Opinion
02-CV-6088T.
August 10, 2004
DECISION and ORDER
INTRODUCTION
Plaintiff Patricia K. Sofia ("plaintiff"), brings this action as executrix of the estate of her mother, Catherine M. Sofia ("Mrs. Sofia"), seeking to recover a premium Mrs. Sofia paid to defendant Massachusetts Mutual Life Insurance Company ("Mass Mutual" or "defendant") to purchase a Single Premium Immediate Annuity ("SPIA"). Mrs. Sofia purchased the SPIA shortly before her death from Michael Mooney ("Mooney"), an independent agent of Mass Mutual. Plaintiff alleges that the contract for the purchase of the SPIA between her mother and Mass Mutual was invalid because: (1) Mooney fraudulently misrepresented the terms of the SPIA to Mrs. Sofia; (2) Mooney breached his fiduciary duties to Mrs. Sofia; (3) Mooney negligently/recklessly misrepresented the terms of the SPIA to Mrs. Sofia; (4) Mrs. Sofia lacked the mental capacity to lawfully purchase the SPIA; and (5) the SPIA's terms are unconscionable.
Mass Mutual moves for summary judgment pursuant to Federal Rule of Civil Procedure 56, dismissing all of plaintiff's claims, alleging that: (1) plaintiff offers no evidence of fraud on Mooney's part; (2) as an insurance agent, Mooney owed no fiduciary duty to Mrs. Sofia; (3) Mooney could not have negligently or recklessly misrepresented the terms of the SPIA because he had no "special relationship" with Mrs. Sofia; (4) plaintiff presents no medical evidence that Mrs. Sofia was mentally incompetent; and (5) the transaction is not unconscionable because the New York State Department of Insurance expressly permits the sale of SPIAs to individuals in their eighties. For the reasons set forth below, Mass Mutual's motion for summary judgment is granted in its entirety.
BACKGROUND
On December 18, 2000, an independent representative of Massachusetts Mutual Insurance Corporation named Michael Mooney visited 81 year-old Catherine Sofia at her home. Mooney, who had previously met with Mrs. Sofia in May and November of that year, visited at her request to discuss rearranging her investments so that she could receive larger monthly income payments. At that time, Mrs. Sofia was contemplating purchasing a home near her daughter and granddaughter, and believed that she would need additional cash to make monthly mortgage payments. Mooney presented Mrs. Sofia with several investment options, including exchanging an annuity that she held which was issued by The Principal Mutual Life Insurance Company ("Principal") and valued at $275,055.44, for a Single Premium Immediate Annuity ("SPIA") issued by Massachusetts Mutual. The SPIA differed from Mrs. Sofia's Principal annuity in two respects. First, it would provide Mrs. Sofia with monthly income of approximately $3,100, whereas the Principal annuity only provided her $2,490.81 per month. Second, while it guaranteed specified monthly payments to Mrs. Sofia for her entire life, it was "non-refundable," and would pay no additional amount to her estate upon her death. Mooney explained to Mrs. Sofia that if she died within the first seven years of the annuity that she would not recoup the entire $275,055.44 she invested, but that if she lived seven years she would recover the entire amount, and if she lived longer than seven years she, over the life of the annuity, would receive a greater sum of money than she invested initially.
The parties concede that since Mooney was not authorized to sell Principal financial products, he presented Mrs. Sofia no information regarding the desirability or availability of various Principal investment vehicles.
That day, Mrs. Sofia decided to transfer the money she held in her Principal annuity to Mass Mutual to purchase the SPIA. In so doing, she executed numerous acknowledgment and release forms required under New York State Insurance Law. Although Mooney took those forms with him when he left Mrs. Sofia's house that day, he also subsequently mailed copies to her. Principal was notified of the action, but did not attempt to retain Mrs. Sofia's business. For his part in the sale, Mooney received a commission of $8,001.11.
The parties advise the Court that it is common practice that upon the transfer of annuity funds from one carrier to another, the previous annuity holder is given notice of the change prior to the actual transfer date. The purpose of this notice is to allow the previous annuity holder to attempt to compete to retain the annuity, and make an offer for new terms in exchange for avoiding the transfer.
