EFG Bank AG, Cayman Branch v. AXA Equitable Life Insurance Company

Filing 102

OPINION AND ORDER re: (64 in 1:17-cv-04803-JMF) MOTION to Dismiss Notice of Motion for Partial Dismissal of the First Amended Complaint, filed by AXA Equitable Life Insurance Company, (75 in 1:17-cv-04767-JMF) MOTION to Dismiss Notic e of Motion for Partial Dismissal of the Second Amended Complaint, filed by AXA Equitable Life Insurance Company. For the foregoing reasons, AXAs partial motion to dismiss is GRANTED, and Plaintiffs' implied-covenant claims, punitive damag es claims, and declaratory judgment claims are dismissed. AXA shall file its answer to Plaintiffs' remaining claims within twenty-one days of the date of this Opinion and Order. The Clerk of Court is directed to terminate the motions. (Signed by Judge Jesse M. Furman on 2/14/2018) (ras)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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EFG BANK AG, CAYMAN BRANCH,
:
:
Plaintiffs,
:
:
-v:
:
AXA EQUITABLE LIFE INSURANCE
:
COMPANY,
:
:
Defendant.
:
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THE DUFFY 2004 LLC and THE TULL 2006 LLC,
:
:
Plaintiffs,
:
:
-v:
:
AXA EQUITABLE LIFE INSURANCE
:
COMPANY,
:
:
Defendant.
:
---------------------------------------------------------------------- X

02/14/2018

17-CV-4767 (JMF)

17-CV-4803 (JMF)

OPINION AND ORDER

JESSE M. FURMAN, United State District Judge:
In these related cases, the owners and beneficiaries of flexible-premium universal life
insurance policies bring claims against the issuer of those policies, Defendant AXA Equitable
Life Insurance Company (“AXA”). The Court described the policies at issue in Brach Family
Found., Inc. v. AXA Equitable Life Ins. Co., 16-CV-740 (JMF), 2016 WL 7351675 (S.D.N.Y.
Dec. 19, 2016), a related case, and will not repeat the description here. For now, it suffices to
say two things. First, each of the policies — which are known as Athena Universal Life II
(“AUL II”) policies — “consists of two distinct components: (1) the life insurance component,
for which the insurance company charges a cost to cover the risk of the insured’s death (the cost
of insurance); and (2) a savings component, where premiums paid in excess of the cost of
insurance (and certain other policy charges) accumulate and earn interest at a rate that will not be
lower than a guaranteed minimum crediting rate.” (EFG Docket No. 64 (“EFG SAC”), ¶ 5).

