SETTLEMENT FUNDING v. AXA EQUITABLE LIFE INSURANCE CO

0315E (SC), 2002 WL 1020775, * 7 (W.D.N.Y. March 4, 2002). Several recent out-of-state decisions are generally in accord.

See Fioretti v. Massachusetts General Life Ins. Co., 53 F.3d 1228 (11th Cir. 1995) (Under New Jersey law, insurer was entitled to rescind life insurance contract, even after expiration of incontestability period, where applicant knowingly misrepresented his or her HIV-positive status as well as other health related information in both final policy application and "Statement of Good Health"); Protective Life Ins. v. Sullivan, 892 F. Supp. 299 (D. Mass. 1995) (under Massachusetts law, there is implicit exception to statutorily required incontestability clause for actual, willful fraud); Paul Revere Life Ins. Co. v. Haas, 137 N.J. 190 (1994) (statutorily required incontestability clause should not be interpreted to override the effect of fraudulent misrepresentations made by insureds in their policy applications, rather it was intended to protect those insureds who were unaware of their disease at the time of application); Sciranko v. Fidelity Guar. Life Ins. Co., 503 F. Supp. 2d 1293 (D. Ariz. 2007) (Under Arizona law, as predicted by the district court, insurer may deny claim after two year incontestability period on basis of fraudulent misstatement in application, even if misstatement concerns insured's preexisting conditions and policy language does not affirmatively preserve insurer's right to deny claims on basis of fraud.)

Additionally, the statutory scheme of New York Insurance Law reveals that incontestability clauses in life insurance policies are less revered than are incontestability clauses in disability or health insurance policies. See Magee v. Paul Revere Life Insurance Company, 172 F.R.D. 647, 652-53 (E.D.N.Y. 1997). The difference derives from the fact that section 3216 of New York's Insurance Law, which governs health and disability insurance policies, expressly allows insurers to include an exception for fraud in their incontestability clauses. Issuers of such policies who opt not to include a fraud exception in their incontestability clause are more appropriately barred on an absolute basis from claiming invalidity due to fraud. Id.

Life insurance policies are different. Section 3203(a)(3) does not provide issuers of life insurance policies this express statutory invitation to carve out a fraud exception. The Court of Appeals articulated the importance of this distinction in New England Mut. Life. Ins. Co. v. Doe, 93 N.Y.2d 122, 129 (1999). While ultimately applying the clause to bar an insurer from challenging a disability insurance policy based on material omissions in the application, the Court suggested that, had it been faced with the same situation under a life insurance policy, it would have come out differently:

Were we faced with a choice between fraud and statutory design, a far more difficult case would be presented. It would be difficult for us to conclude that the Legislature knowingly enacted a statute that would encourage fraud. But that is not the case. A carrier may, compatibly with the incontestability clause, protect itself by including a provision in its incontestability clause creating an exception for "fraudulent misstatements" (see, Insurance Law § 3216(d)(1)(B)) . . . The carrier here purposely chose not to include a fraud exception and is bound by that choice — a calculation that includes marketing inducements."

93 N.Y.2d 122. The Court thus implicitly recognized that, without an incontestability clause that allows fraud-based challenges beyond the two year period, construing the statutory requirement as an absolute ban on fraud-based challenges risks encouraging fraud. Put another way, if bad actors can disguise their fraud for two years, their hands are washed clean by the Legislative requirement of section 3203, and they are free to collect on their ill-gotten gains.

Finally, the interests balanced by the Caruso court twenty-plus years ago carry different weights today. Life insurance policies in which the beneficiary lacks an insurable interest, whether termed "wager" insurance policies or "STOLI" schemes, have long been a problem. See Warnockv. Davis, 104 U.S. 775, 779 (1881); Grigsby v. Russell, 222 U.S. 149, 154-55 (1911). And while the importance of incontestability clauses has ostensibly remained constant, the concern over abuses involving life insurance policies lacking an insurable interest has occasioned two opinions from the New York State Insurance Department in the last ten years alone. See Opinion of Office of General Counsel No. 08-11-08 (November 26, 2008) (procurement of insurance solely as a speculative investment for the ultimate benefit of a disinterested third party is "contrary to the long established public policy against `gaming' through life insurance purchase"); Opinion of Office of General Counsel No. 05-12-15 (December 19, 2005) (same). This indicates that the need to monitor and quell what appears to be an expanding market for STOLI policies tips the scales in favor of reviewing otherwise incontestable life insurance policies where, as here, a substantial factual record points to the existence of an improperly procured policy.

