Ashkenazi v. AXA Equitable Life – Policies Procured by Fraud

Ashkenazi v. AXA Equitable Life – Policies Procured by Fraud

 By Stephan Leimberg and Howard Zaritsky

"life insurance is designed to replace or preserve wealth or income that is lost due to an insured's death, rather than create wealth or income."

Ashkenazi v AXA Equit. Life Ins. Co., 2009 NY Slip Op 33111U (N.Y. Sup. Ct. Dec. 16, 2009), provides a bird's eye view of how a life insurer decides if it will issue coverage based on a client's income and wealth and if so, how much coverage it will allow.

It also provides guidance as to when and under what conditions an insurer will issue insurance for charitable purposes.

It illustrates that insurers are aggressively resisting STOLI schemes and that others are willing to stretch the truth in order to deceive insurers in order to entice them to issue policies they otherwise would not.


This was an action by a trust to recover the death benefits of two life insurance policies.  But the defendant, AXA Equitable Insurance Company asked and received a summary judgment dismissing the breach of contract claim of the plaintiff, Alexander Ashkenazi as Trustee of the Zablidowsky Life Insurance Trust. The Court also granted AXA counterclaim for rescission on the grounds that the life insurance policies were obtained by fraud.


In December 2005, the insured, Estelle Zablidowsky and Trustees Alexander Ashkenazi and Martin Zablidowski (Estelle's son) applied for a $5 million life insurance policy naming the Trustee of the Zablidowsky Life Insurance Trust as the owner and beneficiary of the policy.

The signatories to the application represented that Estelle had

(1)  $825,000 of "annual earned income,

(2)  10.1 Mil." in "net worth,"

(3)  $4 million in liquid assets and $6 million in real estate assets,

(4)  annual income for the current year of $825,000, consisting of $225,000 in dividends/interest, $550,000 in rental income, and $50,000 in pension/social security, and

(5)  $820,000 in annual income in the previous year, consisting of $220,000 in dividend/interest, $550,000 in rental income, and $50,000 in pension/social security.

AXA argued that its Chief Underwriter reviewed and approved the application based on AXA's Financial Underwriting Guidelines. These rules provided that the amount of insurance for which an applicant would qualify depended upon her age, income, and/or net worth.

After she was approved for the $5 million policy, Estelle applied for a $7 million policy with another insurer, Lincoln Life & Annuity Company of New York. That policy was issued on October 8, 2005.

Then, in January 2005, Estelle's broker applied for an additional $5 million policy from AXA on her life.  Relying on the representations Estelle made before, and the representation that no other life insurance had been applied for or was in force, applying the Financial Underwriting Guidelines, and applying the practice of determining the projected estate tax that would be due of her estate, AXA's underwriter concluded that Estelle would qualify for an additional $3 million in insurance. As before, the Insured, and the trustees Alexander Ashkenazi and Martin Zablidowski completed and signed another application.

On both policies, each signatory to the application certified that they understood

"that the statements and answers in all parts of this [AXA] application are true and complete to the best of their knowledge and belief."

They further certified that AXA "may rely on them in acting on this application."

Estelle died in the fall of 2006, within the two-year contestability period. AXA conducted a routine investigation and determined that the applications contained misrepresentations about the Insured's financial status and other insurance coverage. AXA gave notice of rescission and tendered the previous paid premiums to the Trust. This action for breach of contract (first cause of action) and violation of New York General Business Law § 349 (second cause of action) ensued. In response, AXA asserted counterclaims for declaratory relief, rescission and fraud.

AXA's Motion:

AXA contended that the deposition of Estelle's son and of the plaintiff Trustee, pre-litigation interview of the Insured's son, the Insured's application to purchase a cooperative apartment on behalf of her other son Gary Zablidowski ("Gary") in 1987, and the probate papers filed by the two sons, demonstrate that

  • Estelle's net worth was fabricated,
  • Social Security benefits were the only source of her income
  • Estelle worked as a factory bookkeeper making $23,000 per year, lived in a rental apartment for $500 per month, and had only $7,100 in the bank and co-op shares worth approximately $225,000 at the time of her death.

The Trustee did not recall how these policies came about, why they were taken out, notwithstanding the fact that he signed both applications for insurance.