Second, under the terms of the policies, AXA is permitted, subject to certain restrictions, to
change the cost of insurance (“COI”) — which is typically the largest expense that a
policyholder has to pay. (EFG SAC ¶¶ 33, 35; Duffy Docket No. 19 (“Duffy FAC”) ¶¶ 25, 27).
The policies, however, provide that any such changes “will be on a basis that is equitable to all
policyholders of a given class, and will be determined based on reasonable assumptions as to
expenses, mortality, policy and contract claims, taxes, investment income, and lapses.” (EFG
Docket No. 62 Ex. 2 (“EFG Doe Policy”), at 11).
Plaintiffs in these cases allege that, by increasing the COI for a group of life insurance
policyholders (namely, holders of policies that: (1) insure individuals who were seventy years or
older at the time of issue; and (2) have face values of $1,000,000 or greater), AXA breached their
contracts. (EFG SAC ¶¶ 4, 73-77; Duffy FAC ¶¶ 1-2, 64-68). In addition, they bring claims,
sounding in both contract and tort, for breach of the implied covenant of good faith and fair
dealing. (EFG SAC ¶¶ 78-91; Duffy FAC ¶¶ 69-75). They seek compensatory damages and,
with respect to the tort good-faith-and-fair-dealing claims, punitive damages. (EFG SAC ¶¶ 4,
16, 84; Duffy FAC ¶¶ 1, 12, 75). They also seek declaratory relief. (EFG SAC ¶¶ 92-95; Duffy
FAC ¶¶ 76-79). AXA now moves, pursuant to Rule 12(b) of the Federal Rules of Civil
Procedure, for partial dismissal. (EFG Docket No. 75; Duffy Docket No. 64; see also EFG
Docket No. 76 (“AXA Mem.”)). In particular, AXA moves to dismiss Plaintiffs’ good-faithand-fair-dealing claims as well as their requests for punitive damages and declaratory relief.
AXA does not seek to dismiss Plaintiffs’ express breach-of-contract claim. (AXA Mem. 5, 18,
19-20). For the reasons that follow, AXA’s partial motion to dismiss is GRANTED.
DISCUSSION
When reviewing a motion to dismiss, the Court “must accept[] all factual allegations in
the complaint and draw[] all reasonable inferences in the plaintiff’s favor.” ATSI Commc’ns,
Inc. v. Schaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (alterations in original). The Court will
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not dismiss any claims pursuant to Rule 12(b)(6) unless the plaintiff has failed to plead sufficient
facts to state a claim to relief that is facially plausible, see Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007), that is, one that contains “factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged,” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). More specifically, a plaintiff must allege facts showing “more
than a sheer possibility that a defendant has acted unlawfully.” Id. A complaint that offers only
“labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not
do.” Twombly, 550 U.S. at 555. Further, if a plaintiff has not “nudged [its] claims across the
line from conceivable to plausible, [those claims] must be dismissed.” Id. at 570.
As noted, AXA moves to dismiss Plaintiffs’ claims for breach of the implied covenant of
good faith and fair dealing, their requests for punitive damages, and their prayers for declaratory
relief. The Court will begin with the implied covenant claims.
A. Implied Covenant Claims
Plaintiffs allege that AXA violated the implied covenant of good faith and fair dealing by
raising and charging excessive COI rates absent sufficient justification, information disclosure,
or basis; and in a manner that improperly targeted Plaintiffs, boosted profits, and forced Plaintiffs
to choose between paying premiums “that AXA kn[ew] would no longer justify the ultimate
death benefits” and giving up their policies. (EFG SAC ¶ 81(g); Duffy FAC ¶ 72(g)). More
precisely, they bring two species of implied covenant claims. First, they bring claims for
contractual breach of the implied covenant with respect to the policies issued in nine states,
including California. (EFG SAC ¶¶ 31, 78-84; see also EFG Docket No. 78 (“Pls.’ Mem.”), at 6
n.4 (withdrawing implied covenant claims alleged with respect to Alabama and Georgia
policies)). Second, they allege tortious interference of the implied covenant with respect to

3

policies issued in California. (EFG SAC ¶¶ 85-91; Duffy FAC ¶¶ 69-75; see also Pls.’ Mem.
12). The Court will address each species of claim in turn. 1
1. The Contract-Based Claims
The covenant of good faith and fair dealing, which is implied in all contracts, “embraces
a pledge that neither party shall do anything which will have the effect of destroying or injuring
the right of the other party to receive the fruits of the contract.” State St. Bank & Trust Co. v.
Inversiones Errazuriz Limitada, 374 F.3d 158, 169 (2d Cir. 2004) (internal quotation marks and
citation omitted). More specifically, it encompasses “any promises which a reasonable person in
the position of the promisee would be justified in understanding were included.” Manhattan
Motorcars, Inc. v. Automobili Lamborghini, 244 F.R.D. 204, 214 (S.D.N.Y. 2007) (internal
quotation marks omitted). Significantly, however, an “implied-covenant [contractual] claim can
survive a motion to dismiss only if it is based on allegations different than those underlying the
accompanying breach of contract claim and the relief sought is not intrinsically tied to the
damages allegedly resulting from the breach of contract.” Grant & Eisenhofer, P.A. v. Bernstein
Liebhard LLP, No. 14-CV-9839 (JMF), 2015 WL 1809001, at *4 (S.D.N.Y. Apr. 20, 2015)
(internal quotation marks and citation omitted). That is, “[i]f the allegations do not go beyond
the statement of a mere contract breach and, relying on the same alleged acts, simply seek the
same damages or other relief already claimed in a companion contract cause of action, they may

