## Facts

- Trustees of two life insurance trusts owned Phoenix “premium-adjustable universal life” (PAUL) policies and sued Phoenix on behalf of a putative class of similarly situated policyholders.
- The PAUL policies permitted flexible premium payments so long as the policy account value covered monthly charges, including a “cost of insurance” (COI) charge.
- The policies included a COI adjustment provision stating Phoenix could adjust COI rates based on specified factors, including “future expectations as to mortality, expenses, interest, persistency and taxes.”
- In or around 2010, Phoenix implemented a COI rate increase applied to a subset of policyholders defined largely by policy value (over $1 million) and age bands within certain underwriting classes.
- Plaintiffs alleged the increase was not based on changes in the contractually listed factors (particularly mortality expectations), but was driven by business objectives such as increasing revenue and encouraging lapses of large policies.
- After earlier rulings narrowed the case, the remaining claim was a single breach-of-contract count alleging Phoenix violated the COI provision; the parties filed cross-motions for partial summary judgment on liability.

## Issues

1. Whether the COI provision’s listed factors constituted an exclusive set of permissible bases for COI adjustments, thereby barring increases based on unlisted factors such as policy size and age bands.
2. Whether Phoenix’s targeted 2010 COI increase, as implemented, breached the policies because it was not grounded in the enumerated factors (including mortality expectations).

## Decision

- Plaintiffs’ motion for partial summary judgment on liability was granted, and Phoenix’s cross-motion was denied.
- The court held Phoenix breached the policies by basing COI increases on factors not listed in the COI provision, including policy value and insureds’ age as an independent criterion.
- The court found no genuine dispute of material fact that the challenged increase was driven by non-enumerated considerations rather than changes in the listed factors.
- Liability was established on the contract claim; damages and class-related issues were left for later proceedings.

## Legal Principles

- Insurance contracts are construed according to their plain language; when an insurer drafts a provision listing specific factors for a rate adjustment, those factors limit the insurer’s authority.
- A COI adjustment clause that specifies permissible factors is treated as exclusive absent clear language to the contrary; an insurer may not rely on unlisted business objectives or pricing criteria to justify targeted increases.
- Under New York contract interpretation rules, ambiguities in an insurance policy are construed against the insurer as drafter, particularly where the insurer claims broad discretion inconsistent with specific textual limits.
- Summary judgment is appropriate where the record shows COI changes were implemented based on non-permitted criteria and the insurer cannot raise a triable issue that the change was grounded in the enumerated factors.

## Conclusion

The court held that Phoenix’s 2010 COI increase violated the PAUL policies because it was based on non-enumerated criteria such as policy size and age bands rather than the specific factors the contract allowed, and it therefore entered partial summary judgment for plaintiffs on liability for breach of contract.


Fleisher v. Phoenix Life Ins. Co., 18 F. Supp. 3d 456 (S.D.N.Y. 2014)