The Trustee is the trustee of at least seven life insurance trusts that are the beneficiaries of at least 10 life insurance policies, totaling $39 million in life insurance coverage, $12 million of which has already been paid out.

While the Trustee claims that the trusts have charitable purposes, he has no records and cannot recall how the $12 million was distributed. According to the Court, "The Trustee is running a stranger-owned life insurance ("STOLI") mill and using a purported charitable entity for his own purposes."

AXA argued that summary judgment is warranted based on the material misrepresentations made in both applications for insurance.

The Trustee did not deny that the financial statements made in the applications were false.

Additionally, the second application only disclosed the existence of the first $5 million AXA policy, when the Insured had applied for the Lincoln Life policy for $7 million.

The misrepresentations were material as a matter of law pursuant to NY Ins. Law § 3105(b).

Based on AXA's Underwriting Guidelines, AXA would never have issued the policies had the true facts been known.

The "charitable" purpose of these policies was also undisclosed, and in any event, would not have resulted in approval of the policies even if disclosed due to the provision in the Underwriting Guidelines about policies payable to a charity. The applications would have been denied because there was no commensurate history of prior giving to the purported charity, and the amount would in any event have far exceeded that for which the Insured would otherwise have qualified based on her modest finances.

Further, the false statement about Lincoln Life coverage is material, in that AXA would have refused to issue any more insurance on the Insured's life.

The Trustee's Position

The Trustee contended that insurers developed a practice of issuing high value policies to elderly individuals to generate high cash flow from the higher premiums, with the hopes that as the elderly failed to continue paying the premiums, the policies would lapse, thereby permitting the insurers to keep all the past premiums paid.  As a result, insurers ignored their underwriting guidelines and wrote high value policies which were actuarially deficient. The easiest guidelines to ignore were those concerning the net worth because the net worth of the insured does not affect the primary risk incurred by an insurer, to wit: longevity. In the last five years, financial institutions (settlement companies) purchased these actuarially deficient policies in volume and continued to pay premiums until the death benefits became due, and saw tremendous profits.

But according to the trustee, the insurers who were counting on these policies to lapse, were now forced to keep their end of the contract, resulting in more payouts over time. It was the trustee's position that, "Although the insurers did not care about the financial condition of the insured when the policy was written, as that information does not at all increase or decrease the likelihood of death, the insurer began using the financial information in applications as a pretext to rescind policies."

The Trustee argued that AXA failed to establish the Insured's actual net worth and income, and the materiality of financial information.

The Trustee also argues that the sole purpose of AXA's motion is to stay their obligation to produce discovery, to wit: all applications in policies that it issued to insureds over 80 years old with a face value over $5 million. AXA is required to prove by reference to its past behavior, that it would not have issued the policies had the Insured's true net worth been revealed. The only evidence that AXA can point to is the deposition of the Insured's son Gary, since her other son Martin did not testify and the Trustee did not know the Insured. Gary testified that he did not know of any assets owned by his mother, but also testified that he was estranged from his mother in all respects and did not even know she had any life insurance. A fact finder could find that the Insured did not discuss her financial state with an estranged son. Thus, AXA cannot establish the Insured's financial condition.

Further, the evidence of the Insured's financial condition at the time of her death and in 1987 concerning the cooperative apartment, is irrelevant, as AXA must show her financial condition at the time of the applications.

And, in none of the three affidavits submitted by AXA does AXA explain how the Insured's financial state changes the risk that AXA faces. AXA does not provide any examples of its past behaviors concerning similar risks, as required. For example, in another unrelated case, AIG's discovery production indicated that 82% of the policies issued violated the underwriting guidelines purportedly in use at the time. Thus, AXA cannot rely on the conclusory affidavits of its underwriter to prove materiality.

Thus, the motion is premature since document production and the deposition of AXA concerning AXA's past behavior has not been completed. An insurer attempting to void a policy for material misrepresentations must produce other similar policies containing similar representations. Since the Trustee failed to support its motion with any specific applicants who were denied coverage under similar circumstances, its motion must be denied.

AXA's Reply

According to this court, AXA must only show, and has shown, that

  • the Insured grossly overstated her income and assets on her applications,
  • her second application falsely claimed that she had no other life insurance policies in force or applied for, and
  • these misrepresentations were highly material in AXA's underwriting process.