1

One passing and cryptic comment by Plaintiffs notwithstanding (see Pls.’ Mem. 6 (“[T]he
law [governing the contractual claims] is not materially different among the states, other than
possibly New York.” (emphasis added))), the parties appear to agree that the laws of the various
states at issue with respect to the contractual claims are the same and that California law applies
to the tort claims. (See AXA Mem. 5-7 nn.11-12; Pls.’ Mem. 6 & n.3, 12). In light of that, the
Court need not and does not engage in a choice-of-law analysis. See, e.g., Fed. Ins. Co. v. Am.
Home Assurance Co., 639 F.3d 557, 566 (2d Cir. 2011) (“[W]here the parties agree that New
York law controls, this is sufficient to establish choice of law.”); Fin. One Pub. Co. Ltd. v.
Lehman Bros. Special Fin., Inc., 414 F.3d 325, 331 (2d Cir. 2005) (“[W]here the court has
determined that the result would be the same under either jurisdiction’s law, it need not decide
which to apply.” (emphasis omitted)).
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be disregarded as superfluous as no additional claim is actually stated.” Careau & Co. v. Sec.
Pac. Bus. Credit, Inc., 222 Cal. App. 3d 1371, 1395 (1990); accord Fleisher v. Phoenix Life Ins.
Co., 858 F. Supp. 2d 290, 298-99 (S.D.N.Y. 2012).
In this case, Plaintiffs’ contractual implied-covenant claims are duplicative of their
express contract claims. The gravamen of Plaintiffs’ contract claims is that AXA increased COI
rates for reasons other than those permitted under the terms of the policies (namely, “based on
reasonable assumptions as to expenses, mortality, policy and contract claims, taxes, investment
income, and lapses” (EFG Doe Policy 11)) and impermissibly discriminated against certain
classes of insureds. (EFG SAC ¶¶ 4, 13-14, 38-44, 73-77; Duffy FAC ¶¶ 30-35, 64-68). The
gravamen of their implied-covenant claims is the exact same. (EFG SAC ¶¶ 4, 13-14, 38-44, 7891; Duffy FAC ¶¶ 30-35, 69-75). In fact, with one exception — Plaintiffs’ claim that AXA failed
to “provide or make available the documents that Defendant contends support its alleged bases
for raising the cost of insurance rates” (EFG SAC ¶ 81(h); Duffy FAC ¶ 72(h)) — the allegations
underlying the two claims are identical in substance, if not identical in words. (AXA Mem. 8-9
(chart comparing the language of Plaintiffs’ express contract claims and implied-covenant
claims)). Nor does Plaintiffs’ allegation regarding the non-disclosure of documents save their
claims, as the relief they seek is “intrinsically tied to the damages allegedly resulting from the
breach of contract.” Grant & Eisenhofer, 2015 WL 1809001, at *4 (internal quotation marks and
citation omitted). That is, the damages Plaintiffs seek as a result of AXA’s alleged failure to turn
over documents is identical to the damages they seek for the alleged breach of contract. Thus,
the fact that they do not allege non-disclosure of documents as a basis for their express contract
claim (presumably because the policies contain no such provision) “does not mean that those acts
support a separate claim for breach of an implied covenant of good faith.” Alter v. Bogoricin,
No. 97-CV-662 (MBM), 1997 WL 691332, at *8 (S.D.N.Y. Nov. 6, 1997) (Mukasey, J.).