On January 18, 2001, Mass Mutual issued Mrs. Sofia her first monthly payment under the SPIA. On February 8, 2001, Mrs. Sofia acknowledged receipt of the policy detailing the SPIA. Tragically, Mrs. Sofia was diagnosed with cancer in May 2001 and passed away June 12, 2001. She would have received her sixth payment under the SPIA on June 18, 2001. Mrs. Sofia bequeathed her entire remaining estate, totaling approximately $800,000, to her granddaughter and her children. Mass Mutual paid no amount of the SPIA balance to Mrs. Sofia's beneficiaries upon her death. Plaintiff brings this action, claiming that, on behalf of Mrs. Sofia's beneficiaries, they are entitled to a portion of the SPIA.
Thus, for purposes of New York State Insurance Regulations (No. 60), Mrs. Sofia's 60-day rescission period began to run on February 8, 2001.
DISCUSSION
Rule 56 of the Federal Rules of Civil Procedure provides that a party is entitled to summary judgment as a matter of law only where, "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact. . . ." F.R.C.P. 56(c) (2003). The party seeking summary judgment bears the burden of demonstrating that no genuine issue of material fact exists, and in making the decision the court must draw all reasonable inferences in favor of the party against whom summary judgment is sought. Ford v. Reynolds, 316 F.3d 351, 354 (2d Cir. 2003) (citing Marvel Characters v. Simon, 310 F.3d 280, 285-86 (2d Cir. 2002)). "Summary judgment is improper if there is any evidence in the record that could reasonably support a jury's verdict for the non-moving party."Id. A. Fraudulent Misrepresentation ClaimUnder New York State common law, a plaintiff alleging fraudulent misrepresentation must prove five elements: (1) that the defendant misrepresented a material fact; (2) that representation was false; (3) at the time he made the representation the knew it was false; (4) plaintiff's reliance on that representation; and (5) injury to the plaintiff as a result of that reliance. Freschi v. Grand Coal Venture, 767 F.2d 1041, 1050 (2d Cir. 1985), vacated on other grounds by Freschi v. Grand Coal Venture, 478 U.S. 1015 (1986). Federal Rule of Civil Procedure 9(b) imposes an additional burden on a plaintiff alleging fraud, namely that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." Fed.R.Civ.P. 9 (2004). Whereas, "[m]alice, intent, knowledge, and other condition of mind of a person" need only be averred generally. Id.
Here, plaintiff offers no evidence that Mooney made false statements to Mrs. Sofia to induce her to purchase the SPIA. The record contains no statements or promises which could be considered fraudulent. In fact, the disclosures Mrs. Sofia executed were approved for use by the New York State Insurance Department. The only promise Mooney made to Mrs. Sofia was that she would be paid approximately $3,100 a month until she died. She received what she bargained for. As such, plaintiff, as a matter of law, is unable to sustain a fraudulent misrepresentation claim, and thus, Mass Mutual is entitled to summary judgment in its favor on this cause of action.
B. Breach of Fiduciary Duty Claim
Under New York State law an insurance agent owes no fiduciary duty to his client aside from the common law duty to obtain the requested coverage. Murphy v. Kuhn, 90 N.Y.2d 266, 270 (1997). "Insurance agents are not personal financial counselors and risk managers, approaching guarantor status. Insureds are in a better position to know their assets. . . ." Id. at 273. However, an individual who holds himself out to be a financial advisor does owe a fiduciary duty to the client because of the "special relationship" between the two. Rasmussen v. A.C.T. Environmental Services, Inc., 292 N.Y.S.2d 220 (3rd Dep't. 2002). A special relationship may be found where: (1) the agent receives compensation for consultation beyond any premium payments; (2) the insured relies on the expertise of the agent regarding a raised question of coverage; or (3) there is an extended course of dealing sufficient to put objectively reasonable agents on notice that their advice was being relied upon. Murphy at 270.
While it is undisputed that the only service Mooney provided to Mrs. Sofia was the sale of the SPIA, plaintiff contends that he held himself out to be an investment advisor, and as such, owed Mrs. Sofia a fiduciary duty. To support this claim, plaintiff offers: (1) Mooney's business card, which identifies him as a "financial services professional;" (2) a statement Mrs. Sofia made to her real estate agent that Mooney was her financial advisor; and (3) a general statement by her granddaughter that Mrs. Sofia did not understand financial arrangements.
