2nd Circuit Court Rules on Suit Over Insurance Products

At issue was a New York State law that requires a policy to be enforced, even if it's illegal. The class members could have sought to enforce the policy, then, should they have tried, but since they didn't, there was no injury in fact, the district court found. A mere statutory violation wasn't enough to earn them standing.

That was the wrong call, the panel found. Regardless of the merits of the claims, if it's a concrete injury—in this case, years of payments for the unused insurance policies—caused by the violation of a statute, it's enough to establish standing.

The panel found an additional issue with how the district court resolved the case. No New York State court has interpreted the insurance law at issue as precluding an insured person's ability to bring a claim for a refund of the premiums paid for an illegal insurance policy. The panel said reading of the so-called savings clause of the law as such would seemingly conflict with the clear aims of protecting consumers from bogus insurance schemes.

While noting this point meant "no criticism of a very able District Court judge," the panel said Gardephe's "conflating the merits questions with the standing inquiry" may have resulted in the court failing to "give due consideration to this novel question of state law and reached an outcome that would preclude putative plaintiffs from seeking redress in state or federal court."

Lackey Hershman partner Roger Mandel represented the plaintiffs on appeal. Paul, Weiss, Rifkind, Wharton & Garrison partner H. Christopher Boehning was counsel for Federal Insurance Co., while Winstead PC associate Stephen Clarke represented Stonebridge Life Insurance Co. None responded to a request for comment on the decision.

— Read HealthExtras To Market To Hunters, Hobbyists And Fishing Enthusiasts on ThinkAdvisor.

— Connect with ThinkAdvisor Life/Health on Facebook and Twitter.