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In arguing otherwise, Plaintiffs rely on cases for the proposition that the implied covenant
of good faith and fair dealing “finds particular application in situations where one party is
invested with a discretionary power affecting the rights of another.” (Pls.’ Mem. 7 (quoting Sec.
Officers Serv., Inc. v. State Comp. Ins. Fund, 17 Cal. App. 4th 887, 894 (1993)). As Plaintiffs
note (see id. at 8-9), that is indeed the basis on which other courts have denied motions to
dismiss implied-covenant claims in COI-increase actions similar to this one. See In re Lincoln
Nat’l COI Litig., No. CV 16-06605 (GJP), 2017 WL 4021134, at *10-11 (E.D. Pa. Sept. 11,
2017); EFG Bank AG, Cayman Branch v. Transamerica Life Ins. Co., No. 16-CV-8104 (CAS),
2017 WL 3017596, at *9 (C.D. Cal. July 10, 2017); Feller v. Transamerica Life Ins. Co., No. 16CV-1378 (CAS), 2016 WL 6602561, at *12 (C.D. Cal. Nov. 8, 2016); DCD Partners, LLC v.
Transamerica Life Ins. Co., No. 15-CV-3238 (CAS), 2015 WL 5050513, at *8 (C.D. Cal. Aug.
24, 2015). But the policies at issue in those cases did not explicitly constrain the insurers to
apply COI increases “equitably” or use only “reasonable” assumptions in increasing COI rates.
See Lincoln Nat’l COI Litig., 2017 WL 4021134, at *3; EFG Bank AG, 2017 WL 3017596, at
*2; Feller, 2016 WL 6602561, at *2; DCD Partners, 2015 WL 5050513, at *2, 5. Thus, the
plaintiffs could state implied-covenant claims by alleging that the defendants had “exercis[ed]
their limited discretion under the Policies in an unreasonable and unfair manner.” Lincoln Nat’l
COI Litig., 2017 WL 4021134, at *10-11. Here, there are no such gaps in the policy language.
That is, the policies expressly required AXA to exercise its discretion reasonably and equitably.
Accordingly, Plaintiffs’ implied-covenant claims add nothing to the mix. See, e.g., Fleisher, 858
F. Supp. 2d at 299-300 (dismissing an implied-covenant claim in a COI-increase case).
Perhaps recognizing the difficulty of distinguishing between their implied-covenant and
express contract claims, Plaintiffs argue as a fallback that, “[e]ven if the implied covenant claim
were duplicative, Plaintiffs may plead this claim in the alternative to their express breach claim.”
(Pls.’ Mem. 9-10 (citing Fed. R. Civ. P. 8(d)(2))). “But an implied-covenant claim is not a valid
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alternative theory of recovery when it is based on the exact same allegations as a breach-ofcontract claim, as it is here.” Alaska Elec. Pension Fund v. Bank of Am. Corp., 175 F. Supp. 3d
44, 64 (S.D.N.Y. 2016) (internal quotation marks and brackets omitted). Accordingly, Plaintiffs’
contractual implied-covenant claims must be and are dismissed.
2. The Tort-Based Claims
Whether Plaintiffs state a valid claim under California law for tortious interference with
the implied covenant of good faith and fair dealing is a closer question. Although impliedcovenant claims typically sound in contract, California courts recognize an “exception to that
general rule: tort remedies are available for a breach of the covenant in cases involving insurance
policies.” Cates Constr., Inc. v. Talbot Partners, 980 P.2d 407, 416 (Cal. 1999). “[T]he
existence of this remedy has been justified by the ‘special relationship’ existing between insurer
and insured, which is characterized by elements of public interest, adhesion and fiduciary
responsibility.” Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal. App. 3d 1371, 1395
(1990). For one thing, insurance policies are generally “not purchased for profit or advantage;
rather, they are obtained for peace of mind and security in the event of an accident or other
catastrophe.” Cates Constr., 980 P.2d at 416. For another, “an insured faces a unique ‘economic
dilemma’ when its insurer breaches the implied covenant of good faith and fair dealing. Unlike
other parties in contract who typically may seek recourse in the marketplace in the event of a
breach, an insured will not be able to find another insurance company willing to pay for a loss
already incurred.” Id. (quoting Foley v. Interactive Data Corp. 765 P.2d 373, 396 (Cal. 1988)).
Significantly, however, “an insured cannot maintain a claim for tortious breach of the
implied covenant of good faith and fair dealing absent a covered loss.” Benavides v. State Farm
Gen. Ins. Co., 136 Cal. App. 4th 1241, 1250 (2006) (citing cases). That is, “[b]ecause the
essence of the tort of the implied covenant of good faith and fair dealing is focused on the
