i want to propose a little different time arrangement counsel for plaintiffs all the plaintiffs i can take ten to fifteen minutes to start then we'll hear from each of the companies morning and and please the court really i'm a name is eric miller and i represent the plaintiffs the district court erred in dismissing these the complaints in these cases for lack of standing the complaints allege that the defendants insurance companies violated new york law by failing to disclose their use of shadow insurance transactions thereby making their financial situation appear stronger than it actually was and as the new york the injury here can be conceptualized in several different ways all of which are consistent with spoke a of the first of those is that the insurance companies conduct exposed the policyholders to a greater risk of default and the west has to be injury would be the nonpayment of the surance it seems to me granted there's a risk but that the risk is tied to that and the contingencies that would have to her before there would be a non then and in addition to all of that there would have to be a demand for an insurance that would be an aggregate demand that would be triggered by some catastrophic event that required everybody to claim their insurance at the same time and that is a future spec that is speculative it's in the future and and has so it's really a risk of nonpayment in the future here that  compound it is is that is is is attenuated based upon all the circumstances that would have to occur the nonpayment by the primary the the reinsure not paying then to that then calling on  happen under these circumstances and what how is that an image problem so you are correct as a legal matter that a risk to constitute an injury cannot be unduly speculative but it's it's speculative as to whether the risk would ever materialize and that's that's what speculative well i mean i mean just because some you know that means that that new york has his stricter rules and he's other states do that that doesn't change the calculus does it seem so but by definition money when you're talking about a risk there is some uncertainty is you know you are a couple of the factors that are present here are one of this is not just us saying that it's a risky you have a government agency that has said that this conduct exposed policyholders to risk too you have a statute determinative but it is it is relevant that the legislature has identified this risk as one that has created this disclosure requirement in order to protect against and part of the reason they did that of course is that  if by the time that the risk actually comes to fruition by the time it actually materializes there is no remedy for the plaintiffs because if we try to sue at that point that the companies will already be insolvent and will be no recovery so policy and when he or she is no money yes yes so that's that's the the concern that has animated you know regulation of insurance companies for many many years and strike consumers is not the same thing as actual harm is what i'm saying imminent harm by it but it is not abstract because as the term the financial services found the specific practice that was engaged in  here the harm to these policyholders by exposing them to a greater risk than arguing still arguing that the policies were are are worth less than they would be if if if there was no shadow insurance yes and that's another way to there is a study that wisconsin study came to the opposite conclusion that actually premiums would go up under the circumstances if there was actual if there was no  don't understand the study found that when you when you use shadow engine when the company uses shadow insurance to you know artificially lower its reserves it is able to offer insurance more cheaply you know that's consistent with the you know the defective product cases that we've cited you know when when you make a product using inferior components you can sell it more so but i thought the problem was that you paid too much for the insurance and she paid the right price  paid more than we should have we paid more than we should have for the insurance as it actually was or that's that's a conclusion that you've reached in your it seems to me is contradicted by that study that's all i'm saying the judge co default so the the price that the purchaser the policy holder cares about is the risk adjusted price and the study does not suggest a that has gone down and did that is i think i read it somewhere in the breeze and c i'm wrong that neither of these insurance carriers in their history has defaulted on insurance policies or our life insurance policies are very high that that is that's correct oh this is a hit in both cases metropolitan an equitable over one hundred years so give me an example o general financial know the words you sang in order to even constitute about the parade of events we have to assume that these two life insurance companies res letters are predator there and so forth and that there's all these nonpayment so you're saying that there have to be both a number of debts to make the demand for that for for payment of life insurance and the confluence of a financial catastrophe so that  answer another variable to the to the to the to the point i was thinking about so you'd actually have to have a financial collapse as well on top of me and then time that everybody dies and everybody happens to be  are companies and i can imagine these complex you talking about if that's what we have to do well i mean what i would what i would refer you to is is there that the report of the regulator and  know it's a question of the risk and whether it's you know the regulator has said that there is sort of emphasize this risk i think that the the the question has what we're trying to understand is what the anticipated mortality rate on a lower than anticipated return on the capital a reduction of capital why can't your clients go out now and buy insurance with the doesn't have this risk i just you know cancel our policies and go start paying premiums for another because there's