AXA contended that the discovery issue is a fabrication, as no order or directive exists directing the production sought. When the parties appeared in Court regarding such discovery, the Court denied the Trustee the very discovery sought. When asked to reconsider its denial of the discovery sought by the Trustee, the Court advised that although it granted similar discovery to another plaintiff in a wholly unrelated matter, AXA should be given an opportunity to review the underlying papers and transcript in the unrelated matter and respond accordingly. The Trustee later provided some of the documents requested, noting that the transcript would later be provided. However, the transcript was never provided. The Trustee never further pursued its reconsideration request with AXA or the Court, until now in response to AXA's motion. Thus, AXA did not violate any order.

Further, according to the court, the Trustee's opinion of the insurance industry is unsupported, inadmissible, and refuted by the facts of this case. Nor can the Trustee's opinion raise an issue of fact.

The falsity of the financial misrepresentations is clearly proven, and the Trustee failed to identify an issue of fact as to whether the Insured's finances were nowhere near the $10.1 million in assets and $825,000 in income she claimed they were.

Evidence from the insured's son, who never testified that he was estranged, and from the Trustee, is highly relevant and telling.

Both Martin and Gary swore in Probate Court that their mother had limited assets at the time of her death, and neither they nor their siblings inherited any money from his mother's estate.

The Insured's financial misrepresentations were material to AXA's underwriting because the affidavits and Underwriting Guidelines establish that the false representations at issue were actually reviewed and relied upon in the underwriting process and that the policies would not have been issued but for those misrepresentations.

The two highly detailed and first-hand affidavits, coupled with AXA's written underwriting guidelines and contemporaneous underwriting notes, establish that the false representations were relied upon and that the policies would not have been issued but for the misrepresentations.

And, information obtained in another case against another insurer is wholly irrelevant and insufficient to defeat summary judgment. Likewise, other purported AXA insurance applications, lacking in financial statements, do not establish that AXA actually issued such policies without regard to AXA's Underwriting Guidelines.

Finally, the Trustee made no attempt to refute the independent basis for summary judgment on the Insured's $3 million policy that she made a material misrepresentation concerning other life insurance policies pending or in force.



New York Insurance Law § 3105(b) provides:

No misrepresentation shall avoid any contract of insurance or defeat recovery thereunder unless such misrepresentation was material. No misrepresentation shall be deemed material unless knowledge by the insurer of the facts misrepresented would have led to a refusal by the insurer to make such contract. (Emphasis added).

"A misrepresentation is defined by statute as a false 'statement as to past or present fact, made to the insurer ... at or before the making of the insurance contract as an inducement to the making thereof.[i]

Here, the representations made by the Insured concerning her financial worth at the time of both of her applications, and the absence of any other pending insurance policies as to the $3 million policy, were false:

At her death:

        "she "was not engaged in any business."

        "she was a bookkeeper but was unemployed since 1983;

        "her income was derived from Social Security,

        "no stocks were found"; "no broker statements (for stocks or bonds), nothing."

        "she did not own any property - anywhere";

        "she had no other residence and no vacation home.

        She owned no vehicles."

        She had $7,100 in her savings and checking account.

None of the statements above are contested by the trustee - who never claimed that he is unable to obtain the Insured's financial information to challenge AXA's claim of falsity, submitted no documentary evidence or affidavit to corroborate the financial representations made in the applications.

Furthermore, with respect to the $3 million policy, it is uncontested that the representation by the Insured that there were no other policies in force or pending was false. While the second application only disclosed the existence of the $5 million AXA policy, it did not disclose the pending Lincoln Life policy. Therefore, the record demonstrates that the Insured's representations in both applications concerning her financial worth, and the representation in the $3 million policy concerning the existence of other life insurance policies, were false.

But were all these misrepresentations "material" under New York Insurance Law?

A misrepresentation is material if:

  • it "seriously interferes with the exercise of the insurance company's right to accept or reject the application,"[ii], and
  • "knowledge by the insurer of the facts misrepresented would have led to a refusal by the insurer to make such contract"[iii].