prompt payment of benefits due under the insurance policy, there is no cause of action for breach
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of the covenant . . . when no benefits are due.” Progressive West Ins. Co. v. Yolo County
Superior Court, 135 Cal. App. 4th 263, 279 (2005); see also, e.g., Adams v. United of Omaha
Life Ins. Co., No. 12-CV-969 (JST), 2013 WL 12114060, at *4 (C.D. Cal. Aug. 14, 2013) (“In
order to state a claim for breach of the implied covenant of good faith and fair dealing by an
insurer, [a] plaintiff must allege that the insurer ‘withheld payment of an insured’s claim.’”
(quoting Love v. Fire Ins. Exch., 221 Cal. App. 3d 1136, 1151 (1991)); U.S. Bank Nat. Ass’n v.
PHL Variable Ins. Co., No. 2:11-CV-09517 (ODW), 2012 WL 1525012, at *2 (C.D. Cal. Apr.
26, 2012) (“To establish tort liability against an insurer for breach of the covenant, a plaintiff
must show . . . benefits due under the policy were withheld . . . .” (citing Love, 221 Cal. App. 3d
at 1151); Brizuela v. Calfarm Ins. Co., 116 Cal. App. 4th 578, 592 (2004) (“The gravamen of a
claim for breach of the covenant of good faith and fair dealing, which sounds in both contract
and tort, is the insurer’s refusal, without proper cause, to compensate the insured for a loss
covered by the policy.”).
Plaintiffs’ claims founder on this requirement, as they do not allege that AXA has
withheld insurance benefits owed under the policies. Indeed, “those benefits will not be due
until the death of [the insureds].” Adams, 2013 WL 12114060, at *4; accord U.S. Bank Nat.
Ass’n, 2012 WL 1525012, at *3. At most, Plaintiffs contend that AXA denied them benefits in
the form of “their policy account values and guaranteed interest.” (Pls.’ Mem. 16). Critically,
however, those “benefits” do not relate to the “life insurance component” of the AUL II policies.
(EFG SAC ¶ 5). Instead, they relate solely to the “distinct . . . savings component” of the
policies. (Id.). In that sense, Plaintiffs’ claims arise less from the relationship between Plaintiffs
as insureds and AXA as insurer than they do from the relationship between Plaintiffs as
depositors and AXA as a bank (or similar financial institution). Unlike insurers, however,
“banks . . . are not fiduciaries for their depositors” and “the bank-depositor relationship is not a
‘special relationship’ . . . such as to give rise to tort damages when an implied contractual
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covenant of good faith is broken.” Copesky v. Superior Court, 229 Cal. App. 3d 678, 694
(1991); accord Careau & Co., 222 Cal. App. 3d at 1391-92, 1399-1401; Price v. Wells Fargo
Bank, 213 Cal. App. 3d 465, 476-78 (1989); see also Cates Constr., 21 Cal. 4th at 46 n.9 (citing
cases). To recognize a tort claim in these circumstances, therefore, would be to expand the
narrow exception for insurance policy cases beyond its current contours. Cf. Cates Constr., 21
Cal. 4th at 46 (“It is firmly established that the insurance policy cases represent a major
departure from traditional principles of contract law. Thus, we have cautioned courts to exercise
great care in considering whether to extend the exceptional approach taken in those cases to
another contract setting.” (internal quotation marks and citations omitted)).
The Court declines to extend the tort exception to this case, not only because doing so
finds little or no support in California case law, but also because doing so finds little or no
support in the underlying policy rationales for the exception. As noted, California courts justify
the exception in part on the ground that insurance policies are generally “not purchased for profit
or advantage; rather, they are obtained for peace of mind and security in the event of an accident
or other catastrophe.” Id. at 44. But, putting aside whether that description is apt generally, it is
certainly not apt here. After all, the “savings component” of the AUL II policies is purchased for
profit and advantage and, at least during the life of the policies, the insureds “fully reaped the
benefit of peace of mind and security that accompanies a life insurance policy.” U.S. Bank Nat.
Ass’n, 2012 WL 1525012, at *3. (On top of that, Plaintiffs are not even the original insureds, but
rather sophisticated entities that indisputably purchased the policies for investment purposes.
(See EFG SAC ¶¶ 20-28; Duffy FAC ¶ 16; see also Pls.’ Mem. 19; AXA Mem. 14 n.15).)
California courts have also based the exception on the proposition that, “when an insurer in bad
faith fails to properly settle or pay a claim, the insured cannot turn to the marketplace to find
