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The owner of a universal life insurance policy is suing a subsidiary of New York Life Insurance Co. over the policy's cost-of-insurance charges.
The policy owner, Timothy Toolan, says the New York Life subsidiary, New York Life Insurance and Annuity Corp., failed to incorporate the impact of the Tax Cuts and Jobs Act of 2017 on the performance of the policy.
The law cut the corporate income tax rate to 21%, from 35%.
"This was a boon for life insurance companies like New York Life," Toolan said in a complaint filed Monday at the U.S. District Court for the Southern District of New York.
The tax-rate change reduced New York Life's tax payments by hundreds of millions of dollars per year, and the company should use the windfall to reduce cost-of-insurance charges, the plaintiff said.
Toolan is seeking court permission to represent a class consisting of all New York Life Insurance and Annuity Corp. who have not seen the impact of the tax-rate change applied to their universal life cost-of-insurance charges.
A universal life policy is a policy set up in such a way that the company breaks out the performance of the assets supporting the benefits, mortality expenses and other expenses separately.
Representatives for Toolan and for New York Life could not immediately be reached for comment.
What it means: If Toolan prevails, many universal life policy owners could ask the issuers to incorporate the 2017 tax-rate change in cost-of-insurance charge calculations.
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