Metropolitan Life Insurance Company and AXA Equitable Life Insurance were taken to federal court in New York by several insureds after the Department of Financial Services issued its controversial report on life insurers’ failure to disclose captive reinsurance transactions in 2013.
In their separate cases, the insureds claimed that Metropolitan Life and AXA Equitable misrepresented their financial strength by not properly disclosing their captive reinsurance transactions.
The life insurers’ undisclosed use of “shadow insurance” caused them injury, the plaintiff insureds argued.
They attempted to gain class-action status so they could represent insureds throughout the US, but the US District Court for the Southern District of New York dismissed their complaints due to a lack of standing under Article III of the Constitution.
Ruling in favour of Metropolitan Life and AXA Equitable at the end of February, the Second Circuit said: “The mere fact that an insurer may make a misleading representation does not require or even lead to the necessary conclusion that the misleading representation is material or even likely to cause harm.”
Commenting on the litigation, Dentons lawyers Sandra Hauser and Carter White said: “The order is a strong signal from the Second Circuit that plaintiffs who fail to demonstrate concrete, non-speculative injury lack Article III standing to sue, and also dashes future putative plaintiffs' hopes of leveraging New York's insurance laws to support lawsuits by policyholders who are not personally affected by the conduct they challenge.”