In light of the above, it is appropriate in this case to examine whether AXA has put sufficient facts in issue to justify review of the Policy notwithstanding the incontestability clause, and, if so, whether those facts preclude a finding that the Policy is valid as a matter of law.

B. Improper formation of the Trust

The formation of the Trust, AXA alleges, failed to conform to the requirements of EPTL 7-1.17(a), which provides the sole means for creation of a trust in New York. Absent proper creation, its argument goes, the Trust had no ability to enter into the contract for the Policy, and the Policy therefore never came into existence.

EPTL 7-1. 17(a) provides that "[e]very lifetime trust shall be in writing and shall be executed and acknowledged by the person establishing such trust and, unless such person is the sole trustee, by at least one trustee thereof." 2010 Sess. Law News of N.Y. Ch. 451 (A. 11316). These strict requirements were imposed in 1997 in recognition that adherence to formality "reduces substantially the potential for foul play." Fasano v. DiGiacomo, 49 A.D.3d 683, 685 (2d Dept. 2008) (quoting Senate Introducer Mem. in Support, Bill Jacket, L. 1997, ch. 139, at 8). If the formalities are not observed, a valid trust is not formed, and subsequent transactions entered into by the invalid trust may be declared null and void. See Fasano, 49 A.D.3d at 685.

Proper execution in this case would have required the validly notarized signatures of both Mrs. Adler, as the person establishing the trust, and Mr. Rubenstein, as the Trustee. See Decl. of Robert T. Rigal in Supp. of Settlement Funding, LLC's and Life Settlement Corporation's Mot. for Partial Summ. J. ("Rigal Decl."), Ex. 3. And indeed the Trust agreement contains marks purporting to be their signatures, dated March 2, 2007, Nassau County, New York. Id. However, AXA has mustered a number of facts indicating that Mrs. Adler's purported signature on the Trust Agreement is a forgery. In particular, Avi Kestenbaum, whose purported signature and notary stamp notarize the signatures on the Trust Agreement, never met Mrs. Adler, and never notarized her signature. Affidavit of Avi Z. Kestenbaum, Ex. A ¶ 6. According to Kestenbaum, his signature too was forged. Id., Ex. A ¶ 13.

Additionally, AXA points to facts indicating that Mrs. Adler was in Ohio and not New York on the day alleged as the date the Trust was executed. In support, AXA includes in its papers the testimony of Mrs. Adler's hairdresser and phone records showing that calls were made to and from her apartment at times that corroborate the hairdresser's testimony and support a conclusion that she did not travel to New York on that date but rather had her hair done. See AXA Equitable Life Insurance Company's Statement of Undisputed Material Facts in Supp. of its Mot. for Partial Summ. J. ("AXA 56.1"), ¶¶ 26-30.

Mrs. Adler's daughter, Judith Abrams, testified that the Trust Agreement signature held out as Mrs. Adler's did not appear similar to other, genuine signatures of Mrs. Adler. Id. ¶ 39. Although Judith Abrams held a power of attorney for Mrs. Adler at that time, she did not sign the Trust Agreement, nor authorize anyone else to do so. Id. ¶ 40. A handwriting expert determined the signature on the Trust was not genuine. Id. ¶ 45. Rubenstein, the trustee, did not see Mrs. Adler on March 2, 2007 in New York, signed the Trust Agreement outside of Mrs. Adler's presence, id. ¶ 47, and cannot recall ever having spoken to or met Mrs. Adler. Id. ¶ 48. AXA has thus put sufficient facts before the Court to raise an issue of fact as to the validity of the Trust, and by extension the Policy.

C. Improper procurement of the Policy

In April 2007, Mr. Rubenstein on behalf of the Trust applied for the Policy with AXA, despite never having met or spoken to the insured, Mrs. Adler. AXA 56.1 ¶ 48. According to AXA, the procurement of the Policy was improper because it was effected based on misrepresentations and as part of a STOLI scheme wherein the true beneficiary lacked an interest in the insured.

