21-2716 (L)

Principal Life Insurance Co. v. Brand

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A 

SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS 

GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S 

LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH 

THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN 

ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING 

TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED 

BY COUNSEL. 

At a stated term of the United States Court of Appeals for the Second Circuit, held at the 

Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 

30th day of November, two thousand twenty-three.

PRESENT: AMALYA L. KEARSE,

SUSAN L. CARNEY,

MYRNA PÉREZ,

Circuit Judges.

_____________________________________

PRINCIPAL LIFE INSURANCE COMPANY,

Plaintiff-Counter-Defendant-Appellee-Cross-Appellant,

v. Nos. 21-2716, 21-2908

JASON P. BRAND,

Defendant-Counter-Claimant-Appellant-Cross-Appellee.

_____________________________________

FOR DEFENDANT-APPELLANT-CROSS-APPELLEE: TODD D. KREMIN,

Greenblatt Agulnick Kremin P.C.

Great Neck, New York 

FOR PLAINTIFF-APPELLEE-CROSS-APPELLANT: LOUIS P. DIGIAIMO (Janet Nagotko,

on the brief), McElroy, Deutsch, 

Mulvaney & Carpenter, LLP

 Tinton Falls, New Jersey 
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Appeal from a judgment of the United States District Court for the Eastern District of 

New York (Gary R. Brown, Judge).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND 

DECREED that the judgment of the district court is AFFIRMED IN PART and VACATED 

IN PART, and the case is REMANDED for further proceedings. 

Jason Brand (“Brand”) appeals from the judgment of the district court entered on 

September 30, 2021, challenging the court’s dismissal of Brand’s counterclaims for breach of 

contract and breach of the implied covenant of good faith and fair dealing. Brand’s 

counterclaims are based on the failure of Principal Life Insurance Company (“Principal Life”) to 

pay him benefits under his disability insurance policy (the “Policy”). Principal Life cross-appeals

from the same judgment, assailing the court’s (1) dismissal of its claim for an order declaring the 

Policy “null and void and rescinded,” (2) failure to decide whether Brand committed fraud in 

obtaining the Policy, and (3) consideration of the 2016 determination of disability issued to 

Brand by the Social Security Administration Office of Disability Adjudication and Review. We 

assume the parties’ familiarity with the underlying facts, procedural history, and issues on 

appeal, to which we refer only as necessary to explain our decision to affirm in part, vacate in 

part, and remand. 

STANDARD OF REVIEW

We review the grant of summary judgment de novo, construing the evidence in favor of 

the nonmoving party. See Janes v. Triborough Bridge & Tunnel Authority, 774 F.3d 1052, 1054 

(2d Cir. 2014). Where rulings on cross-motions for summary judgment are appealed, each 
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party’s motion must be examined on its own merits, with all reasonable inferences drawn against 

the party whose motion is under consideration. See Morales v. Quintel Entertainment, Inc., 249 

F.3d 115, 121 (2d Cir. 2001).

DISCUSSION

New York applies general rules of contract interpretation to insurance policies. See Olin 

Corp. v. OneBeacon Am. Ins. Co., 864 F.3d 130, 147 (2d Cir. 2017). The words and phrases in a 

contract must be given their plain meaning, id., and the contract must be construed to give full 

meaning and effect to all of its provisions. Galli v. Metz, 973 F.2d 145, 149 (2d Cir. 1992). 

Contract terms are ambiguous, however, if they are “capable of more than one meaning when 

viewed objectively by a reasonably intelligent person who has examined the context of the entire 

integrated agreement and who is cognizant of the customs, practices, usages and terminology as 

generally understood in the particular trade or business.” Nowak v. Ironworkers Local 6 Pension 

Fund, 81 F.3d 1182, 1192 (2d Cir. 1996) (internal quotation marks omitted). But “[s]training a 

contract’s language beyond its reasonable and ordinary meaning” will not be understood to 

“create an ambiguity.” Brass v. Am. Film Techs., Inc., 987 F.2d 142, 149 (2d Cir. 1993). Finally, 

“all provisions of a contract [should] be read together as a harmonious whole.” Seabury Constr. 

