OPINION AND ORDER Plaintiff Andrew Nitkewicz as successor trustee of the Joan C. Lupe Family Trust, on behalf of himself and all others similarly situated, brings this putative class action for breach of contract arising from a universal life insurance policy (the “Policy”) issued by Defendant Lincoln Life & Annuity Company of New York (“Lincoln NY”). Plaintiff paid a “Planned Premium” on May 7, 2018, which, pursuant to the Policy, largely went into an interest-bearing account associated with the Policy. Monthly deductions were made from that account to cover the cost of insurance and administrative charges. Plaintiff argues that New York law requires Lincoln NY to refund a portion of that Planned Premium to cover a period that followed the insured’s death on October 6, 2018. Lincoln NY has moved to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Because the Court concludes that the Planned Premium was not “actually paid for any period beyond the end of the policy month” of the insured’s death, N.Y. Ins. Law §3203(a)(2), the Court grants Lincoln NY’s motion to dismiss. I. Background A. Facts The following facts, which are assumed true for purposes of this motion, are taken from the Complaint and from the Policy, which is integral to the Complaint. See Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002) (noting that at the motion to dismiss stage, a court may consider “any written instrument attached to [the complaint] as an exhibit or any statements or documents incorporated in it by reference” as well as any documents “integral” to the complaint, i.e., “where the complaint ‘relies heavily upon [the document's] terms and effect’” (quoting Int’l Audiotext Network, Inc. v. Am. Tel. & Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995))); Pastor v. Woodmere Fire Dist., No. 16 Civ. 892 (ADS), 2016 WL 6603189, at *4 (E.D.N.Y. Nov. 7, 2016) (“[C]ourts within this Circuit routinely consider copies of relevant policy documents in connection with insurance disputes.”); see also Dkt. 26 at 1 (Plaintiffs agreeing that the Court may consider the Policy at this stage). On April 4, 2011 (the “Policy Date”), Lincoln NY issued a Flexible Premium Adjustable Life Insurance Policy, Dkt. 23, Exh. A (“Policy”), to the Joan C. Lupe Family Trust to insure the life of Joan C. Lupe. Compl.
4, 9.1 A Flexible Premium Adjustable Life Insurance Policy is Lincoln NY’s “generic name for universal life insurance.” Policy at 2. There are two main facets of the Policy: insurance coverage and an interest-bearing account with cash value (the “Policy Account” or the “Policy Value”). Policy at 2-5, 7-15; see Dkt. 22 (“Motion to Dismiss”) at 1. The Policy allows the Policy owner (the “Owner”) to pay flexible premiums. See Policy at 2 (“‘Flexible premium’ means that You may pay premiums by any method agreeable with Us, at any time prior to the Insured’s Attained Age 121 and in any amount subject to certain limitations. ‘Adjustable life insurance’ means that You, with Our agreement, can change the death benefit to meet Your changing needs.”). This includes a so-called “Planned Premium.” “The Planned Premium is the amount of premium [the Owner] intend[s] to pay.” Id. at 8. The “Premium Frequency,” in turn, “is how often [the Owner] intend[s] to pay the Planned Premium.” Id. “Payment of the Planned Premium is [the Owner's] option,” with both the amount and the timing of any Planned Premium largely left to the discretion of the insured. Id.; see also id. at 5. When the Owner pays Lincoln NY a premium, including a Planned Premium, Lincoln NY deposits the net premium into the Policy Account. Policy at 2, 4, 11-14. The net premium is based on the “Guaranteed Net Premium Factor” stated in the Policy, which is “assessed against a premium before it is applied” to the Policy Account. See id. at 2. The Policy lists net premium factors as part of “Monthly Cost of Insurance and Administrative Charges,” which are “applied to cover the company’s cost of insurance and other expenses.” Id. Here, the Guaranteed Net Premium Factor was 85 percent of the premium paid. Id. at 4. Thus, for example, if a policy owner paid a premium of $100, $85 would go to the Policy Account and Lincoln NY would retain $15. The Policy Account then earns interest, id. at 2, 11, and the Owner can also take out a loan against that account, id. at 14. The Owner can access the money in the Policy Account by partially or totally surrendering the Policy. See id. at 12; see also id. at 5, 11. On the Monthly Anniversary Day, which corresponds to “the same day in each month as the Policy Date,” id. at 5, Lincoln NY deducts money from the Policy Account to pay for the insurance coverage, id. at 9, 11-12. This is referred to as the “monthly deduction.” Id. at 11. Because here the Policy Date was April 4, 2011, these deductions occurred on the fourth of each month. There are two parts to the monthly deduction: (1) the “cost of insurance” (“COI”) charge and (2) “administrative charges.” Id. at 11. The COI charge is directly proportional to the “net amount at risk” for Lincoln NY, which, in simple terms, is based on the potential payout at the time of the insured’s death. Id. at 11-12 (“The net amount at risk for the Policy Value calculation is computed as (1) minus (2) where: (1) is the death benefit for the month before reduction for any Debt, discounted to the beginning of the month at the guaranteed interest rate[, and] (2) is the Policy Value at the beginning of the month after subtracting all parts of