1. Misrepresentations.

While the policy application claimed Mrs. Adler had an annual income of $1.5 million and assets in excess of $12 million, she in fact lived in a rental apartment in Ohio, had an annual income under $16,000 and a net worth of less than $100,000. Id. ¶¶ 27, 62-63. SF disputes the truth of these claims. Settlement Funding, LLC's and Life Settlement Corporation's Resp. to Rule 56.1 Statement and Additional Statement of Uncontested Facts in Opp. to AXA Equitable Life Insurance Company's Motion for Partial Summary Judgment ("SF Opp. 56.1"), ¶ 63.

Additionally, in March and April 2007, two other $5 million policies insuring Mrs. Adler's life were taken out, one with John Hancock Life Insurance Company, naming Chaim Citronenbaum as trustee, and one with Principal Life Insurance Company, naming Alan Rubenstein as Trustee. This contradicted Rubenstein's representation on the AXA application that only one life insurance policy would be obtained. AXA 56.1 ¶¶ 58-61.

As part of its underwriting process, and per industry standard, AXA required an inspection report to verify the information contained in the application. The investigator creating this report on behalf of AXA interviewed an individual representing himself as Allan Goldstein, Mrs. Adler's accountant, who confirmed the financial details in the application. Id. ¶¶ 17-19. However, Mr. Goldstein was not her accountant — a man named Aron Bloch had been her accountant for over 15 years. Affidavit of Gregory J. Star in Support of AXA Equitable Life Insurance Company's Opp. to Settlement Funding LLC's and Life Settlement Corporation's Mot. For Partial Summary Judgment ("Star Aff."), Ex. D. Neither Mrs. Adler's daughter nor her close friend knew of Allan Goldstein. Id. ¶¶ 20-21. No one by the name of Allan Goldstein ever lived or worked at the address he provided, and there is no Ohio CPA by that name. Id. ¶ 20.

2. STOLI allegations.

As noted above, "STOLI" is an acronym for "stranger-originated life insurance," a practice by which an insured unlawfully procures a policy for the "sole purpose of transferring it, directly or indirectly, to an investor," who has no legally-recognized interest in the life of the insured and stands to profit at the death of the insured. Penn Mut. Life Ins. Co. v. Wolk, No. 09 CV 1808, 2010 WL 2594876, *1 (S.D.N.Y. June 28, 2010). Such schemes fall afoul of the insurable interest rule, which is well-rooted in New York law and operates to prevent the issuance of "wager" life insurance policies. See Angel, 530 F.Supp.2d at 652; New York Ins. Law § 3205(b)(2). As Justice Holmes explained, "[a] contract of insurance upon a life in which the [policy owner] has no interest is a pure wager that gives the [policy owner] a sinister counter interest in having the life come to an end." Grigsby v. Russell, 222 U.S. 149, 154-55 (1911).

"No person shall procure or cause to be procured, directly or by assignment or otherwise any contract of insurance upon the person of another unless the benefits under such contract are payable to the person insured or his personal representatives, or to a person having, at the time when such contract is made, an insurable interest in the person insured." N.Y. Ins. Law § 3205(b)(2) (McKinney 2006).

To determine whether a trust holding an insurance policy is a sham designed to evade the insurable interest rule or a genuine, good-faith assignment, courts consider factors such as whether the insured paid premiums, the length of time the insured held the policy before assigning it, whether the trust was executed contemporaneously to the policy application, and whether a subsequent purchaser of the policy was involved in the trust agreement. Id. at 654-655. The facts here are at a minimum suggestive of a STOLI scheme.

D. Conclusion

As discussed above, while an incontestability provision may not yield to challenges based solely on a lack of insurable interest or material misrepresentations, the aggregate allegations brought here involving both lack of insurable interest and fraud, and arising from a context of allegedly widespread, systematic fraud involving careful planning, multiple policies, imposters, forgeries, and misstatements, all in pursuit of an improper STOLI scheme, raise additional material issues of fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). As a consequence, summary judgment on this prong of SF's motion is herewith denied.