Corp. v. Jeffrey Chain Corp., 289 F.3d 63, 69 (2d Cir. 2002) (internal quotation marks omitted).

1. A Judicial Determination of Fraud is Required for Principal Life to Rescind

The critical terms of the Policy for present purposes are the Time Limit on Certain 

Defenses provision (“Time Limit” provision) and the Fraud provision, which follows the Time 

Limit provision directly in the Policy’s text. They read as follows:
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TIME LIMIT ON CERTAIN DEFENSES 

In issuing the coverage(s) under this policy and any attached riders, We [i.e., the 

Insurer] have relied on the statements and representations on the application. We 

have the right to void the coverage(s) due to a material misstatement or omission 

in the application. However, after two years from the effective date of coverage(s),

no material misstatements or omissions, except fraudulent statements or omissions, 

made by You or the Owner in an application will be used to void the coverage(s) 

or deny a claim for Disability which starts after the expiration of such two-year 

period. . . .

FRAUD

Upon a judicial decision in a civil or criminal court that You and/or the Owner have 

committed fraud in obtaining this policy or the filing of a claim under this policy, 

We may void this policy.

App’x at 2490 (emphases added). We interpret the words “policy” and “coverage,” and the 

phrase “deny a claim,” in accordance with their ordinary and plain meanings and as parties to an 

insurance contract would reasonably understand them. See Olin, 864 F.3d at 147–48. 

Principal Life contends that the Time Limit provision entitled it to void the Policy and 

obtain a judicial ruling of rescission. In doing so, it attempts to equate voiding “the coverage” 

(under the Time Limit provision) with voiding “the [P]olicy” (under the Fraud provision). We 

are unpersuaded. To begin, that the phrasing of the two clauses is different suggests that they are 

best understood as having different meanings. The Time Limit provision addresses 

“void[ing] . . . coverage” and “deny[ing] a claim.” Both actions reject a particular claim or set of 

claims; neither purports to terminate the Policy as a whole. In contrast, the Fraud provision 

addresses the conditions on which Principal Life may “void th[e] [P]olicy.” We understand 

“coverage” under the Policy and the continued existence of the Policy—that is, of the contractual 

agreement between the insurer and the insured—to be two distinct concepts, as reflected by their 
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different phrasing. For example, a type of coverage might be “voided” as described in the Time 

Limit provision while the Policy itself could continue in existence, offering other coverages or 

rights and requiring continued payment of premiums. Further, the Time Limit provision focuses 

on defenses that the insurer may assert (denying a claim or coverage), whereas the Fraud 

provision sets out affirmative actions that the insurer may take (rescinding or voiding the Policy 

as a whole). Only the Fraud provision permits the insurer to void the Policy as a whole, and by 

its plain terms it allows the insurer to do so only “[u]pon a judicial decision in a civil or criminal 

court that [the insured] . . . ha[s] committed fraud in obtaining this policy or the filing of a claim 

under this policy.” App’x at 2490.

Principal Life concedes that it has not obtained a judicial determination of fraud with 

regard to Brand’s obtaining or filing a claim under the Policy. Principal Life argues that it can

rely on the Fraud provision to rescind where an “insured is adjudicated criminally liable,”

Appellee’s Br. at 41, but that argument fails here because none of the charges of which Brand 

was convicted concerned fraud with regard to obtaining, or making a claim under, the Policy. See

App’x at 1211–12. We conclude that Principal Life has not shown an entitlement to rescission at 

this stage of the proceedings.