another insurance company willing to pay for the loss already incurred.” Jonathan Neil &
Assocs., Inc. v. Jones, 33 Cal. 4th 917, 938 (2004) (internal quotation marks omitted); accord
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Cates Constr., 21 Cal. 4th at 44, 54. Once again, however, that rationale does not fit here, as
Plaintiffs — who have incurred no loss as of yet — face no such “economic dilemma.” Foley,
47 Cal. 3d at 692. That is, to the extent that they allege that AXA deprived them of benefits
relating to the “savings component” of the policies, they can turn to the marketplace and invest
their money elsewhere.
In arguing that the exception for insurance policy cases does apply here, Plaintiffs rely
most heavily on a set of cases decided by a single judge on the United States District Court for
the Central District of California. (See Pls.’ Mem. 17). Those cases did involve policies — from
Transamerica — much like those at issue here, with both an insurance component and a savings
component. And in denying motions to dismiss claims much like those at issue here, the Court
did hold that the plaintiffs had adequately alleged that COI increases deprived them of two
“benefits” under their policies: “the accumulated value of their accounts” and “the monthly
accrual of guarantee interest based upon the accumulated value in their accounts.” Feller, 2016
WL 6602561, at *13; see also EFG Bank AG, 2017 WL 3017596, at *9; DCD Partners, 2015
WL 5050513, at *8. In doing so, however, the Court failed to cite, let alone address, the
authority discussed above, which makes clear that the requisite “benefit” must relate to insurance
qua insurance — namely, “the security against losses and third party liability.” Jonathan Neil,
33 Cal. 4th at 939. Relatedly, the Court failed to consider whether allowing the plaintiffs to
bring a tort claim in these circumstances was consistent with the policy rationales underlying the
exception. It thus failed to heed the California courts’ admonitions to “proceed with caution,”
Freeman & Mills, Inc. v. Belcher Oil Co., 11 Cal. 4th 85, 92, 102 (1995) (quoting Seaman’s
Direct Buying Serv., Inc. v. Standard Oil Co., 36 Cal. 3d 752, 769 (1984)) (overruling Seaman’s
and establishing “a general rule precluding tort recovery for noninsurance contract breach”), and
to “exercise great care in considering whether to extend the exceptional approach taken in [the
insurance policy] cases” to other contract settings, Cates Constr., 21 Cal. 4th at 46 (internal
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quotation marks and citation omitted). Accordingly, the Court finds the Transamerica cases
unpersuasive and declines to follow them.
Plaintiffs rely on a handful of other cases for the proposition that California law does not
limit tortious interference claims to actions involving the denial of insurance policy proceeds or
mishandling of insurance claims (Pls.’ Mem. 12-16), but their reliance is misplaced. All but one
of the cases on which they rely involved “claims handling policies and practices” and, thus, are
distinguishable. Notrica v. State Comp. Ins. Fund, 70 Cal. App. 4th 911, 918 (1999); see Sec.
Officers Serv., 17 Cal. App. 4th at 891-92 (noting discovery of “improprieties in claims
handling”); Schwartz v. State Farm Fire & Cas. Ins., 88 Cal. App. 4th 1329, 1332, 1339-40
(2001) (discussing “improper claims handling”); see also Jonathan Neil, 33 Cal. 4th at 940 & n.9
(distinguishing Security Officers Service and Notrica on the ground that, in those cases, “the
overcharging of premiums was inextricably linked to the mishandling of claims — precisely the
kind of bad faith behavior that goes to the heart of the special insurance relationship and gives
rise to tort remedies”); U.S. Bank Nat’l Ass’n, 2012 WL 1525012, at *4 (distinguishing Schwartz
on the ground that it “involve[d] claims mishandling”). But see EFG Bank AG, 2017 WL
3017596, at *9 (holding that the plaintiffs adequately alleged loss of a benefit where, “in
essence,” they alleged that the insurer’s increase in COI compelled them “to pay an increase in
premiums in order to retain death benefits under the Policies” (citing Notrica, 70 Cal. App. 4th at
923-24)). Plaintiffs’ final case, Spindle v. Travelers Insurance Co., 66 Cal. App. 3d 951 (1978),
held that tort damages were available for the cancellation of an insurance policy for improper
reasons (namely, to pressure a group of doctors to accept an increase in their premiums beyond
what the policies permitted). In reaching that decision, however, the Court stated that “the
conduct of the insurer effectively deprive[d] the insured of the benefit of his bargain, i.e., the