there is a a lock in effect weigh it with life insurance or at this point the in the in the policyholders are older the premiums would like let out of these policies you just suggested that you wouldn't want them the the relief provided by section forty two to twenty six the new york insurance law is a return of the premium on that for you would and no insurance and continue to have new you get the growth on the premiums during the period the company had the money is that correct well we can we continue to have the policy but we get back you have the policy and be sued for by any person aggrieved and i think one of the things that that what does that mean to you it means that the contract remains in force but we get back the premium that was paid during the now it's been disclosed but still you get free life insurance forever  disclosure statute and exactly what the elements of a claim under the statute are disputed between the parties but that we go to the merits but it clearly does give a private right of action  to a person who has been aggrieved whatever that means but it has to mean at least an injury in fact but that obviously the statute c detriment by a misrepresentation and has standing to bring a claim in respect of that detrimental reliance and that misrepresentation in many contexts while i'm in love fraud  because we don't have any injury well i think what's vitally important here your honor is what's not to lift the plaintiffs here do not alleged that they purchased their policies based on a misunderstanding of the fact that is alleged not to be disclosed that is to say they are saying that they weren't aware or it didn't influence their decision one way or the other they bought life insurance they did they were not influenced one way or another by whether there was or wasn't a parental guarantee providing a credit enhanced meant to the bank they gave a letter of credit as collateral for the reserve credit  well your honor i did there's no allegation that our client wasn't in compliance with applicable regulation with respect to what was required to be disclosed in their statutory annual statements which is the there's no disk you're saying what they did was walk all the new york financials agency said was that well this happens to be a loophole in the law but it's like a tax loophole or a loophole  tofore been required i the new york superintendent are going i'm going to require it going forward and he did and by the way that disclosure is required in the portion of the statutory annual statement that is not publicly available so if the superintendent had thought this was information that was mute tiriel to policyholders or to rating agencies or to anybody else who's a member of the general public as opposed to of interest to the regulator you boxes that require information and you fill in the boxes it's it's quite analysis analogous there was no box that prior to two thousand and thirteen require the disclosure of the parental guarantees per se information but that exhibit is available only to the regulator it's not part of the publicly available that the companies were in fact using this method of reducing their researcher but it was just report d your honor at the reduction in the reserves was reported all along the allegation is not that there was any secrecy around the reserve credits let me explain if i may how this actually wor so if there is no reinsurance the insurance company has to hold admitted assets to support its reserve liabilities that's alleged in the complaint and it's in fact the case under new york law if there is a reinsurance transaction then the insurer receiving the losses to the reinsurer can take a reserve credit for some of those reserve liabilities all as set forth in new york law if and only if there is collateral to support the reinsurers obligations that meets the requirements of new york law you're right but not just in the letter credit your honor it has to be a letter of credit that complies with new york law which means it must be clean and unconditional it must be irrevocable and it must be evergreen that the standard in some jurisdictions with  and there is no allegation that it did not and in fact it did so let me explain what that means a new practice a parent parental guarantee seems to be the issue and that's why that's what the new york where the leaders are complaining about rangers your honor let me be clear about one thing there is no allegation in the complaint and there is nothing in the superintendents report that says that the rental guarantee to the bank of the letter of credit that is provided as collateral for the reinsurance obligations is in any way unlawful under new york law that is a credit enhanced meant to the bank the regulator doesn't regulate the bank it just enables the reinsurer to get the letter of credit with the backing of its appearance larger balance sheet that's all it is it has nothing to do with either the policyholder or x an equitable what matters then access equitable has the absolute unconditional right to draw down the letter of credit so it has the cash to pay the claims absolutely without the reinsurance it would have had admitted assets with the reinsurance it has the same amount of cash standing or yes as the parent and x are in effect interchange that is the parent is is given the guarantee but then the guarantee ultimately has to be backed by actions self am i wrong that your you are your honor respectfully it is the letter of credit is for the benefit of the insurer acts equitable in this case before the guarantee ever kicks in acts equitable draws down the letter of credit it has the cash once it has the cash that cash is in effect trapped in that into the and subject to the jurisdiction of the new york department of financial services the parent company is a public holding company in france i separately regulated and not an insurance company and subject to the laws of a different jurisdiction it has no power to prevent that drawdown from occurring or to influence what happens to the money there is no money you can pay the bank to pay