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FINKELSTEIN v. LINCOLN NATL. CORP.


HAROLD FINKELSTEIN et al., Appellants-Respondents, v. LINCOLN NATIONAL CORPORATION et al., Defendants, and LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK et al., Respondents-Appellants.


Appellate Division of the Supreme Court of New York, Second Department.


107 A.D.3d 759, 967 N.Y.S.2d 733, 2013 NY Slip Op 4308


Decided June 12, 2013.


Finkelstein v. Lincoln Natl. Corp.

107 A.D.3d 759, 967 N.Y.S.2d 733


Rivera, J.P., Leventhal, Austin and Miller, JJ., concur.


Ordered that the cross appeal is dismissed, as the respondents-appellants are not aggrieved by the portion of the order cross-appealed from (see CPLR 5511); and it is further,


Ordered that the order is reversed insofar as appealed from, on the facts and in the exercise of discretion, and that branch of the plaintiffs' motion which was pursuant to CPLR 3025 (b) for leave to amend their complaint to assert a third cause of action so as to allege that the defendant Lincoln Life & Annuity Company of New York violated Insurance Law 4226 is granted; and it is further,


Ordered that one bill of costs is awarded to the plaintiffs.


A person "is aggrieved when he or she asks for relief but that relief is denied in whole or in part [and] when someone asks for relief against him or her, which the person opposes, and the relief is granted in whole or part" (Mixon v TBV, Inc., 76 A.D.3d 144, 156-157 [2010]). Here, the portion of the order cross-appealed from granted that branch of the plaintiffs' motion which was for leave to amend the complaint so as to add Randy P. Siller as a party defendant and assert a cause of action against him alleging that he violated Insurance Law 2123. Since that branch of the plaintiffs' motion did not seek relief against the defendants Lincoln Life & Annuity Company of New York (hereinafter LLACNY), Lincoln Financial Advisors Corp. (hereinafter Lincoln Financial), Sagemark Consulting (hereinafter Sagemark), or Siller & Cohen, those defendants are not aggrieved by the portion of the order cross-appealed from. Accordingly, their cross appeal must be dismissed.


The plaintiffs Harold Finkelstein and Marilyn Finkelstein (hereinafter together the Finkelsteins) created the H. Finkelstein Family Trust (hereinafter the Trust), of which their son, the plaintiff Ronald Finkelstein, is the trustee. The Trust and the Finkelsteins consulted with Lincoln Financial through the latter's agents, the defendants Siller & Cohen and Sagemark, to obtain advice about, inter alia, estate planning and the use of life insurance products to pay estate taxes. After consulting with these defendants, the plaintiffs, in January 2007, purchased a "second to die life insurance policy" issued by LLACNY. The plaintiffs paid the first $800,000 premium by January 28, 2007, and made their second $800,000 premium payment less than one year later. Thereafter, the plaintiffs cancelled the subject policy upon discovering that American General Life Insurance Company offered a similar second-to-die life insurance policy with a slightly reduced death benefit, but at a much lower price for the premium.


In March 2009, the plaintiffs commenced this action against, among others, LLACNY, Lincoln Financial, Sagemark, and Siller & Cohen, asserting causes of action sounding in breach of contract (first cause of action), breach of fiduciary duty (second cause of action), fraud (third cause of action), constructive fraud (fourth cause of action), and negligent misrepresentation (fifth cause of action). The plaintiffs alleged that the defendants induced them to purchase the subject life insurance policy by misrepresenting that policy to be the best means of achieving their estate planning goals.


Prior to answering, the defendants moved to dismiss the complaint. In an order dated November 18, 2009, the Supreme Court directed the dismissal of the complaint insofar as asserted against Lincoln National Corporation pursuant to CPLR 3211 (a) (8), and directed the dismissal of the third, fourth, and fifth causes of action in the initial complaint insofar as asserted against the remaining defendants pursuant to CPLR 3211 (a) (7).


Thereafter, the plaintiffs moved for leave to amend the complaint, inter alia, to assert a new third cause of action so as to allege that LLACNY violated Insurance Law 4226. The Supreme Court, among other things, denied that branch of the plaintiffs' motion which sought leave to add the proposed Insurance Law 4226 cause of action against LLACNY.


"Leave to amend the pleadings `shall be freely given' absent prejudice or surprise resulting directly from the delay" (McCaskey, Davies & Assoc. v New York City Health & Hosps. Corp., 59 N.Y.2d 755, 757 [1983], quoting CPLR 3025 [b]), "unless the proposed amendment is palpably insufficient or patently devoid of merit" (Lucido v Mancuso, 49 A.D.3d 220, 222 [2008]; see Maldonado v Newport Gardens, Inc., 91 A.D.3d 731, 731-732 [2012]; Gongolewsky v Empire Ins. Co., 51 A.D.3d 720, 721 [2008]). "A determination whether to grant such leave is within the Supreme Court's broad discretion, and the exercise of that discretion will not be lightly disturbed" (Gitlin v Chirinkin, 60 A.D.3d 901, 902 [2009]; see Ingrami v Rovner, 45 A.D.3d 806, 808 [2007]).


The Supreme Court improvidently exercised its discretion in denying that branch of the plaintiffs' motion which was for leave to amend their complaint to assert a cause of action alleging that LLACNY violated Insurance Law 4226. Insurance Law 4226 prohibits, inter alia, an insurer authorized to sell life insurance policies in this state from issuing or circulating illustrations, circulars, statements, or memoranda misrepresenting the terms, benefits, or advantages of any of its policies (see Insurance Law 4226 [a] [1]). "Insurance Law 4226 (a) (1)... reflects State policy that insurers deal fairly with their insureds and the public at large" (Unibell Anesthesia v Guardian Life Ins. Co. of Am., 239 A.D.2d 248, 248 [1997]).


Here, the proposed new third cause of action was not palpably insufficient or patently devoid of merit since the plaintiffs alleged that LLACNY misrepresented the terms, benefits, or advantages of the subject policy by presenting the subject policy so as to make it appear to offer the most advantageous death benefit and premium structure out of all commercially available policies, by failing to disclose the existence of other policies that were more advantageous, and by using less desirable health and age assumptions in comparing, to the subject policy, the competing policies that it identified and disclosed. Further, LLACNY will not suffer any prejudice or surprise as a result of this amendment. Accordingly, the Supreme Court should have granted that branch of the plaintiffs' motion which was for leave to amend the complaint to assert the new third cause of action so as to allege that LLACNY violated Insurance Law 4226.


The defendants' remaining contentions are without merit.




The case of FINKELSTEIN v. LINCOLN NATL. CORP. is provided as part of a free educational service by J. Douglas Barics, attorney at law, for reference only. Cases such as FINKELSTEIN v. LINCOLN NATL. CORP. may be overruled by subsequent decisions, different judicial departments may have different controlling case law, and the level of the court deciding each case will determine whether it is controlling law or not. FINKELSTEIN v. LINCOLN NATL. CORP. is presented here to help illustrate how the law works in general, but for specific legal matters, an attorney should be consulted.


If you have any questions or comments, please feel free to contact Mr. Barics at lawyer@jdbar.com or (631) 864-2600. For more articles and information, please visit www.jdbar.com


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