coverage for the period for which he paid a premium.” Id. at 958. In this case, by contrast,
Plaintiffs were not deprived of any such benefit, as their losses would have been covered had the
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insureds died during the life of the policies. See U.S. Bank Nat’l Ass’n, 2012 WL 1525012, at *3
(distinguishing Spindle on similar grounds). Moreover, the California Supreme Court cast doubt
on the continuing validity of Spindle in Jonathan Neil, and strongly suggested that an insurer’s
cancellation of a policy can give rise to tort liability only in extreme circumstances — where, for
example, the cancellation is done in bad faith to avoid payment of imminent claims. See
Jonathan Neil, 33 Cal. 4th at 941 & n.11; see also Avery Dennison Corp. v. Allendale Mut. Ins.
Co., 310 F.3d 1114, 1117 (9th Cir. 2002) (“Except perhaps in highly extraordinary
circumstances, California does not permit recovery on a bad faith claim unless insurance benefits
are due under the policy.”). “No such termination [is] alleged in this case.” Jonathan Neil, 33
Cal. 4th at 941 n.11.
In short, although the question is a close one, the Court concludes that, in the
circumstances of this case, Plaintiffs cannot bring tort claims under California law for breach of
the implied covenant of good faith and fair dealing. Accordingly, those claims are dismissed.
B. Punitive Damages
Next, AXA moves to dismiss Plaintiffs’ punitive damages claims. (AXA Mem. 18).
AXA argues that Plaintiffs’ complaints “contain[] no facts that support elevating the alleged
contractual breach into the kind of consciously wrongful and outrageous conduct necessary for a
punitive damages award.” (AXA Mem. 19). The Court need not decide whether that is the case,
however, because Plaintiffs’ punitive damages claims fail for a more fundamental reason: They
are sought only in connection with Plaintiffs’ tort claims (see Pls.’ Mem. 6 n.4, 20), and for good
reason. See, e.g., Cates Constr., 21 Cal. 4th at 61 (“In the absence of an independent tort,
punitive damages may not be awarded for breach of contract even where the defendant’s conduct
in breaching the contract was wilful, fraudulent, or malicious.” (internal quotation marks
omitted)); N.Y. Univ. v. Cont’l Ins. Co., 87 N.Y.2d 308, 319-20 (1995) (dismissing a punitive
damages claim due to “the absence of an underlying tort duty sufficient to support a claim for
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punitive damages”); see also Carvel Corp. v. Noonan, 350 F.3d 6, 24 (2d Cir. 2003) (“[I]t is
hornbook law that punitive damages are unavailable in ordinary contract actions.”). Given the
Court’s dismissal of Plaintiffs’ tort claims, it follows that their claims for punitive damages must
be and are dismissed as well.
C. Declaratory Relief
Finally, AXA contends that Plaintiffs’ request for relief under the Declaratory Judgment
Act (“DJA”), 28 U.S.C. § 2201, should be dismissed as duplicative. (See AXA Mem. 19-22).
The Court agrees. Declaratory relief is a prospective remedy intended to resolve or mitigate
disputes that may yield later litigation. Such disputes “must not be nebulous or contingent but
must have taken on fixed and final shape so that a court can see what legal issues it is deciding,
what effect its decision will have on the adversaries, and some useful purpose to be achieved in
deciding them. Where the relief sought would . . . merely determine a collateral legal issue
governing certain aspects of . . . pending or future suits, a declaratory judgment action falls
outside the constitutional definition of a ‘case’ in Article III,” and thus should not proceed.
Jenkins v. United States, 386 F.3d 415, 418 (2d Cir. 2004) (internal quotation marks and citations
omitted). More generally, a decision whether to award relief under the DJA lies within the
discretion of the district court; in making that determination, a district court should consider:
“(1) whether the judgment will serve a useful purpose in clarifying or settling the legal issues
involved; and (2) whether a judgment would finalize the controversy and offer relief from
uncertainty.” Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co., 411 F.3d 384, 389 (2d Cir.
2005). The court may also weigh other factors, including “whether there is a better or more
effective remedy” than the DJA. Dow Jones & Co. v. Harrods Ltd., 346 F.3d 357, 360 (2d Cir.
2003). Courts generally reject a DJA claim when other claims in the suit will resolve the same
issues. See, e.g., City of Perry, Iowa v. Procter & Gamble Co., 188 F. Supp. 3d. 276, 286

