21-1830-cv Nitkewicz as Tr. of Joan C. Lupe Fam. Tr. v. Lincoln Life & Annuity Co. of N.Y.

United States Court of Appeals for the Second Circuit August Term, 2021

(Argued: June 6, 2022 Final Briefs Submitted: January 23, 2024 Decided: August 8, 2024)

Docket No. 21-1830-cv

_____________________________________

ANDREW NITKEWICZ, as Trustee of the Joan C. Lupe Family Trust and on behalf of himself and all others similarly situated,

Plaintiff-Appellant,

v.

LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK,

Defendant-Appellee. _____________________________________

Before:

CALABRESI, LOHIER, and SULLIVAN, Circuit Judges.

The United States District Court for the Southern District of New York (Cronan, J.) concluded that Lincoln Life & Annuity Company of New York was not obligated under Section 3203(a)(2) of the New York Insurance Law to refund a payment that Andrew Nitkewicz, as trustee of the Joan C. Lupe Family Trust, had deposited into a policy account associated with Lupe’s life insurance policy five months before she died. Because no New York court had analyzed this provision of New York insurance law, and because that provision implicates significant New York State interests, we deferred decision on this appeal in order to certify the following question to the New York Court of Appeals: Whether a planned payment into an interest-bearing policy account, as part of a universal life insurance policy, constitutes a “premium actually paid for any period” under the refund provision of New York Insurance Law Section 3203(a)(2). Because the Court of Appeals has now answered the certified question in the negative, we conclude that the District Court did not err in dismissing the complaint seeking a statutory refund under Section 3203(a)(2). AFFIRMED.

Seth Ard (Alexander P. Frawley, on the brief), Susman Godfrey L.L.P., New York, NY, for Plaintiff-Appellant Andrew Nitkewicz, as Trustee of the Joan C. Lupe Family Trust and on behalf of himself and all others similarly situated.

John F. LaSalle (Alan B. Vickery, on the brief), Boies Schiller Flexner LLP, New York, NY, for Defendant- Appellee Lincoln Life & Annuity Company of New York.

LOHIER, Circuit Judge:

In our prior opinion, Nitkewicz as Tr. of Joan C. Lupe Fam. Tr. v. Lincoln

Life & Annuity Co. of N.Y.,

(2d Cir. 2022) (Nitkewicz I),

familiarity with which is assumed, we considered a universal life insurance

policy issued in 2011 by Lincoln Life to the Joan C. Lupe Family Trust on the life

of Joan C. Lupe. This case now returns to us following our receipt from the

New York Court of Appeals of an answer to a certified question of New York

law. See Nitkewicz as Tr. of Joan C. Lupe Fam. Tr. v. Lincoln Life & Annuity

Co. of N.Y.,

, 358 (2023) (Nitkewicz II).

2 Unlike a term or whole life insurance policy where the policyholder pays

fixed, periodic premiums, a universal life insurance policyholder can make

payments in any amount at any time to an interest-bearing policy account

administered by the insurer, subject to certain specified limitations. Every

month, the insurer deducts from this account an administrative fee and the cost

of insurance. “The remaining funds in the policy account can grow tax-free over

time based on an interest rate set by the insurer and can fund future [insurance]

deductions.” Nitkewicz II, 40 N.Y.3d at 352.

Lupe structured her payments to Lincoln Life in the form of an annual

“Planned Premium” of $53,877.72. She also opted to execute a “Coverage

Protection Guarantee Rider,” which prevented her life insurance policy from

lapsing in the event that the money in the policy account was insufficient to

cover the monthly deduction, so long as the alternate “Coverage Protection

Guarantee Test” set forth in the rider was met. See App’x at 88. Any fees for

the Coverage Protection Guarantee Rider were taken from the policy account as

part of the monthly deduction. See App’x at 62, 78.

Andrew Nitkewicz, as trustee of the Joan C. Lupe Family Trust, paid the

last annual Planned Premium in May 2018 before Lupe passed away in October

3 2018. Upon her death, Lincoln Life declined to refund any portion of the

Planned Premium that Nitkewicz paid in May 2018. Nitkewicz then brought

suit alleging, among other things, that Lincoln Life’s refusal to refund a prorated

portion of the Planned Premium violated New York Insurance Law Section

3203(a)(2). The relevant portion of that provision establishes that “if the death

of the insured occurs during a period for which the premium has been paid, the

insurer shall add to the policy proceeds a refund of any premium actually paid

for any period beyond the end of the policy month in which such death

occurred.”