Generally, materiality is a question of fact to be determined at trial; however, "where the evidence concerning materiality is clear and substantially un-contradicted, the matter is one of law for the court to determine"[iv]

Here, the burden was on the insurer, AXA, to establish that it would have rejected the applications if it had known the undisclosed information, and summary judgment cannot be granted unless the insurer comes forward with proof that it would not have issued the policy had it known the undisclosed facts.[v]  To meet the burden of proof on materiality, an insurer must submit evidence of its underwriting practices with respect to similar applicants.[vi]

A "court, in finding a material misrepresentation as a matter of law, generally relies upon two categories of evidence, an affidavit or testimony from the insurer's underwriter who testifies that the insurer would not have issued the particular contract it did had the facts been disclosed and the insurer's underwriting manual, guideline manuals or rules.[vii]

Thus, to establish materiality of misrepresentations in an application for insurance, as would warrant rescission of the policy, the insurer must submit documentation such as the insurer's underwriting manual which pertains to insuring similar risks, and testimony of the insurer's underwriter or other qualified employee.[viii]

Here, AXA in fact submitted the Underwriting Guidelines, which explain the purpose of financial underwriting, a term which describes the process of evaluating an applicant's financial status. In defining "financially justified," AXA's Underwriting Guidelines state that

the theory behind financial underwriting is to have a method that screens out... speculation .... The signs are weakly defined motivation or overinsurance .... No matter what the plan or purpose of insurance, as long as there is a death benefit, the underwriter must have some economic-related basis of selection. The process underwriters utilize is called financial underwriting.

The Guidelines further provide:

Special attention should be paid to all circumstances of the application on older aged individuals, at ages when the need for insurance is usually diminished.... Those who are still self-supporting with dependents or with estate tax problems can be considered for amounts within the PERSONAL INSURANCE GUIDELINES when the need for coverage is clear. Higher amounts may be considered for tax problems with knowledge of the approximate value of the estate.

(Emphasis added)

For non-professionals, the table is as follows:

Ages   Factor × Income

18-45        15

46-55        10

56-60        7

61-65        5

66 and over  IC [Individual Consideration]

As to older applicants, the Guidelines explain:

Special attention should be paid to all circumstances of the application on older aged individuals, at ages when the need for insurance is usually diminished and the prospect of death is less unpredictable. Those who are still self-supporting with dependents or with estate tax problems can be considered for amounts within the PERSONAL INSURANCE GUIDELINES when the need for coverage is clear. Higher amounts may be considered for estate tax problems with knowledge of the approximate value of the estate. (Emphasis added).

AXA also provided detailed affidavits of two of its underwriting agents, describing the various portions of the Underwriting Guidelines. According to AXA, life insurance is designed to replace or preserve wealth or income that is lost due to an insured's death, rather than create wealth or income.

As explained by an AXA underwriter, an elderly person would ordinarily qualify for coverage only if the amount applied for was either "

(1)  ... an acceptable multiple of his or her stated annual income (income replacement purposes)," or

(2)  "was consistent with the estate taxes that would be due based on the likely net worth of the insured at the time of death (estate preservation purposes)."

Here, the AXA Equitable underwriter expressly relied upon Estelle's representation that she had a net worth of over $10 million and an annual income of $825,000, and based on that representation, the $5 million policy was issued. (According to AXA, the Lincoln Life application makes financial misrepresentations that the Insured had a net worth of $15.6 million and an annual income of $1.25 million). This would have been well within AXA's Financial Underwriting Guidelines since the estate tax due would likely have well-exceeded the amount of insurance for which the Insured applied.

In approving the $3 million, AXA reviewed the representations made in the Estelle's application, including her representations that she had:

  • no other pending or in force insurance,
  • a net worth of over $10 million, and
  • anticipated an estate tax of approximately $8,255,500.

For this reason, AXA's underwriters concluded that the maximum permitted insurance from all companies would be approximately $8 million and therefore it would not issue another $5 million as requested, but that a $3 million policy was justified.

According to an AXA underwriter, AXA would not have issued these two policies it had known that the Insured "had no material annual income and net worth of less than $250,000."

According to the Court, "The record adequately demonstrates that in approving the $5 million and $3 million policies, AXA applied its Guidelines, including the estate planning financial underwriting practice of attempting to approximate the amount of estate taxes that would likely be due on the insured's estate (at the time of death), in order to determine the maximum amount of life insurance that would be appropriate.