13

(S.D.N.Y. 2016); Fleisher, 858 F. Supp. 2d at 302-03; Amusement Indus., Inc. v. Stern, 693 F.
Supp. 2d 301, 311-12 (S.D.N.Y. 2010).
In this case, Plaintiffs seek a declaration “that Defendant’s cost of insurance rate increase
is improper under the Plaintiff Policies and that the policies’ account values be recalculated
according to the original cost of insurance rates” and “that Defendant’s purported ‘class’ of
policies defined by issue age and face amount is an improper class.” (EFG SAC ¶ 94; Duffy
FAC ¶ 78). But, if successful, Plaintiffs’ contract claims — which call for a determination of
whether AXA “materially breached the Plaintiff Policies,” including “[b]y imposing excessive
[COI] rates” or “specifically targeting the Discriminated Group” — would provide that very
relief. (EFG SAC ¶¶ 75, 81; Duffy FAC ¶¶ 66, 72). Plaintiffs also seek a declaration from the
Court “setting forth the specific guidelines that govern the factual circumstances under which
Defendant can raise the cost of insurance rates.” (EFG SAC ¶ 94; Duffy FAC ¶ 78). To the
extent, however, that Plaintiffs seek “specific guidelines” concerning the matters at issue in this
case — for example, with respect to the bases on which AXA can raise its COI rates and as to
whom — the contract claim, once again, will provide complete relief. And to the extent that
Plaintiffs go beyond the matters at issue in this case and seek “specific guidelines” as to other
matters, it would be inappropriate for the Court to opine. See, e.g., Nat’l Org. for Marriage, Inc.
v. Walsh, 714 F.3d 682, 687 (2d Cir. 2013) (“To be justiciable, a cause of action must be
ripe[.] . . . A claim is not ripe if it depends upon contingent future events that may not occur as
anticipated, or indeed may not occur at all.” (internal quotation marks and citations omitted));
Nike, Inc. v. Already, LLC, 663 F.3d 89, 94-95 (2d Cir. 2011) (“In order to qualify as a
justiciable ‘case or controversy’ under Article III, ‘[t]he controversy must be definite and
concrete, touching the legal relations of parties having adverse legal interests.’ The ‘case or
controversy’ requirement is not satisfied by a ‘difference or dispute of a hypothetical or abstract
character.’” (quoting Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240-41 (1937))), aff’d, 568
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U.S. 85 (2013). In short, to the extent that the Court has authority to grant relief at all, Plaintiffs’
contract claims “‘will necessarily settle the issues for which the declaratory judgment is sought,’
meaning that the DJA claim, ‘will serve no useful purpose’ and will not ‘serve to offer relief
from uncertainty.’” City of Perry, 188 F. Supp. 3d at 286 (quoting Amusement Indus., 693 F.
Supp. 2d at 311-12 (internal quotation marks omitted)). Accordingly, the Court exercises its
discretion and dismisses Plaintiffs’ declaratory judgments claims as duplicative. See id.;
Fleisher, 858 F. Supp. 2d at 302-03. But see, e.g., DCD Partners, LLC, 2015 WL 5050513 at
*11 (denying a motion to dismiss a DJA claim as duplicative in similar circumstances); Feller,
2016 WL 6602561, at *12-13 (same).
CONCLUSION
For the foregoing reasons, AXA’s partial motion to dismiss is GRANTED, and Plaintiffs’
implied-covenant claims, punitive damages claims, and declaratory judgment claims are
dismissed. AXA shall file its answer to Plaintiffs’ remaining claims within twenty-one days of
the date of this Opinion and Order.
The Clerk of Court is directed to terminate Docket No. 64 in 17-CV-4803 and Docket
No. 76 in 17-CV-4767.

SO ORDERED.
Dated: February 14, 2018
New York, New York

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