III. Remaining issues for resolution

A. SF's alternative arguments for liability

SF argues several alternative theories that it claims entitle it to summary judgment even if the Policy is found invalid. It argues that despite any infirmities at inception, AXA's challenge to the validity of the Policy fails based, among other things, on principles of estoppel, since SF relied on AXA's representations concerning the validity of the Policy, and AXA accepted later SF's performance on the Policy (i.e. payment of premiums); Mrs. Adler's subsequent ratification; AXA's admission that "unless and until the court declares the Adler Policy void ab initio, it remains in force"; the presumption of validity enjoyed by trusts; and AXA's failure to join required parties.

To the extent that these theories have merit — and several of them may — they are insufficient to warrant summary judgment in light of the facts that AXA has put in issue. One claim that demands fuller treatment relates to joinder of required parties.

B. Failure to join required parties

SF argues that the Trust beneficiaries are required parties, and AXA's failure to join them warrants a dismissal of AXA's claims. This issue has come up previously in this litigation. On its motion to dismiss AXA's counterclaims, SF argued that the fact that Trust beneficiaries had not been joined within the Court's Pre-Trial Scheduling Order constituted grounds for dismissing the counterclaims based on the failure to comply with a Court order. I ultimately denied that motion because on a motion to dismiss the non-moving party receives the benefit of every doubt. I noted, however, that the issue may warrant further attention on summary judgment, and therefore address it in full here.

1. Whether the Trust beneficiaries are required parties.

Rule 19 of the Federal Rules of Civil Procedure provides that "required parties" must be joined if "feasible." Fed.R.Civ.P. 19(a); Laine v. Pride, 2010 WL 199927, *9 (S.D.N.Y. 2010). A person is a required party if

(A) in that person's absence, the court cannot accord complete relief among existing parties; or (B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence may:

(i) as a practical matter impair or impede the person's ability to protect the interest; or (ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.

Id. Whether a particular party must be joined out of necessity requires a fact-intensive determination. Laine, 2010 WL at *9 (citing 7 Charles Alan Wright et al., Federal Practice Procedure § 1604, available at FPP § 4425 (Westlaw)). In New York, courts have generally held that trust beneficiaries are "necessary" parties to disputes arising in relation to a trust. See, e.g., Du Pont-De Bie v. Tredegar Trust Co., 61 A.D.3d 610, 611 (1st Dept. 2009); Fagan v. Nowitz, 65 A.D.3d 1184, 1185 (2d Dept. 2009); Bankers Trust Co. v. Manufacturers Nat. Bank of Detroit, 139 F.R.D. 302, 310 (S.D.N.Y. 1991).

The parties alleged to be required here are the beneficiaries of the Trust, Mrs Adler's two daughters and son in law. New York law posits that beneficiaries of a trust, at least in an action such as this, are required parties. Even if this action could be resolved without a declaration of the validity of the Trust, the beneficiaries may have independent claims on the Policy proceeds. Should the resolution of this case ultimately award the Policy proceeds to SF, such a judgment would impede any interests in or claims to the proceeds that the beneficiaries may have; moreover, given any potential claims the beneficiaries could raise, a judgment for SF would leave AXA subject to a substantial risk that it would incur double obligations on the Policy. See Fed.R.Civ.P. 19(a)(1)(B)(i-ii). Accordingly, the beneficiaries are required parties as a matter of New York law, and as a practical matter to the extent that their fortunes are tied to those of the parties already here.

2. Whether joinder is feasible.

The inquiry does not end there, because "[j]oinder of a party is not feasible where the court's subject matter jurisdiction rests on diversity of citizenship and joining the party to the action would destroy complete diversity." LoCurto v. LoCurto, No. 07 Civ. 8238 (NRB), 2008 WL 4410091, at *4 (S.D.N.Y. Sept. 25, 2008). AXA is a New York insurance company, and AXA asserts, and SF does not deny, that the beneficiaries are New York residents. See Oral Arg. Hr'g Tr. 35:9-13; 46:19-22 Sep. 8, 2010. Their interests are of course adverse to AXA's, and so their joinder would destroy diversity and divest this court of jurisdiction. In other words, under Rule 19 and the cases construing it, continuing with less than all required parties is preferred to dismissing completely.

3. Whether the action may proceed absent necessary parties.

If joinder of a necessary party is not feasible, then the court must consider whether in "equity and good conscience, the action should proceed among the existing parties or should be dismissed." Fed.R.Civ.P. 19(b). The factors at play in determining whether a litigation may proceed in the absence of a required party are:

"first, to what extent a judgment rendered in the person's absence might be prejudicial to the person or those already parties; second, the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; third, whether a judgment rendered in the person's absence will be adequate; fourth, whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder."