Further, based on AXA's Guidelines, AXA would never had issued the two insurance policies it did with a face value of $5 million and $3 million, had the Insured been truthful about her financial net worth and, as to the $3 million policy, about the existence of other pending Lincoln Life insurance policy.

And, as to the $3 million policy, the effect of these misrepresentations especially in combination, must be said to have deprived AXA of freedom of choice in determining whether to accept or reject the risk.


Additionally, an AXA underwriter testified that had the charitable purpose been disclosed, the subject policies would clearly not have been issued by AXA, since issuance of the policies would have violated AXA's Financial Underwriting Guidelines.

AXA Financial Underwriting Guidelines provide:

On occasion, one encounters an application payable to charity. This type of case necessitates a review of the individual's income and net worth, plus the proposed insured's past pattern of charitable giving, considering such factors as:

  • The overall involvement of the insured with the charity listed as owner and beneficiary.
  • The correlation between the amount of the life insurance application and the loss to the charity if the individual were to die prematurely. (AXA considers reasonable, for purposes of charitable giving, a face amount equal to the applicant's total "personal insurance" in force - if this amount is commensurate with past contributions.)
  • However, the combination of "regular" personal insurance personal insurance and insurance payable to charity may not exceed the total line of personal insurance available under normal circumstances (see personal insurance factor chart).

The bottom line is that,

applications for policies payable to charity will be issued in very limited circumstances where the insured's (a) net worth, (b) personal insurance in force, and (c) history of giving support the issuance of insurance in an amount commensurate with the insured's past contributions.

Further, the amount approved for charitable giving should not in any event exceed the amount of personal insurance for which an applicant would otherwise qualify. Therefore, an AXA underwriter testified that AXA would never have approved issuance of a multi-million dollar policy or her life for the benefit of a charity had AXA known of the Insured's true finances. The applications would have been denied also because there was no commensurate history of prior giving to the charity mentioned by the trustee and the amount would,  in any event, have far exceeded that for which the Insured would otherwise have qualified based on the Insured's modest finances.

Here, the Underwriting Guidelines provided economic-related basis and tables that support the affidavits of the underwriters that the policies at issue would not have been approved -  but for the misrepresentations made by the Insured.

The Trustee never raised an issue of fact as to the contents of the Underwriting Guidelines or the affidavits of AXA's underwriters.

Furthermore, discovery of other "policies AXA issued in the four year period surrounding the Zablidowsky application to insureds over 80 years old and with a face value of over 5 million" is unwarranted and would not, in any event, lead to any material facts that would raise an issue as to whether AXA would have denied the applications if it had knowledge of the Insured's true financial net worth.

The bottom line test of materiality, according to this court,

"is not whether the company might have issued the policy even if the information had been furnished; the question in each case is whether the company has been induced to accept an application which it might otherwise have refused"[x]. ...the undisclosed fact at issue is the fact that the net worth of the Insured was less than $225,000, which, according to AXA, would never support the policies' issues.

Having failed to raise an issue of fact or demonstrate that further discovery warrants denial of the motion, the Trustee failed to overcome AXA's showing of entitlement to summary judgment. Consequently, AXA's motion for summary judgment dismissing the breach of contract claim of the Trustee and granting AXA's second counterclaim for rescission was granted.


Given the egregious facts of this case, the conclusion of this court is hardly surprising.  This is just another example of how greed results in attempted insurance fraud - and how time consuming and expensive it is to litigate it.


Steve Leimberg

CITE AS: LISI Estate Planning Newsletter #1603 (February 11, 2010) at  Copyright 2010 Leimberg Information Services, Inc. (LISI).  Reproduction in Any Form or Forwarding to Any Person Prohibited - Without Express Permission.

Obtain a Free Download of Ashkenazi v. AXA Equitable Life.



Ashkenazi v AXA Equit. Life Ins. Co., 2009 NY Slip Op 33111U (N.Y. Sup. Ct. Dec. 16, 2009); Alexander Ashkenazi as Trustee of the Zablidowsky Life Insurance Trust v. AXA Equitable Life Insurance Company, No. 115034-2007, Motion No. 006.



[i] Mutual Benefit Life Ins. Co. v JMR Electronics Corp, 848 F.2d 30, 32 [2d Cir. 1988] quoting NY Ins. Law § 3105(a).