Mass Mutual argues that Mooney's service to Mrs. Sofia never exceeded that of an insurance agent because: (1) the only payment he received from her was the commission paid for his work on the SPIA; (2) the relationship lasted only two years; (3) she had numerous investments with at least five named financial advisors; and (4) that he did not help her pay bills or balance her checkbook.
I find that no reasonable jury could conclude that Mooney's duties exceeded those of an insurance agent. First, Mooney received no fees other than the commission on the SPIA arising from his business relationship with Mrs. Sofia. Second, Mrs. Sofia was the one who recruited Mooney for help rearranging her investments. Third, he sold her an annuity, and to that end, provided her with several different options from which to choose. However, Mrs. Sofia chose which option best suited her financial needs and goals at that time. Fourth, Mr. Barberi, Mrs. Sofia's former CPA, testified at his deposition that she could understand the financial transaction options once they were explained to her. Lastly, they had only two business dealings in two years. Accordingly, defendant is entitled to summary judgment in its favor on plaintiff's breach of fiduciary duty claim.
C. Negligent/Reckless Misrepresentation Claim
For plaintiff to establish a negligent or reckless misrepresentation claim, she must prove that a "special relationship" existed between Mooney and Mrs. Sofia. See White v. Guarante, 43 N.Y.2d 356 (1977). "Liability for negligent misrepresentation has been imposed only on those persons who possess unique or specialized expertise, or who are in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified."Kimmell v. Schaefer, 87 N.Y.2d 257, 263 (1996). Since, as described above, I find that no reasonable jury could conclude that Mooney engaged in a "special relationship" with Mrs. Sofia other than as an insurance agent, plaintiff, as a matter of law, is unable to sustain her negligent misrepresentation claim. Thus, defendant is entitled to summary judgment in its favor on this cause of action as well.
D. Lack of Capacity Claim
To demonstrate that an individual lacked the capacity to enter into a business transaction under New York State law, a plaintiff must prove, "that the party did not understand the nature of the transaction at the time of the conveyance as a result of mental disability." Lopresto v. Brizzolara, 458 N.Y.S.2d 881, 884 (1st Dep't 1986).
Plaintiff's only evidence of her alleged diminished capacity is deposition testimony from her grandson-in-law that "she didn't look well" at Christmastime 2000.
I find that plaintiff offers insufficient evidence indicating that Mrs. Sofia suffered from any mental deficiency at the time she purchased the SPIA. First, plaintiff offers no medical evidence that Mrs. Sofia suffered from a mental deficiency. Second, while it is true that she was 81 years old, her friend Mrs. Sacheli testified that she did not have any problems getting around or taking care of herself. Third, Mooney states in his affidavit that she seemed as lucid in 2000 as she did when he first met her in 1998. Since plaintiff presents no evidence that Mrs. Sofia lacked the mental capacity to enter into the SPIA sales contract, that cause of action is dismissed.
It should also be noted that plaintiff does not contest the validity of gifts Mrs. Sofia made to her granddaughter around the same time that she purchased the SPIA, including an automobile and jewelry.
E. Unconscionability Claim
In New York State a business transaction is unconscionable only if it is so grossly unreasonable or unconscionable in light of the mores and business practices of the time and place according to its literal terms. Because the New York State Insurance Department allows insurance agents to sell SPIAs to 81 year-old people, this transaction can not be deemed unconscionable. Therefore, plaintiff's unconscionability claim is also denied.
F. Unsuitability Claim
Lastly, plaintiff argues that the SPIA should be rescinded because the investment was "unsuitable" for Mrs. Sofia. Since there is no such cause of action in New York State, plaintiff may not rely on this assertion to defeat Mass Mutual's motion for summary judgment. Accordingly, plaintiff's "unsuitability" claim, to the extent that it was alleged, is dismissed.
Nowhere does plaintiff allege "unsuitability" as a cause of action in her Complaint. See Defendant's Notice of Removal, Ex. A (Doc. No. 1).
CONCLUSION
For the reasons set forth above, I find that Mrs. Sofia's purchase of the Mass Mutual SPIA was a valid financial transaction. Accordingly, defendant's motion for summary judgment is granted in its entirety, and each of plaintiff's claims is dismissed with prejudice.
ALL OF THE ABOVE IS SO ORDERED.