for the bank to pay the guarantee your honor and let me back up because i think your honor is operating under a misapprehension of who owes what to whom the letter of credit is a credit facility provided by the bank the bank is responsible for paying upon a proper presentation by the beneficiary which is  equitable all that guaranteed is provide the bank with as surance that if the reinsurer doesn't read if the letters drawn down in the reinsurer doesn't repay the bank then the parent will repay the bank now suppose we've got this hypothetical liquidity crisis that plaintiffs have hypothesized what happens then well actually equitable tenders losses to its reinsure reinsurer hypothetically doesn't pay x it goes to the bank draws down the letter of credit it's got the cash now the bank says ok reinsurer you owe me that money it reassures a sorry i don't have any money i'm in a liquidity crisis and so the bank goes to the parent and says parent repay me the money under you know plaintiff's scenario of a trillion dollar balance sheet not being able to meet that obligation parent says sorry i don't have any money i can't repay you bank well that's you know unfortunate for the bank but x equitable has the money it has the money to pay claims and the bank can't come after  what the superintendent says he's concerned about and this is on on page two of the of the report is that transactions of this kind could potentially affect the stability of the broader financial system no if you're a regulator it's you know perfectly legitimate concern to think about the stability of the broader financial system but plaintiffs don't have a cause of action to protect the broader the stability of the and now we're really in the realm of speculation your honor and i you know i think as clapper and many other decisions of the supreme court make clear not only is an injury that's purely conjectural and hypothetical like the injury here insufficient to support standing but an injury that relies on the into remaining conduct of a third party activities not before the court is also insufficient to support standing so you know we can imagine whatever we like about the bank that doesn't help plaintiffs at all  reinsurer on the strength of the parental guarantee but not without the print till guarantee well so what does that have to do with the plaintiffs with the policyholders your risk of repayment but that's just an economic issue for the insurance group as a whole for your time has expired thank you very much your honor you will hear from  good morning your honour's may please the court and sandra hauser from denton's representing metropolitan life insurance company which i will for refer to this morning is met life just for convenience your honour's have i have heard this morning  not to show some theory that isn't wholly in implausible that we could and magine in our in our academic minds something unfolding the plaintiff's burden is just to show certainly impending injury and we contend that none of their theories come anywhere close and not only does the injury have to be certainly impending it has to be fairly traceable to the claim so i would take  back to look a little bit at what the claim is here and the statute under which the plaintiffs sued because the claim here is not that they were lied to by met life they don't even challenge met life or use of captive reinsurance the only claim in this case is that the insurers omitted to disclose certain details particularly the parental guarantee which which by the way was was regulator approved in these particular documents which are the statutory annual statements to regulators those disclosures were not required by the regulators and they were not required by statute and the plaintiffs never claim that they would not purchase the policies had they know and when you think about a scenario where both within and without these disclosures plaintive situation is exactly the same they have the same life insurance policy they've alleged no facts to show this court that either of these companies will be unable to pay that doesn't even get them past tier one of the of the parade of things that we've shown the court might happen here they first have to show that there's some certain likelihood that the insurers will be unable to pay in the first instance because it doesn't have to be a certain likelihood mightly that would do well it has to there has to be a likelihood and it has to be a when you're talking about a risk of injury it has to be a certainly impending risk under this under this court's precedent that's more than just the academic exercise that i think the plaintiffs have faced so hypothetically if and when the buildings stuart forming and banks come up  that the parade of horribles will occur and in addition were what i just i think it's just been pointed out here is that it's not just the inability to pay it's the parental guarantee evergreen letter of credit and the exact same amount as the captive reinsurance assets so that it can be drawn down to give the insurance company cash in hand so when you think about the disclosure issue right the the  company is exactly situated when it draws down that that line of credit has the cash in hand instead of the instead of the reinsurance they can't possibly waive policyholders any worse off it's there it's in exactly the same position as they would have been without this captive reinsurance and certainly when you think about the fairly traceable standard that the only claim is a lack of disclosure so that's right and really for that for that reason there are many many layers of protections in the law and assets that are held by these insurance companies separate and apart for the captive reinsurance  instances of catastrophic loss of life i mean after nine eleven these companies were unable no nobody failed to pay out on the insurance the only risk i can think of is a nuclear explosion in look if it was if it was the test of this quote this court that that a nuclear explosion might cause injury then there wouldn't be a case where you didn't get standing i mean