2. The Criminal Activity Exclusion Applies and Justified Principal Life’s Denial of 

Coverage

In New York, “[t]he law governing the interpretation of exclusionary clauses in insurance 

policies is highly favorable to insureds.” Beazley Ins. Co. v. ACE Am. Ins. Co., 880 F.3d 64, 68 

(2d Cir. 2018) (internal quotation marks omitted). Courts may enforce such a clause only when it 

has “a definite and precise meaning, unattended by danger of misconception . . . and concerning 
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which there is no reasonable basis for a difference of opinion.” Id. at 68–69 (internal quotation 

marks omitted). “[W]henever an insurer wishes to exclude certain coverage from its policy 

obligations, it must do so in clear and unmistakable language. Any such exclusions or exceptions 

from policy coverage must be specific and clear in order to be enforced.” Id. at 69 (internal 

quotation marks omitted). When an insurer relies upon an exclusionary clause to deny coverage, 

it bears the burden of demonstrating that the allegations can be interpreted in one way only: to 

exclude coverage. See Town of Massena v. Healthcare Underwriters Mut. Ins. Co., 98 N.Y.2d 

435, 444 (2002).

The Policy contains the following exclusion for criminal activity (the “Criminal Activity 

Exclusion”): 

This policy does not pay benefits for an injury or sickness which in whole or in part 

is caused by, contributed to by, or which results from: . . . Your commission of or 

Your attempt to commit a felony, or Your involvement in an illegal occupation[.]

App’x at 2483 (emphasis added). Principal Life contends that this exclusion entitled it to deny 

Brand’s 2014 claim for coverage.

Estoppel. As an initial matter, we find no merit in Brand’s contention that Principal Life 

should be estopped from relying on the Criminal Activity Exclusion. He asserts that it invoked 

the Criminal Activity Exclusion for the first time in its motion for summary judgment. The 

record shows, however, that Principal Life referenced the Policy’s four exclusions generally in 

its Answer and Affirmative Defenses, and, given the nature of the other exclusions,

1 this was

1 The Policy contains four exclusions. It excludes any “injury or Sickness which in whole or in part is caused by, 

contributed to by, or which results from: 1. Intentional, self-inflicted injury; or 2. Your commission of or Your 

attempt to commit a felony, or Your involvement in an illegal occupation; or 3. War or act of war (whether declared 

or undeclared), or service in the Armed Forces or unit auxiliary thereto; or 4. Loss We have excluded by name or 
7

likely sufficient to put Brand on reasonable notice that Principal Life would later rely on the 

Criminal Activity Exclusion, at least so as to undercut his estoppel argument.

But even if Principal Life’s Answer and Affirmative Defenses left any doubt as to the 

precise defenses to coverage that it asserted, at the summary judgment stage a district court may 

entertain unpleaded defenses in the absence of undue prejudice to the plaintiff, bad faith or 

dilatory motive on the part of the defendant, futility of the defense, or undue delay of the 

proceedings. Rose v. AmSouth Bank of Fla., 391 F.3d 63, 65 (2d Cir. 2004). Brand has 

demonstrated none of these factors. Crucially, Brand has not shown any prejudice at all: he had 

ample opportunity to address Principal Life’s Criminal Activity Exclusion argument in his 

opposition to its motion for summary judgment. In short, Brand had a “full and fair opportunit[y] 

to respond,” even assuming that Principal Life pleaded its affirmative defense in “arguably 

conclusory terms.” EMA Fin., LLC v. Chancis, 80 F.4th 395, 404 (2d Cir. 2023). The district 

court therefore properly entertained Principal Life’s argument that the Criminal Activity 

Exclusion barred Brand’s claim for benefits.

Application of the Criminal Activity Exclusion. As to the applicability of the Criminal 

Activity Exclusion, Brand premised his November 2014 claim for disability benefits on his

assertion that he was “total[ly] disab[led]” by “extreme anxiety” that began in “July 2014, [after]

a warrant was served” on him by officers of the New York State Attorney General’s Office.

App’x at 451 (quoting application for benefits). The application cites no other cause or type of 

disability. On February 8, 2016—about fifteen months after filing the application—Brand 

specific description in any attached rider or endorsement.” App’x at 2483.
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entered into a plea agreement in which he admitted to committing, in connection with his 

businesses, and between January 1, 2009, and March 11, 2015, the felony crimes of enterprise 

corruption, insurance fraud in the first degree,2 and grand larceny in the second degree. App’x at 

1205, 1209. The Criminal Activity Exclusion excludes coverage when an insured’s commission 

of a felony “in whole or in part . . . contribute[s] to” the insured’s “injury or [s]ickness.” App’x 

at 2483 (emphasis added). 

