author: Jones, J. Pigott, J. (dissenting).

text:
    [939 NE2d 1197, 914 NYS2d 67]
    In the Matter of the Arbitration between Carmen I. Falzone, Now Known as Carmen I. Cordero, Appellant, and New York Central Mutual Fire Insurance Company, Respondent.
    Argued September 16, 2010;
    decided October 21, 2010

      POINTS OF COUNSEL

      Gross, Shuman, Brizdle & Gilfillan, EC., Buffalo (Hugh C. Carlin and David H. Elibol of counsel), for appellant.
    I. The arbitrator exceeded his authority in redetermining the previously determined issue of causal relation despite the fact there were no factual disputes regarding issues or parties involved. (Matter of Ranni [Ross], 58 NY2d 715; Clemens v Apple, 102 AD2d 236, 65 NY2d 746; Casey v Country-Wide Ins. Co., 240 AD2d 232; Matter of Pinnacle Envt. Sys. [Cannon Bldg, of Troy Assoc.], 305 AD2d 897; Ryan v New York Tel. Co., 62 NY2d 494; Motor Veh. Acc. Indem. Corp. v Travelers Ins. Co., 246 AD2d 420; Matter of New York City Tr. Auth. v Transport Workers’ Union of Am., Local 100, AFL-CIO, 6 NY3d 332; Matter of Medina Power Co. [Small Power Producers], 241 AD2d 915; Matter of American Honda Motor Co. v Dennis, 259 AD2d 613; Matter of Ulster Elec. Supply Co. v Local 1430, Intl. Bhd. of Elec. Workers, 253 AD2d 765.) II. The SUM arbitration award should be vacated on the grounds it violates strong public policy favoring finality and the resolution of disputes and arbitrability of such disputes. (Merrill Lynch, Pierce, Fenner & Smith v Benjamin, 1 AD3d 39; Matter of Reilly v Reid, 45 NY2d 24; Xiao Yang Chen v Fischer, 6 NY3d 94; Motor Veh. Acc. Indem. Corp. v Travelers Ins. Co., 246 AD2d 420; Casey v Country-Wide Ins. Co., 240 AD2d 232; Matter of Maye [Bluestein], 40 NY2d 113; Matter of Mole [Queen Ins. Co. of Am.], 14 AD2d 1; Clemens v Apple, 65 NY2d 746.) III. The SUM arbitrator’s award is wholly irrational and unsupported by the evidence. (Matter of Town of Callicoon [Civil Serv. Empls. Assn., Town of Callicoon Unit], 70 NY2d 907; Rudolph’s Women’s Apparel of Mt. Kisco v Chiappinelli, 167 AD2d 379; Matter of Aetna Cas. & Sur. Co. v Bonilla, 219 AD2d 708; Maddison v Furneaux, 8 Misc 3d 1012[A], 2005 NY Slip Op 51059[U].)

      Brown & Kelly, LLP, Buffalo (H. Ward Hamlin, Jr., of counsel), for respondent.
    I. The question of collateral estoppel or issue preclusion is solely within the province of the arbitrator, who is free to redetermine an issue based on new evidence or a different burden of proof. (Bronx Radiology, P.C. v New York Cent. Mut. Fire Ins. Co., 17 Misc 3d 97; Matter of Allen [New York State], 53 NY2d 694; Matter of New York City Tr. Auth. v Transport Workers’ Union of Am., Local 100, AFL-CIO, 6 NY3d 332; Matter of Mays-Carr [State Farm Ins. Co.], 43 AD3d 1439; Matter of United Fedn. of Teachers, Local 2, AFT, AFL-CIO v Board of Educ. of City School Dist. of City of N.Y., 1 NY3d 72; Matter of Silverman [Benmor Coats], 61 NY2d 299; Matter of Sprinzen [Nomherg], 46 NY2d 623; Board of Educ. of Patchogue-Medford Union Free School Dist. v Patchogue-Medford Congress of Teachers, 48 NY2d 812; Matter of Port Auth. of N.Y. & N.J. v Office of Contract Arbitrator, 254 AD2d 194, 93 NY2d 913; Clemens v Apple, 102 AD2d 236, 65 NY2d 746.) II. The Appellate Division applied the applicable standard for review of an arbitrator’s award. (Matter of Motor Veh. Acc. Indem. Corp. v Aetna Cas. & Sur. Co., 89 NY2d 214; New York Cent. Mut. Fire Ins. Co. v Nichols, 192 AD2d 1131; Matter of New York Cent. Mut. Fire Ins. Co. v Drasgow, 12 AD3d 1038, 4 NY3d 841; Matter of Singleton [Fireman’s Fund Ins. Co.], 247 AD2d 868.) III. The subject arbitration award was not imperfectly executed or irrational and had an evidentiary basis. (Matter of Town of Callicoon [Civil Serv. Empls. Assn., Town of Callicoon Unit], 70 NY2d 907; Matter of Motor Veh. Acc. Indem. Corp. v Aetna Cas. & Sur. Co., 89 NY2d 214.)
   OPINION OF THE COURT

Jones, J.

In this CPLR article 75 proceeding arising from respondent’s determination denying petitioner’s claim for supplementary uninsured/underinsured motorist (SUM) benefits, the primary issue before this Court is whether the SUM arbitrator exceeded the scope of his authority by not giving preclusive effect to a prior arbitration award involving the same parties and accident.