(a)(2) (emphasis added).

The District Court nonetheless dismissed the complaint because it

concluded, among other things, that the Planned Premiums are not “actually

paid” and are instead “simply a statement of intent” to pay for insurance when

the monthly deduction is due. Nitkewicz as Tr. of Joan C. Lupe Fam. Tr. v.

Lincoln Life & Annuity Co. of N.Y., No. 20 CIV. 6805 (JPC),

, at

*8–9 (S.D.N.Y. July 2, 2021) (cleaned up). The District Court further noted that

the Planned Premiums “increase the account value, and in doing so earn interest,

and are accessible to the owner.” Id. at *9 (quotation marks omitted).

On appeal, we concluded that the question of “[w]hether a planned

4 payment into an interest-bearing policy account, as part of a universal life

insurance policy, constitutes a ‘premium actually paid for any period’ under the

refund provision of New York Insurance Law Section 3203(a)(2)” was best

answered by the New York Court of Appeals. Nitkewicz I,

. In

certifying that question, we determined that even if the Coverage Protection

Guarantee Rider transformed the annual Planned Premium into a payment for a

specific period of coverage, the Planned Premium would still not be “actually

paid” for insurance “since only the monthly deduction pays for insurance.”

at 727 n.4.

The New York Court of Appeals accepted and answered our certified

question in the negative. Nitkewicz II, 40 N.Y.3d at 358. The Court of Appeals

held that the Planned Premiums were not “actually paid” for insurance under

New York law because “such payments would not necessarily keep the Policy

from terminating”; rather, “it was defendant’s monthly deductions that actually

‘paid’ for the insurance because those deductions kept the policy in force for

another month.” Id. at 355. The Court of Appeals further explained that the

Planned Premiums were not paid “for any period” beyond the end of the policy

month in which Lupe’s death occurred, as “the amount of any given Planned

5 Premium may or may not have been used to cover the monthly deductions” and

“might have gone to fund future monthly deductions or might have remained in

the [policy account], accruing interest . . . .” Id. at 355–56.

After the Court of Appeals’ decision, the parties filed supplemental

briefing. In his supplemental briefing, Nitkewicz argues that the final Planned

Premium nevertheless qualifies for a statutory refund because the Coverage

Protection Guarantee renders his premium “actually paid.” Appellant’s Supp.

Br. 5. We remain unpersuaded. We previously held, and the New York Court

of Appeals agreed, that it was the monthly deduction from the policy account

that “actually paid” for insurance and directly kept the policy in force each

month. See Nitkewicz I,

n.4; Nitkewicz II, 40 N.Y.3d at 355. The

Coverage Protection Guarantee merely offered a backstop to prevent the policy

from lapsing in the event that the cash value of the policy account was

insufficient to cover the monthly deduction. Nitkewicz never alleged that the

account’s cash value fell below the monthly deduction.

That the Coverage Protection Guarantee was effective only if sufficient

Planned Premiums had been paid did not transform such Planned Premiums

into “payments . . . for insurance.” Nitkewicz II, 40 N.Y.3d at 355 (quotation

6 marks omitted). On the contrary, as Nitkewicz admitted at oral argument, Lupe

was free to withdraw from her policy account (although not necessarily without

penalty) the portion of her annual Planned Premium not yet used for monthly

deductions or the load charge. See Oral Arg. Tr. at 39:01–44:20 (discussing

availability of partial surrender). Although Lupe did not ultimately make such

a withdrawal, see id. at 42:25, the fact that she could have done so leads us to

conclude that her Planned Premium was not a “premium actually paid,”

notwithstanding the Coverage Protection Guarantee Rider. Furthermore,

because we hold that the final Planned Premium does not qualify for a statutory

refund even with the Coverage Protection Guarantee Rider, we also reject

Nitkewicz’s request to amend his complaint to elaborate on the Coverage

Protection Guarantee Rider.

We thank the New York Court of Appeals for its assistance in resolving

this unsettled question of New York law. We have considered Nitkewicz’s

remaining arguments and conclude that they are without merit. For the

foregoing reasons, we AFFIRM the judgment of the District Court.

7