[ii] New England Life Ins. Co. v Taverna, [EDNY 2002] citing Process Plants Corp., 53 AD2d 214, 216 [1st Dept 1976].

[iii] New England Life Ins. Co. citing Mutual Benefit Life Ins. Co., 848 F2d at 32 (quoting NY Ins. Law § 3105(b).

[iv] New England Life Ins. Co. citing Mutual Benefit Life Ins. Co., 848 F2d at 32.

[v] First Financial Ins. Co. v Allstate Interior Demolition Corp., 193 F3d 109 [2d Cir 1999] citing Feldman v Friedman, 241 AD2d 433, 661 NYS2d 9 [1st Dept 1997].

[vi] First Financial Ins. Co. citing Sonkin Assocs. v Columbian Mutual Life Ins. Co., 150 AD2d 764 [2d Dept 1989] [insurer submitted neither the "underwriting manual" nor any "testimony about its underwriting practices with respect to similar applicants"]; Cutrone v American Gen. Life Ins. Co., 199 AD2d 1032, 606 NYS2d 491, 491 [4th Dept 1993] ["To meet that burden, defendant [insurer] was required to adduce proof concerning its underwriting practices with respect to applicants with similar conditions].

[vii] (New England Life Ins.; Kroski v Long Island Sav Bank FSB, 261 AD2d 136, 689 NYS2d 92 [1st Dept 1999] [underwriter's affidavit and guidelines demonstrated insurer's underwriting practices and were fact specific to the non-discretionary denial of coverage for persons with non-insulin dependent diabetes mellitus and peripheral vascular disease, the conditions at issue]; Feldman v Friedman, 241 AD2d 433, 661 NYS2d 9 [1st Dept 1997]; Crotty v State Mutual Life Assurance Co. of America, 80 AD2d 801 [1st Dept 1981] [where underwriting manual specified that where a suicide had been attempted, no life insurance policy was to be issued for at least one year, by reason of the withheld information, the policy was issued less than five months after the recorded suicide attempt. Under these circumstances, materiality is established as a matter of law]). As the court may not rely merely on statements by the insurer that it would not have issued the policy but for the representation (see Feldman, at 433; Curanovic v New York Cent. Mut. Fire Ins. Co., 307 AD2d 435, 437 [3d Dept 2003] [conclusory statements by insurance company employees, unsupported by documentary evidence, are insufficient to establish materiality as a matter of law]), the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins or rules pertaining to similar risks, to establish that it would not have issued the same policy if the correct information had been disclosed in the application (Curanovic [where insurer had no written underwriting policies on the topic of plaintiff's misrepresentations and the conclusory affidavits by its employees were insufficient as they did not identify a written underwriting policy or any specific applicants with similar histories that were denied coverage] citing Insurance Law § 3105 [c]).

[viii] Precision Auto Accessories, Inc. v Utica First Ins. Co., 52 AD3d 1198, 859 NYS2d 799 [4th Dept 2008], citing Curanovic; Courtney v Nationwide Mut. Fire Ins. Co., 179 F Supp2d 8 [NDNY 2001] [Defendant's submission of the affidavit of an underwriting specialist, and the Company's underwriting standards supports defendant's position that if plaintiffs had truthfully disclosed information about the prior judgments rendered against them and their prior losses, plaintiffs would have been denied insurance coverage]; see also Cohen v Mutual Ben. Life Ins. Co., 638 F Supp 695 [EDNY 1986] ["A determination of materiality .. . may be based on evidence of the insurer's practice with respect to similar risks, as shown by such documents as the insurer's underwriting manuals or rules, and by testimony of a qualified employee of the insurer that the insurer would not have issued the particular contract it did had the facts been disclosed" [emphasis added].

[ix] Tax Planning For Life Insurance (800 950 1216) and Tools and Techniques of Charitable Planning (800 543 0874) both describe numerous situations and techniques in which life insurance can be used effectively, ethically, and legally for charitable purposes.

[x] New England Life Ins. Co. quoting Geer v Union Mutual Life Ins. Co., 273 NY 261, 269.



  • 03-28-2012

Now that this decision has been reversed by the First Department on January, 31, 2012 ( will you be updating your reader base?