Lawsuit revived for man who lost $16M in life policies on a missed payment

A federal appeals court ruled partially for a policyholder who claims AXA did not inform him of a possible policy lapse.

By John Hilton

A federal appeals court gave a partial win to a Connecticut man claiming that AXA Equitable allowed his life insurance policies to lapse without any payment reminder.

The Court of Appeals for the Second Circuit affirmed summary judgment for AXA on its decision to terminate the policies sold to Malcolm Wiener. But the court sided with Wiener and sent the case back to the district court on the issue of reinstatement.

Wiener is a historian, lawyer and the retired founder of Millburn Corp., a financial services firm based in New York City. In 1986, Wiener retired from Milburn and bought three life policies from AXA totaling $16 million, court documents say.

The universal life insurance policies did not require regular premium payments. Wiener could skip premium payments or change them, as long as he maintained enough funds in each policy account to cover his monthly deductions for the cost of insurance and other fees.

"If the Policy Account had insufficient funds to cover these deductions, Wiener would be given a 61-day grace period to pay a sufficient amount to cover three months of monthly deductions," the appeals court decision reads. "If Wiener failed to pay the required sum within the grace period, the Policies would “end without value.”

AXA agreed to send two notices to Wiener yearly to remind him of the required premiums. When he bought the policies, Wiener was 51 years old and chose to delegate policy management to Millburn, who reviewed notices from AXA and made necessary payments.

"Wiener, or the Millburn employees in New York acting on his behalf, adopted a practice of not paying any semiannual premiums—even after receiving premium notices from AXA," the decision reads. "Only when Wiener received a lapse notice would Millburn tender payment. Even then, the payments would barely bring Wiener’s accounts into good standing."

AXA Equitable dropped the AXA from its name in 2020.

Warning issued

In fact, the financial professional who sold Wiener the policies sent a 2005 memo to Millburn to recommend paying more than the minimum required to cure a lapse, so as to avoid a lapse every three months.

"Wiener and his agents at Millburn did not heed this advice," the Second Circuit decision states.

AXA’s records show that from 1994 to 2013, the policies lapsed 209 times combined. On at least three occasions -- in 1999, 2007 and 2008 -- Millburn failed to cure the lapse and AXA terminated the policies, court documents say. When Wiener applied for reinstatement on these occasions, AXA approved his applications.

In March 2009, AXA changed the address from Millburn to Wiener’s residence in Connecticut and provided written notice of the change to both the New York and Connecticut addresses. Wiener did not authorize this change, court documents note.

"Ultimately, Wiener’s high-risk approach backfired," the Second Circuit decision says. "On Oct. 1, 2013, the Policies lapsed yet again, triggering a 61-day grace period. Consistent with its typical practice, AXA did not send Wiener premium notices once the Policies had lapsed."

AXA claimed that it sent lapse notices, but Wiener denied receiving any. Because no payment was made by Dec. 1, 2013, AXA terminated the policies, costing Wiener a $16 million loss in potential death benefits.

Wiener applied for reinstatement and this time AXA denied the application.

Court wants more info

The Second Circuit took a buyer-beware stance to the termination of the policies, rejecting all claims that either AXA or the financial professional who sold the policies had a duty to contact Wiener about premium payment. The missed lapse notice late in 2013 was not material, the court ruled.

"No reasonable factfinder could find that the breach caused Wiener to suffer damages," the decision reads. "The undisputed evidence shows that from 1994 to 2013 (19 years), Millburn employees in New York never tendered payment in response to premium notices."

On the reinstatement issue, however, the appeals court found AXA's denial somewhat lacking. According to court documents, the insurer's senior underwriter did not call Wiener's personal physician despite being directed to by two AXA employees.

In addition, the underwriter's denial codes and a letter sent to Wiener never mention a protein deficiency. Later, during a two-part deposition, the underwriter specifically stated the protein deficiency as the reason for the reinstatement denial.

The court noted that AXA's guidelines do not call for an automatic denial for the protein deficiency.

"In short, some evidence suggests that [the underwriter] wrongfully assigned Wiener debits for health conditions that he did not have, and that she declined an opportunity to clarify these points with Wiener’s doctor," the decision reads.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.