper COI during the relevant period and had no effective property interest in the reverted account values, the court held that those damages were not recoverable. Only damages for class members who actually paid the allegedly improper COI charges were cognizable.

Statute of Limitations

LLANY argued that some claims were untimely because the relevant mortality assumptions had been calculated in earlier years. The court rejected that argument under New York law, which allows a new limitations period to begin with each successive breach when a contract requires continuing performance. The court held that each month in which LLANY improperly deducted COI charges from a class member’s account constituted a breach, so Vida’s claims were not time-barred on the theory LLANY presented.

Sealing and Other Requests

The court granted in part and denied in part the parties’ motions to seal. It allowed sealing or redaction for most material involving internal pricing methods, confidential communications, proprietary insurance-product features, and other proprietary methods. But it found that LLANY had not adequately shown competitive harm from disclosure of five documents: ECF Nos. 157-12, 157-13, 157-14, 157-26, and 157-29.

The court ordered Vida to file those five documents with its proposed redactions and ordered LLANY to publicly file versions with updated redactions preserved at ECF No. 186. The parties also had to refile their legal memoranda, statements of fact, and related exhibits by April 12, 2024. The court denied LLANY’s motion for oral argument.

Disposition

The court granted in part and denied in part LLANY’s motion for summary judgment. It also granted in part and denied in part the parties’ motions to seal, and denied LLANY’s motion for oral argument.