Fed.R.Civ.P. 19(b). The Supreme Court has summarized these four factors in these terms: (1) whether the party sought to be joined has an interest in having a forum and whether an adequate alternate forum exists; (2) the interest of the party seeking joinder in avoiding "multiple litigation, or inconsistent relief, or sole responsibility for a liability that he shares with another;" (3) "the interest of the outsider whom it would have been desirable to join;" (4) "the interest of the courts and the public in complete, consistent, and efficient settlement of controversies." See Randolph Foundation v. Duncan, 2002 WL 32862, *7 (S.D.N.Y. 2002) (citing Provident Tradesmens Bank Trust Co. v. Patterson, 390 U.S. 102, 109-11 (1968)); see also Klockner Stadler Hurter, Ltd. v. Insurance Co. of Pennsylvania, 785 F.Supp. 1130, 1133 (S.D.N.Y. 1990) (discussing Provident Tradesmens' analysis of Rule 19(b)'s four factors); Ente Nazionale Idrocarburi v. Prudential Sec. Group, 744 F.Supp. 450, 458-62 (S.D.N.Y. 1990). "Rule 19(b), however, does not require that every factor support the district court's determination." Universal Reinsurance Co., Ltd. v. St. Paul Fire and Marine Ins. Co., 312 F.3d 82, 88-89 (2d Cir. 2002). "The major question is whether the court can render a decision which will not impair the rights of the absent party." Ente Nazionale Idrocarburi, 744 F.Supp. at 456 (citing J. Moore et al., Moore's Federal Practice ¶ 19.05[2] n. 6, at 19-77); see also Lipton v. Nature Co., 781 F.Supp. 1032, 1034 (S.D.N.Y. 1992) ("the Rule 19 motion regarding indispensability of parties . . . [is] addressed to the court's equitable discretion.").

Dismissal here would be a drastic and unjustified step. "[V]ery few cases should be terminated due to the absence of non-diverse parties unless there has been a reasoned determination that their non-joinder makes just resolution of the action impossible." Jaser v. New York Property Ins. Underwriting Ass'n, 815 F.2d 240, 242 (2d Cir. 1987).

Continuing this action under Rule 19(b) will not prejudice the beneficiaries nor the parties. The beneficiaries have been on notice of this lawsuit since June 2010 at the latest, when all three were deposed with at least two were represented by counsel. See Star Aff., Exs. D, E; Decl. of Ina M. Berlingeri in Supp. of Settlement Funding, LLC's and Life Settlement Corporation's Opp. to AXA Equitable Life Insurance Co.'s Mot. for Partial Summ. J. ("Berlingeri Decl."), Ex. F. The fact that the Trust beneficiaries knew about this lawsuit and had advice of counsel, yet opted not to join provides the greatest assurance that the court may proceed without them in "equity and good conscience." Fed.R.Civ.P. 19(b).

Moreover, no action is pending elsewhere that would afford either plaintiff or counterclaim plaintiff the opportunity to seek relief, were this action dismissed. The entire corpus of the Trust consisted of the Policy, and since the Policy has been sold, the Trust ostensibly holds no more property, and the risk that this lawsuit poses to the Trust beneficiaries is accordingly de minimis.

Finally, at this stage in the scenario, the Trust beneficiaries' interests are not wholly distinct from the interests of SF — both essentially seek in the first instance to have the Policy declared valid and enforceable. Should that happen, their interests of course will quickly part ways. But even if a judgment is ultimately rendered in favor of SF, it could be fashioned so as to reduce the potential for prejudice to the beneficiaries, for instance by issuing a temporary stay on the payment of any proceeds to allow the assertion of any related claims as between potential beneficiaries of the death benefits. The commencement of a separate action would have some slight overlap, but the claims as between SF and the beneficiaries would ultimately be sufficiently distinct from those raised here as to avoid excessive redundancy and waste of judicial resources.

C. SF's claim for breach of contract (Count II).

SF argues that since the Policy is valid, AXA is in breach of contract for (1) contesting the validity of the Policy after expiration of the incontestability clause, and (2) failing to pay benefits due under the Policy. AXA counters that the Policy is void ab initio, and it cannot have breached a non-existent contract. In the event the Policy is found valid, it maintains, it should not be held liable for properly seeking a judicial declaration concerning the validity of the Policy, particularly in view of its many statements that it will pay a claim if the Court declares the Policy valid.