the monthly deduction other than the cost of insurance.”). If there is insufficient money in the Policy Account on the Monthly Anniversary Day to cover that month’s deduction, the Policy enters a grace period. Id. at 9 (“If on a Monthly Anniversary Day the Cash Surrender Value is less than the monthly deduction due, Your policy will enter the grace period.”); see also id. at 5 (defining the Cash Surrender Value as the “Cash Value,” i.e., “[t]he Policy Value as of the date of surrender less the charge, if any, for full surrender,” minus any “Debt,” i.e., “[t]he principal of a policy loan together with interest due”). The Policy may then lapse if the Owner does not pay “the minimum amount needed to continue th[e] policy” within sixty-one days. Id. at 9. “If the amount specified is not paid within the grace period, th[e] policy will terminate without value at the end of such period.” Id. The insured may, within five years of the date of termination, make an application to reinstate the Policy, which includes “pay[ing] an amount that results in a Cash Surrender Value on the date of reinstatement that is sufficient to keep th[e] policy in force for at least two (2) months.” Id. The Policy also allows for the Owner to select an optional Coverage Protection Guarantee Rider (“CPGR”) add-on.2 If the Owner opts into the CPGR add-on, the Coverage Protection Guarantee premium is taken from the Policy Account each month as part of the monthly deduction. Id. at 2 (“We deduct the cost of providing the coverage (the cost of insurance) plus the cost of any additional benefits and/or riders and administrative charges from th[e Policy Value] each month as a ‘monthly deduction.’”). Lincoln NY applies the Coverage Protection Guarantee Net Premium Factor to any such deductions, and allocates the net premium remaining to specified Coverage Protection Accounts. Id. The Coverage Protection Guarantee Net Premium Factor is similar to the 85 percent guaranteed net premium factor discussed above, except that it varies depending on the Policy Year during which the premium is paid. Id. at 4. The CPGR is designed to “ensure that [the Owner's] coverage will continue even if the Cash Surrender Values are insufficient to cover the monthly deductions.” CPGR at 1. The Policy explains how this works: The guarantee references an “alternate” value (Coverage Protection Value) calculated by utilizing monthly deduction charges and credited interest rates. All charges and interest rates used in the Coverage Protection Value calculation are fixed and are guaranteed not to increase or decrease for the Initial Specified Amount. You will be notified of any increase in Coverage Protection Guarantee charges due to an increase in Specified Amount. The Coverage Protection Value is not used in determining the actual Policy Value, it is simply a reference value used to determine whether the Coverage Protection Guarantee is in effect. Id. Specifically, the CPGR establishes the Coverage Protection Guarantee Test (the “CPG Test”), which creates a “reference value.” Id. The CPG Test is satisfied when the reference value is positive; this occurs when the amount in the Coverage Protection Accounts equals or exceeds Debt. Id.; Policy at 5 (defining “Debt” as “[t]he principal of a policy loan together with interest due”). When the CPG Test is satisfied, a policy does not enter the grace period, even if the funds in the Policy Account are insufficient to cover the monthly deduction. CPGR at 4. In other words, “[t]he addition of the Coverage Protection Guarantee Rider to the policy provides that the policy and all riders will continue in force as long as either the Cash Surrender Value is sufficient to cover the monthly deduction or the total of the Coverage Protection Accounts equals or exceeds Debt.” Id. “If neither amount is sufficient and no additional premiums are paid, the policy will terminate according to the Grace Period Provision.” Id. Here, Plaintiff opted for the CPGR add-on. See Policy at 4; Dkt. 25 (“Opposition”) at 4. The Policy provides for two death benefit options. Under Option I, the Policy will pay out, upon the insured’s death, either the “Specified Amount” that the Owner has selected or, if higher, the value of the Policy Account multiplied by a factor under an Internal Revenue Code schedule.3 Policy at 9-10; see also Motion to Dismiss at 5. By electing this option, the insured generally pays lower monthly COI deductions because the value of the Policy Account reduces the net amount at risk. See Policy at 11 (“The cost of insurance is determined on a monthly basis as the cost of insurance rate for the month multiplied by the net amount at risk for the month.”); id. (defining the net amount at risk as (1) “the death benefit for the month before reduction for any Debt, discounted to the beginning of the month at the guaranteed interest rate,” minus (2) “the Policy Value at the beginning of the month after subtracting all parts of the monthly deduction other than the cost of insurance”); see also Opposition at 5. In contrast, under Option II, Lincoln NY pays out both the Policy Account and the Specified Amount upon the insured’s death. Policy at 10. Under this option, higher monthly COI charges are therefore deducted from the Policy Account. See id. at 11; see also Motion to Dismiss at 6. Any death benefit is reduced by any Debt as of the date of death. Policy at 10. Here, Plaintiff elected the Option I benefit. The Policy had a Specified Amount of $1.5 million. Compl.
