The latest in a string of insurer victories in “bonus annuity” suits came via a May 6, 2009 ruling by the U.S. District Court for the Western District of Tennessee. Like the plaintiffs in similar suits, the plaintiff in Cirzoveto v. AIG Annuity Ins. Co. alleged that the insurer designed the fixed annuity at issue to allow it to recoup a first-year interest bonus by subsequently crediting lower renewal rates.
Upon consideration of AIG’s summary judgment motion, the court rejected each of the plaintiff’s claims. Among other things, the court found there could be no contractual breach because the plaintiff’s annuity was credited first-year and renewal interest rates consistent with those promised in the contract.
Rejecting the misrepresentation claims, the court observed that AIG had disclosed in multiple documents that the bonus interest rate would be in effect only for the first year. Largely adopting the first substantive opinion in this genre of litigation, Sayer v. Lincoln National Life Ins. Co., issued by an Alabama federal court and affirmed by the Eleventh Circuit (see Expect Focus Vol. 1, Winter 2007), the court held that there could be no reasonable reliance on oral representations contrary to the terms of a written contract where the plaintiff had the opportunity to read that contract. The Court also relied on Sayer and Tennessee authorities to hold that AIG had no duty to disclose its internal ratemaking and pricing procedures.
This latest ruling on the merits, coupled with the class certification denial by a federal court in Pennsylvania (see Smith v. John Hancock Life Ins. Co. discussed in Expect Focus Vol. IV, Fall 2008), reflect insurers’ continued success in repelling this particular bonus theory.