As many jurisdictions recognize, an action for declaratory judgment determining the validity of a contract does not constitute a repudiation of contractual obligations. See, e.g., Landwehr v. F.D.I.C., No 09 CV 0716, 2010 WL 3452345, *8 (D.D.C. Sep. 3, 2010) (commencement of a declaratory judgment action does not constitute an anticipatory repudiation); Principal Life Ins. Co. v. Lawrence Rucker 2007 Ins. Trust, 674 F.Supp.2d 562 (D. Del. 2009) (collecting cases). Thus, unless and until the Policy is declared valid and AXA repudiates its current position, no reasonable fact finder could conclude that AXA is in breach or anticipatory breach of any obligations. Moreover, SF's rights under the Policy will be determined through its claim, in Count I, for recovery of insurance proceeds. Its claim for breach of contract is therefore redundant, and it has not argued otherwise. SF has failed to show that, as a matter of law, it is entitled to summary judgment on its contract claim, and has failed to raise any factual issues to be tried in connection with this claim. Accordingly, its motion for summary judgment on this claim is denied, and AXA's motion for summary judgment dismissing this claim is granted.

D. The Ohio Viatical Settlements Act claim (Counterclaim Count III)

SF seeks dismissal of AXA's counterclaim under the Ohio Viatical Settlements Act, Ohio Rev. Code Ann. § section 3916.01 et seq. ("Ohio Act"). AXA's counterclaim asserts that the sale of the Policy from the Trust to LSC violated section 3916.16 of the Ohio Act, which prohibits the purchase of a Policy less than five years after its issuance. The sale also violated section 3916.171, which prohibits a party from recklessly entering into a life settlement contract involving a policy obtained by fraud or fraudulent concealment, for the purpose of misleading and with intent to defraud the issuer of the policy.

SF does not dispute that the Policy was sold less than five years after it issued. AXA 56.1 ¶¶ 13, 30. As noted above, significant facts surround the question whether the Policy was procured through fraud, and LSC's alleged recklessness and intent are issues of fact to be determined at trial. Angel, 530 F.Supp at 656 ("cases that turn on the issue of intent are generally not appropriate for summary disposition").

The question whether the Ohio Act applies here is a more difficult one. Rather than argue under a conflict of laws paradigm, the parties point to specific language they claim governs the Ohio Act's reach. AXA points to one provision and asserts that the Ohio Act applies to any insurance policy that impacts the rights of a resident of Ohio or bears a reasonable relationship to the state of Ohio, regardless of where the policy was issued. SF points to two separate provisions that state:

(B)(1) If there is more than one owner on a single policy and the owners are residents of different states, the viatical settlement contract shall be governed by the law of the state in which the owner having the largest percentage ownership of the policy resides or, if the owners hold equal ownership, the state of residence of one owner agreed upon in writing by all owners.

(2) If the viator is a resident of this state, all agreements to be signed by the viator shall provide exclusive jurisdiction to courts of this state and the laws of this state shall govern the agreements. Nothing in the agreements shall abrogate the viator's right to a trial by jury.

Ohio Rev. Code Ann. § 3916.02. Neither party provides much guidance, and it appears that no reported case discusses the applicability of the particular provisions under which AXA brings its claims. The first provision urged by SF applies to Policies with multiple owners. It offers no help because there was never more than one owner at a time. The second provision requires application of Ohio law if the viator, i.e. the owner of the policy, is an Ohio resident. Since the Policy's purported owner was the Trust, and the Trust is not an Ohio trust, this provision is likewise no help.

Reference to the provision urged by AXA is more fruitful. The substantive provisions AXA seeks to apply govern "policies." A policy includes "an individual or group policy, group certificate, or other contract or arrangement of life insurance affecting the rights of a resident of this state or bearing a reasonable relation to this state, regardless of whether delivered or issued for delivery in this state." Ohio Rev. Code Ann. § 3916.01(J) (emphasis added). By its terms, then, the Ohio Act may apply if the Policy here bears a reasonable relation to this state. AXA urges that it does because it was issued on the life of an Ohio resident. Whether this constitutes a "reasonable relationship" is a question of fact. Accordingly, SF's motion for summary judgment dismissing this claim is denied.

