New York’s High Court Assesses Punitive Damages Where Alleged Deceptive Conduct Underlies Claims for Breach of Contract and Violation of General Business Law 349

When New York’s highest Court comments on what might amount to fraud-related issues, it is always a time to pay attention here. The Court’s latest commentary is contained in Hobish v AXA Equit. Life Ins. Co., 2025 NY Slip Op 00183 (Jan. 14, 2025).

In Hobish, the New York Court of Appeals held, among other things, that (a) the breach of contract claim, albeit enmeshed with allegations of deceptive conduct, did not, as a matter of law, justify imposing punitive damages; and (b) New York’s consumer fraud statute, General Business Law Section 349 (GBL 349), does not allow for punitive-type damages beyond the statutory “amount not to exceed three times the actual damages up to one thousand dollars, if the court finds the defendant willfully or knowingly violated this section.”

Hobish Facts

In Hobish, the terms and application of a universal life insurance policy were at issue. The plaintiff trust purchased the policy to insure the life of a then 82-year-old woman. The policy provided for an intricate methodology for paying the premiums and various ways the death benefit (there $2 million) would be paid or if the policy were terminated, surrender values disbursed. While the policy did indicate that the premiums (known as “COI charges” for cost of insurance), could be increased, it further stated “that any such increase must be ‘equitable to all policyholders of a given class.’” The dispute at issue was the meaning of the word “class” insofar as there were two possible interpretations of the language: “first, that ‘given class’ refers to the ‘rating class,’ delineated in all capitalized letters, which would tether rate increases to Ms. Hobish’s particular rating class of ‘standard non-smoker’; or second, that use of two different phrases, ‘given class’ and ‘rating class,’ implies that the terms are not equivalent, and that a ‘given class’ therefore simply refers to any actuarially reasonable grouping of policies.”

After the policy was purchased, the defendant insurance company increased the COI charges. Plaintiff ultimately elected to terminate the policy and obtained the contractual surrender benefit. Plaintiff then sued to recover the entire death benefit (less the surrender payment received), contending that defendant breached the contract (the policy) by increasing the COI charges the way it did, and deceptively induced the plaintiff to purchase the policy when defendant allegedly knew it was going to raise the COI charges beforehand and never so advised the plaintiff.

Read the full blog post here.