New York State Ass'n of Life Underwriters v. Superintendent of Ins.

• Decision Date: 21 October 1971
• Citation: 325 N.Y.S.2d 172,37 A.D.2d 304
• Parties: In the Matter of NEW YORK STATE ASSOCIATION OF LIFE UNDERWRITERS et al., Respondents, v. SUPERINTENDENT OF INSURANCE of the State of New York et al., Appellants.
• Court: New York Supreme Court — Appellate Division

Page 172

325 N.Y.S.2d 172

37 A.D.2d 304

In the Matter of NEW YORK STATE ASSOCIATION OF LIFE UNDERWRITERS et al., Respondents, v. SUPERINTENDENT OF INSURANCE of the State of New York et al Appellants.

Supreme Court, Appellate Division, Third Department.

Oct. 21, 1971.

Louis J. Lefkowitz, Atty. Gen., Albany (Ruth Kessler Toch, Thomas P. Zolezzi and Vincent P. Molineaux, Albany, of counsel), for Superintendent of Insurance.

DeGraff, Foy, Conway & Holt-Harris, Albany (John E. Holt-Harris, Jr., Albany, of counsel), for Connecticut General Life Ins. Co. Shearman & Sterling, New York City (Herman E. Compter, Henry Harfield and James B. Keenan, New York City, of counsel), for First National City Bank.

John R. Davison, Albany, for respondents New York State Ass'n of Lefe Underwriters and others.

Royall, Koegel & Wells New York City (Mataraso & MacAffer, Albany, of counsel) for amici curiae CUNA Mutual Ins. Society and New York State Credit Union League, Inc.

Roderick C. Sager, Syracuse (Frederick W. Read Jr., Daniel J. Reidy, Victor Whitehorn, New York City, Donald M. Wilson, Binghamton, of counsel), for amicus curiae Ass'n of New York State Life Ins. Co.

Before HERLIHY, P.J., and STALEY, COOKE, SWEENEY and SIMONS, JJ.

OPINION FOR REVERSAL

COOKE, Justice.

This is an appeal from a judgment of the Supreme Court at Special Term, entered August 20, 1971 in Albany County, which: (1) directed that the Superintendent of Insurance cease taking further action, except cancellation, as to his 'Circular 'Circular Letter No. 14 (1970)' issued November 19, 1970 addressed 'To All insurers Licensed to Write Life and Accident and Health Insurance in New York State' and that he rescind any actions, approvals and opinions in effectuation thereof; (2) declared that said letter and any plans, contracts and orders pursuant thereto are without authority and contrary to law; and (3) restrained appellants from taking or continuing any actions in reliance upon the 'Wholesale Life Insurance Standards' in said letter and any related plans, policies and contracts.

On November 19, 1970, the Superintendent issued 'Circular Letter No. 14 (1970)' which amended prior circular letters by adding as a group to whom wholesale life insurance could be distributed upon a mass merchandising basis '(b) individual depositors holding interest bearing savings accounts in the same bank or credit union' under which the insured's right to renew his policy may be contingent upon the continuance of such savings deposit. These circular letters, by their nature, were advisory in form and imparted general standards which would have to be met before applications to sell wholesale life insurance would be approved.

Appellants First National City Bank of New York and Connecticut General Life Insurance Company developed a plan for the sale by the latter of life insurance on a wholesale basis to depositors in First National savings accounts, under the terms of which First National would deduct a scheduled amount of the interest earned quarterly on a savings account of a depositor, who wished to be insured, and apply that as a premium for the term life insurance issued by Connecticut General. The amount of coverage would depend on the age of the depositor and the sum of interest the account earned, approximately one-half of the interest being credited for premium payments up to the cost of coverage for a maximum of $15,000 of insurance. The plan was approved by the Superintendent on May 28, 1971.

By their petition dated and filed June 3, 1971, respondents sought relief substantially the same as that granted in the judgment under review, it being alleged that the Superintendent was without authority in issuing said circular letter and in approving said plan of First National and Connecticut General. Special Term, in deciding what it termed 'the real issue', held the plan to be a tie-in scheme violative of subdivision 3 of section 193 of the Insurance Law, as a matter of law.

Said subdivision, in relevant part, provides:

'3. No insurer * * * shall directly or indirectly, or by any of its agents or representatives, participate in any plan to offer or effect any kind or kinds of life insurance * * * in this state as an inducement to, or interdependent with, the purchase by the public of any goods, securities, commodities, services or subscriptions to periodicals, except as provided (in enumerated sections not here applicable). Nothing in this subdivision shall prohibit payment plans which are otherwise in compliance with this subdivision and this chapter.'

In proscribing the sale of life insurance as 'an inducement to, or interdependent with, the purchase by the public of any goods, securities, commodities, services or...