E. Other Ohio claims

The parties assert various other claims under Ohio law in the event that Ohio law applies. These Ohio law claims are distinct from the Ohio Act claims, whose applicability is defined by statute, per the parties' arguments. Here, the parties assert claims in the event that Ohio law governs the dispute generally. AXA seeks a declaration that Ohio law applies to its insurable interest claims, and seeks dismissal of SF's claims for bad faith denial of coverage and "Tort Action" under Ohio law (Counts VI and VII).

The parties agree for the most part that Ohio and New York law do not differ on the issues raised here. See Settlement Funding, LLC's and Life Settlement Corporation's Memorandum of Law in Supp. of Mot. for Partial Summ. J. at 12; AXA Equitable Life Insurance Co.'s Memorandum of Law in Opp. to Settlement Funding, LLC's and Life Settlement Corporation's Mot. for Partial Summ. J. ("AXA Opp.") at 8, n. 12. However, AXA claims that one conflict does exist wherein Ohio, unlike New York, allows an insurer to challenge the validity of a life insurance policy based on a lack of insurable interest even after the close of the contestability period. AXA Opp. at 17. It cites two older cases, Harris v. Sovereign Camp, 1940 WL 2917, *2 (Ohio Ct. App. 1940) and John Hancock Mut. Life Ins. Co. v. Snyder, 3 N.E.2d 898, 900 (Ohio Ct. App. 1935). SF argues persuasively that these cases have been superseded by Ohio Code § 3915.05, which requires the inclusion of incontestability clauses and enumerates exceptions to their application — a lack of insurable interest is not among them. See SF at 12. Accordingly, I conclude that no conflict exists and therefore need not engage in a choice of law analysis. I.B.M. Corp. v. Liberty Mut. Ins. Co., 33 F.3d 137, 143-44 (2d Cir. 2004).

Even if a conflict did exist, the choice of law analysis would come out in favor of applying NY law because the dispute's "center of gravity" is here. See Maryland Cas. Co. v. W.R. Grace Co., 332 F.3d 145, 151 (2d Cir. 2003); Olin Corp, v. Ins. Co. of N. Am., 743 F.Supp. 1044, 1049 (S.D.N.Y. 1990). AXA points only to Adler's residence in Ohio, and asserts that the New York contacts are merely "sham" and "illusory" as a result of the impropriety of everyone involved in the transactions. Even if cloaked as they may be in fraud and wrongdoing, the greatest concentration of significant events and entities are nonetheless in New York:

• AXA is a New York corporation with its principle place of business in New York. SFOpp. 56.1 ¶ 73.

• Premium payments were made from the Trust's bank account in New York. Id. ¶ 87.

• Rubenstein is a New York resident and citizen. Id. ¶ 74.

• The Policy was delivered to Rubenstein in New York. Id. ¶ 82.

• The Trust is organized under New York law and has a New York address. Id. ¶ 75.

• The Policy application was a New York application, any Policy changes are subject to the NYS Insurance Department's approval, and AXA's representative indicated that AXA's intent with respect to the Policy would have been to comply with New York law. Id. ¶ 78-86.

Accordingly, AXA's motion for summary judgment dismissing SF's claims for "Tort Action" and bad faith denial of coverage under Ohio law is granted, and AXA's request for a declaration that Ohio law applies is denied.

F. AXA's remaining requests.

AXA seeks dismissal of SF's claims for negligent misrepresentation and common law fraud (Counts II and V) and deceptive business practices (Count IV). While close, this must be denied. AXA also seeks a declaration that SF is not entitled to punitive damages. This motion, or arm of a motion, will likely be granted after trial, but not now. AXA's motion here must be denied.

CONCLUSION

For the reasons described above, plaintiffs and counterclaim defendant's motion for summary judgment is DENIED. Defendant's motion for summary judgment is GRANTED to the extent that it seeks dismissal of Plaintiffs claims for breach of contract, bad faith denial of coverage and Tort Action under Ohio law, and is otherwise DENIED.

The Clerk of the Court is instructed to close the relevant motions and remove them from my docket.

SO ORDERED

September 29, 2010 New York, New York