Brand thus has sworn that he committed enterprise corruption, insurance fraud, and grand 

larceny in the period before he submitted his disability claim for “extreme anxiety.” Those 

activities led to the execution of a search warrant that Brand cited in his disability claim and to 

his subsequent prosecution. We therefore see no genuine dispute of fact as to whether Brand’s 

commission of these felonies in part “caused” or “contributed to” the extreme anxiety that 

formed the basis of his 2014 disability application: his felonious conduct led to the warrant and 

the prosecution, and it was those actions that in Brand’s own words triggered his extreme 

anxiety.

Brand resists this conclusion, contending that it was the criminal proceedings brought 

against him, not his commission of several felonies, that were the proximate cause of his 

disability. This argument is meritless. Even if the criminal proceedings triggered his most 

extreme anxiety, it was Brand’s commission of the felonies that led to those criminal 

proceedings that in turn led to his disabling anxiety. There is no genuine dispute that Brand’s 

felony conduct “contributed to” the onset of that anxiety.

2 The insurance fraud of which Brand was convicted concerned the operations of his business, not his application 

for, or his claim under, the Policy.
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Brand raises one final protest, arguing that the district court erred by failing to distinguish 

between the physical disability and the mental disability for which he claimed benefits in the 

2014 application. The disability that Brand cited in his application, however, was “extreme 

anxiety” that began in “July 2014, [after] a warrant was served.” App’x at 451. Although Brand 

asserts on appeal that he “submitted a claim to Principal [Life] for both a mental disability and a 

physical disability,” Appellant’s Br. at 3, see also id. at 27–28, Brand does not cite any record 

evidence showing that he filed a separate claim for disability benefits related to a physical 

disability. 

To support his assertion that he is physically disabled within the meaning of the Policy

and therefore entitled to benefits notwithstanding the absence of an application submitted on that 

ground, Brand points to the favorable disability determination issued to him in 2016 by the 

Social Security Administration. See id. at 27.

3 Even assuming, over Principal Life’s objections,

that the Social Security Administration’s determination is admissible, it does not help Brand: that

determination considered both Brand’s physical ailments and his psychiatric ones in finding him 

disabled. Indeed, the determination letter shows that the Social Security Administration examiner 

concluded that Brand has “residual functional capacity to perform sedentary work as defined in 

20 CFR 4041.1567(a),” in part, because he “can occasionally maintain attention and 

concentration, maintain a regular schedule[,] appropriately deal with stress[,] and interact 

3 Brand also cites to Principal Life’s rescission letter, in which Principal Life sought to rescind the Policy, in part, on 

grounds that Brand failed to disclose fully his history of neck and back injuries in his 2012 application for disability 

insurance. Appellant’s Br. at 28 (citing App’x at 277). That letter has no bearing, however, on the question whether 

Brand has submitted a claim for disability benefits based on his physical disabilities.
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appropriately with others.” D. Ct. Dkt. 300-8 at 12. In reaching that conclusion, the examiner

gave “great weight” to a psychiatric evaluation finding “psychiatric issues . . . hindered [Brand’s] 

functioning.” Id. at 15. Thus, Brand has not shown that he is disabled within the meaning of the 

Policy independent of his psychiatric disabilities; accordingly, his claim falls within the ambit of 

the Criminal Activity Exclusion.

3. The Question Whether Principal Life Is Entitled to Rescind the Policy is Justiciable

The district court declined to address Principal Life’s request for a declaration that the 

Policy was void, reasoning that Principal Life’s claim for an order rescinding the Policy was 

“rendered moot by [the magistrate judge’s] determination that [Brand] is not entitled to coverage 

under the [P]olicy. In other words, because Principal Life has been relieved of its obligation to

pay the disputed claim, there remains no ‘substantial controversy’ between the parties that would 

warrant a declaratory judgment.” Principal Life Ins. Co. v. Brand, No. 15-cv-3804, 2021 WL 

