## Facts

- An insurer issued 11 life insurance policies on George Rosen between 1947 and 1961, naming family members as beneficiaries, with an aggregate face amount of $2,000,000.
- In 1963 Rosen became indebted to Baxter House, Inc. ($24,000) and Vanderbilt Towers, Inc. ($19,000).
- From April 30, 1963 until his death on August 28, 1963, Rosen paid premiums on certain policies.
- The plaintiffs alleged Rosen was insolvent (or rendered insolvent by the premium payments) and paid premiums with actual intent to defraud creditors; the beneficiaries allegedly gave no consideration.
- After Rosen’s death, beneficiaries received $1,939,329.39 in policy proceeds.
- Plaintiffs asserted four causes of action: (1) and (3) sought recovery under Insurance Law § 166(4) for fraudulent premium payments; (2) and (4) alleged misappropriation of plaintiffs’ funds used to pay premiums and sought a constructive trust on proceeds proportionate to such payments.
- The trial court dismissed the amended complaint for failure to state a cause of action; plaintiffs appealed.

## Issues

1. Whether Insurance Law § 166(4) permits creditors to recover premiums paid with actual intent to defraud while the insured was insolvent (or rendered insolvent), even without any assignment, change of beneficiary, or other transfer of the policy.
2. Whether the amended complaint sufficiently pleaded claims entitling plaintiffs to proceed against beneficiaries to recover amounts traceable to fraudulent premium payments.
3. What relief is available against life-insurance beneficiaries when premiums were paid in fraud of creditors.

## Decision

- The Appellate Division reversed the dismissal of the statutory fraudulent-premium claims (first and third causes of action).
- The court held that the trial court erroneously construed Insurance Law § 166(4) as requiring an assignment, beneficiary change, or other transfer as a precondition to creditor recovery.
- The court concluded the complaint’s allegations of insolvency (or resulting insolvency) and actual intent to defraud creditors were sufficient at the pleading stage to proceed under § 166(4).
- One justice dissented.

## Legal Principles

- Under Insurance Law § 166(4), creditors may recover from life-insurance beneficiaries the amount of premiums paid by an insured with actual intent to defraud creditors while insolvent (or rendered insolvent by the payments).
- Creditor recovery for fraudulent premium payments is not conditioned on an assignment, change of beneficiary, or other formal transfer of the policy.
- The statutory scheme preserves the general protection of life-insurance proceeds for beneficiaries while allowing a fraud-based remedy limited to the amount of fraudulent premium payments (subject to proof).

## Conclusion

The court allowed creditors to pursue recovery of life-insurance premiums allegedly paid by an insolvent insured with actual intent to defraud creditors, holding that a beneficiary change or other transfer is not required for relief under Insurance Law § 166(4).


Baxter House, Inc. v. Rosen, 27 A.D.2d 258, 278 N.Y.S.2d 442 (N.Y. App. Div. 2d Dep’t 1967)