i think it's not it i hopefully hopefully god help us all that's not a substantial certainly impending risk repeatedly to the department of financial services report and i think the court understand understands that that report and that it didn't say that any insurance company is at risk of an inability to pay claims it pointed to what was a loophole in their own actually in their in their own regulations for not requiring this disclosure they've now since required the disclosure but it's also relevant that they didn't require any corrective disclosures they didn't require any additional infusion of cash changed the whole process right i mean and actually sit since the time of this report then commissioner of insurance benjamin lawsky and this is in the record at the joint appendix three fifty six i'm sorry seventy after studying the issue further the department actually reduced the reserve requirements for insurers and new york saying that and we we have determined that our term life formula results in reserves that are high relative to actuarial experience and he just them downward saying it's being done in a prudent way that doesn't jeopardize policyholder protections or companies solvent see so new york actually reduced the reserve requirements after this report after studying the issue further if they were truly true could they do with the parental guarantee process with the reinsurance  have done that but they did not do that and you know and i think that's that's telling i can't speak to the full extent of what the record like there might be able not be able to do but they didn't they didn't do any of these things they required additional disclosures once they required the disclosures the ratings of of these companies didn't didn't change i mean nothing changed in his truck insurance market  insurance market no the insurance market didn't change at all actually the change that the commissioner made to lower the reserve requirements change change the industry more button but no not the disclosures that are not there was no impact on the pla t the regulator was concerned about what what the regulator knew because each of these captive reinsurance transactions is approved by the regulator and so they were they were pointing primarily to to a loophole in their own process and you can look at some of the rhetoric in that report that plaintiffs council would like to point you to i'm sure but when you look at the takeaways from the report the department said we want to  disclosures and we want to look at this further it's their own process that they were worried about their own regulatory scheme they were they were they were interested in looking at their own process they were interested in looking at the disclosure to do they were encouraging others to do the same and in fact there was an effort to fight among other insurance regulators no other regulator anywhere in the country followed new york there's actually a whole different protocol out there in some states that i don't need to take the court's time and getting and getting into but i think the the point is that plaintiff claim that they didn't get these disclosures now these disclosures are out there and nothing has changed about the other policies that about the ratings about the pricing you know and when you add to that the fact that these are policyholders who want the court to find that they were injured by missed by omissions that they never experienced that they didn't they don't impact them in any way that they never saw never knew about they don't say they would have employments their purchase it's not a claim that support this is a consumer protection statute that gives a contract holder a right to challenge a misrepresentation that affects them in their insurance i mean whatever we might what else we might say about that statute it requires a misrepresentation apparently affected that person in their own ability to secure and secure a point in the court remitted for that matter for that reason i say that every case there has to be a palpable deprivation that the plaintiffs can point to as a result of and allege non disclosure and the statute just doesn't doesn't support it thank you canto thank you thank you your honors this you know you have five minutes of rebuttal but before you start i have a question to cognizable quote injuries that were previously inadequate in law so you know even if even if we think that the you know the risk standing alone or the reduction in values standing alone are not adequate by themselves to constitute article three injury in fact the legislature can make that concrete and the legislature has done that here by conferring upon policyholders not up the public at large but people who enter into contractual relationships with the insurance companies insurance because the little credit has been run down from the bank is paid on the letter of credit and just is stuck with the inability to get repaid and the real guarantee is worthless life insurance contract and so the problem that the policyholder faces is you know some point the parent runs into trouble in the bank says ok we're not going to renew this line of credit you know going forward and now the parent ok so what you're talking about now is that the system the overall system is weak you know your honor if it could be before the letter of credit has even been drawn to the bank says you know what we're not going to renew this going forward so now the t what what the legislature has has done is to make concrete an injury that by itself might might not have been sufficient it's given a policyholders a right to accurate disclosures of information it's very much like the the rights  right to accurate disclosures on the theory that the purchaser is themselves may not ever go and peruse the regulatory filings but now having that information in the market leads to their somebody has to show a insurance company failures there was you know there have been and it doesn't require you know massive mortality new york in new york that's what's led to this part of what led to this whole regulatory