(Reuters) - A federal appeals court has revived a proposed class action
by New York credit card holders accusing several insurance companies of
selling them disability policies endorsed by the late actor Christopher
Reeve that were void under state law.
In a decision on Thursday, a three-judge panel of the 2nd U.S. Circuit
Court of Appeals said a lower court erred in finding that the consumers
lacked standing on the grounds that they did not suffer a concrete harm.
The credit card holders alleged that they paid premiums for illegal and
void policies, which is all that is needed to establish that they were
harmed, Circuit Judge Richard Wesley, writing for the panel said. He was
joined in the opinion by Circuit Judges Rosemary Pooler and Peter Hall.
”Obviously, this is a big victory in the case,” said
Mandel, who represents the credit card holders.
Lawyers for the defendants could not be reached.
Filed in 2015 in Manhattan federal court, the lawsuit accused Maryland-based
HealthExtras and several insurance companies it worked with, including
American International Group and Transamerica Financial Life Insurance,
of selling disability policies that had not been approved by New York
HealthExtras partnered with major credit card issuers such as Citigroup,
American Express and Capital One to gain access to credit card holders
and marketed the insurance in flyers included in their monthly statements,
the complaint said. The credit card issuers were not named as defendants.
Marketing materials included a picture of “Superman” movie
star Christopher Reeve, who was paralyzed in a 1995 horse-riding accident,
reminding readers that sometimes “lives change in an instant.”
The insurance was sold to consumers nationwide, including thousands of
New York residents, between 2000 and 2014, as a purported low-cost group
policy offered to credit card holders. Credit card holders, however, do
not qualify for group insurance under New York law, which limits such
coverage to employers, labor unions and similar groups, the complaint said.
Alleging fraud and violations of a New York state law barring deceptive
practices, the credit card holders are seeking compensatory damages and
restitution of premiums they paid.
In a motion to dismiss, the insurance companies argued that the plaintiffs
lacked standing because they did not show that they suffered a concrete
harm. Under New York’s so-called “savings statute,”
technically void insurance policies are enforceable against an insurer,
and the plaintiffs would have been covered if they had filed claims, the
U.S. District Judge Paul Gardephe in Manhattan agreed, dismissing the lawsuit
in 2016 for lack of standing.
On appeal, lawyers for the plaintiffs said they were injured by buying
virtually worthless insurance based on misrepresentations that it was
valid. The savings statute only applies when a consumer seeks coverage
for an illegal policy and cannot be invoked by insurance companies to
defend against lawsuits, they said.
The 2nd Circuit agreed.
Defendants’ argument that the savings statute would require them
to honor the policies is actually a challenge to the merits of plaintiffs’
claims, something courts cannot weigh in a decision on standing, the appeals
The case is DuBuisson v. Stonebridge Life Insurance, 2nd U.S. Circuit Court
of Appeals, No. 16-2536.
For the plaintiffs/appellants:
Mandel Law Office; Golomb & Honik; Aughtman Law Offices; Hemmings and Stevens
For the defendants/appellees: Paul Weiss Rifkind Wharton & Garrison