4458843, at *2 (E.D.N.Y. Sept. 29, 2021). On de novo review, we disagree.4

Article III of the Constitution limits the “judicial Power of the United States” to “Cases”

and “Controversies.” U.S. Const. art. III, §§ 1–2. As codified in title 28 of the United States 

Code, the Declaratory Judgment Act (DJA) provides that “[i]n a case of actual controversy 

within its jurisdiction, . . . any court of the United States . . . may declare the rights and other 

legal relations of any interested party seeking such declaration, whether or not further relief is or 

4 As the district court pointed out, this case has involved “more than six years of litigation, hundreds of court filings, 

and approximately 75 orders issued by at least five different judicial officers.” Brand, 2021 WL 4458843, at *1 

(emphasis in original). Still, the district court’s treatment of the rescission claim was both incorrect and internally 

inconsistent. The court concluded that the rescission claim was “moot” and thus that there was “no substantial 

controversy,” id. at *2 (internal quotation marks omitted), yet it also entered a final judgment purporting to grant 

“summary judgment as to [Principal Life’s] rescission claims,” Sp. App’x at 57, an adjudication on the merits.

Without jurisdiction, the court could not enter a merits determination on the rescission claim. 
11

could be sought.” 28 U.S.C. § 2201(a). The Supreme Court has instructed that “the phrase ‘case 

of actual controversy’ in the [DJA] refers to the [same] type of ‘Cases’ and ‘Controversies’ that 

are justiciable under Article III.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007). 

The critical question for courts in assessing their jurisdiction under Article III to entertain 

a claim for declaratory relief “is whether . . . there is a substantial controversy, between parties 

having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a 

declaratory judgment.” Id. (internal quotation marks omitted). That “liability may be contingent 

does not necessarily defeat jurisdiction of a declaratory[-]judgment action. Rather, courts should 

focus on the practical likelihood that the [relevant] contingencies will occur.” E.R. Squibb & 

Sons, Inc. v. Lloyd’s & Companies, 241 F.3d 154, 177 (2d Cir. 2001) (internal quotation marks 

omitted). Relevant here, we have observed that “litigation over insurance coverage has become 

the paradigm for asserting jurisdiction [under the DJA] despite future contingencies that will 

determine whether a controversy ever actually becomes real.” Id. (internal quotation marks 

omitted).

We have explained that Brand’s 2014 claim for benefits is barred by the Criminal 

Activity Exclusion and that Principal Life was within its rights to reject the claim. Accordingly, 

the related breach of contract claim no longer presents a substantial controversy between the 

parties. Nevertheless, because we conclude that Principal Life cannot rescind the Policy without

a judicial determination of whether Brand committed fraud in obtaining the Policy or submitting 

a claim under the Policy, Brand remains contractually entitled to submit additional claims under 

the Policy based on a different—perhaps a future—disability, provided that he meets other 
12

applicable conditions (such as continued payment of premiums, for example). The continued 

existence of that right (along with the potential liability for Principal Life) suffices to make 

Principal Life’s claim for rescission a substantial, immediate, and real controversy. See Republic 

Ins. Co. v. Masters, Mates & Pilots Pension Plan, 77 F.3d 48, 51 (2d Cir. 1996) (an insurer’s 

“claim to rescind its policies is by itself a justiciable controversy,” even if there are “no active 

claims pending at the time”). On remand, the district court should determine whether Principal 

Life has satisfied the conditions necessary for rescission of the Policy.

The district court thus erred in dismissing the remaining claim asserted by Principal Life. 

Accordingly, we vacate the district court’s judgment insofar as it dismissed Principal Life’s

claim for rescission, and we remand the case for further proceedings.

CONCLUSION

We AFFIRM so much of the judgment as granted Principal Life’s motion for summary 

judgment dismissing, based on the Criminal Activity Exclusion, Brand’s counterclaims for breach 

of contract and breach of the implied covenant of good faith; we VACATE so much of the 

judgment as granted Brand’s motion for summary judgment dismissing Principal Life’s claim for 

rescission of the Policy, and we REMAND the case for further proceedings on that claim.

FOR THE COURT: 

Catherine O’Hagan Wolfe, Clerk of Court