PHL Variable Sues Its Insurers for Help With Defense Costs
The Nassau Financial subsidiary wants XL to pay bills related to cost-of-insurance increase suits.
A life insurer is suing its own insurers over coverage for lawsuit defense costs.
PHL Variable Insurance, a subsidiary of Nassau Financial Group, filed the complaint in a state court in California earlier this week.
PHL contends that XL Specialty Insurance, its primary insurer, or its providers of excess insurance coverage should cover the expenses it faced when it responded to two lawsuits over life insurance premium increases. AXA acquired XL Group in 2018, and XL Specialty is now a subsidiary of AXA.
Nassau Financial and PHL could not immediately be reached for comment. AXA said it could not comment on pending litigation.
The COI increases: PHL wrote many universal life policies, or policies designed to split the effects of the investment performance of the assets the policyholder is feeding into the policy for savings purposes from the effects of “cost of insurance” expenses.
The list of COI expenses includes the cost of administering policies and the cost of paying death benefits.
PHL says its policies included provision notifying policyholders that it could review COI rates regularly to see if they should be changed.
PHL notified policyholders in 2020 that it intended to increase universal life policy COI rates in 2021.
The litigation: A trust filed a single-plaintiff lawsuit against PHL over the COI rate increases in Connecticut in 2021.
A Missouri resident filed a separate suit, seeking class-action status, in Connecticut that same year.
PHL’s coverage: PHL says that XL declined to cover the COI litigation defense costs, based on policy provisions related to coverage for professional services and an exclusion for “interrelated wrongful acts.”
PHL asserts that its excess insurers, or insurers that have agreed to protect PHL against claims over XL’s coverage limit, will likely use the same reasoning as XL to deny coverage.
PHL has asked the court to determine the rights, duties and obligations of it and XL and to provide compensation, indemnification and recovery for breach of contract and other causes of action.
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