On May 15, 2004, petitioner was involved in a two-car collision. Subsequently, she filed a claim for no-fault benefits with respondent insurer, alleging she had injured her shoulder. When respondent denied petitioner’s no-fault claim on the ground that her shoulder injury was not related to the accident, petitioner challenged the denial in arbitration. Disagreeing with respondent’s denial, the no-fault arbitrator, in May 2008, ruled that respondent’s denial based on lack of relatedness was inappropriate and awarded petitioner $4,354.56 in no-fault benefits.

After petitioner settled her lawsuit against the driver of the other vehicle for that driver’s $25,000 policy limit, she sought SUM benefits in the amount of $75,000 from respondent insurer. Citing the prior denial of no-fault benefits as being unrelated to the accident, respondent denied the claim for SUM benefits. On February 28, 2008, during the pendency of the no-fault arbitration, petitioner sought to challenge the denial of SUM benefits in a separate arbitration proceeding.

At the hearing in the SUM arbitration, held about two months after the decision in the no-fault arbitration, respondent again argued that the injury was unrelated to the accident, while petitioner countered that the SUM arbitrator was bound by the prior determination of the no-fault arbitrator under the doctrine of collateral estoppel. After the hearing, in August 2008, the SUM arbitrator issued an award in favor of respondent denying SUM benefits. In a finding directly opposite that of the no-fault arbitrator, the SUM arbitrator concluded that petitioner’s injury was not caused by the accident, and also found that her recovery from the other driver was more than adequate compensation for any injuries sustained in the accident.

Thereafter, petitioner commenced this CPLR article 75 proceeding to set aside the SUM arbitration award in respondent’s favor. Petitioner argued that respondent was collaterally estopped from relitigating the causation issue. Respondent sought confirmation of the award.

Supreme Court vacated the SUM arbitration award and ordered that a new arbitration be scheduled before a different arbitrator. The court concluded that although it is within an arbitrator’s discretion to determine the preclusive effect of a prior arbitration award, here, there was nothing in the SUM arbitrator’s decision to indicate whether petitioner’s collateral estoppel argument was even considered.

By a 3-2 vote, the Appellate Division reversed Supreme Court’s order and confirmed the SUM arbitration award (64 AD3d 1149 [4th Dept 2009]). The majority concluded that (1) “[t]he fact that a prior arbitration award is inconsistent with a subsequent award” is not a ground, pursuant to CPLR 7511, for vacating an arbitration award, (2) it is within the arbitrator’s sole discretion to determine the preclusive effect of a prior award, and (3) “the SUM arbitrator was not required to state that he had considered” the collateral estoppel argument raised before him. (64 AD 3d at 1150.) The dissenting Justices countered that the SUM arbitrator exceeded his power by disregarding the preclusive effect of the prior no-fault arbitration award, which involved the same parties and was based on the same facts. Petitioner appeals as of right pursuant to CPLR 5601 (a); we now affirm.

It is well settled that a court may vacate an arbitration award only if it violates a strong public policy, is irrational, or clearly exceeds a specifically enumerated limitation on the arbitrator’s power (see Matter of New York City Tr. Auth. v Transport Workers’ Union of Am., Local 100, AFL-CIO, 6 NY3d 332, 336 [2005]; Matter of United Fedn. of Teachers, Local 2, AFT, AFL-CIO v Board of Educ. of City School Dist. of City of N.Y, 1 NY3d 72, 79 [2003]; CPLR 7511 [b] [1] [iii]). Even where an arbitrator has made an error of law or fact, courts generally may not disturb the arbitrator’s decision (see Transport Workers’ Union of Am., Local 100, AFL-CIO, 6 NY3d at 336 [“(C)ourts are obligated to give deference to the decision of the arbitrator. This is true even if the arbitrator misapplied the substantive law in the area of the contract” (citations omitted)]). Here, petitioner’s claim—that the arbitrator erred in failing to apply collateral estoppel to preclude litigation of the causation issue in the SUM arbitration—falls squarely within the category of claims of legal error courts generally cannot review.

In this appeal, we are merely applying this State’s well-established rule that an arbitrator’s rulings, unlike a trial court’s, are largely unreviewable (see Board of Educ. of Patchogue-Medford Union Free School Dist. v PatchogueMedford Congress of Teachers, 48 NY2d 812, 813 [1979] [this Court, addressing the doctrine of res judicata, held that if a grievance is within the scope of the arbitration agreement and would do no harm to the State’s public policy in favor of arbitration, further judicial inquiry into arbitrability is foreclosed and “any remaining questions, including whether a prior award constitutes a bar to the relief sought, are within the exclusive province of the arbitrator to resolve” (citations omitted)]; Matter of City School Dist. of City of Tonawanda v Tonawanda Educ. Assn., 63 NY2d 846, 848 [1984] [“The effect, if any, to be given to an earlier arbitration award in subsequent arbitration proceedings is a matter for determination in that forum”]; compare with Clemens v Apple, 65 NY2d 746 [1985], and Matter of American Ins. Co. [Messinger—Aetna Cas. & Sur. Co.], 43 NY2d 184, 191 [1977] [holding that if an issue between identical parties is resolved in an arbitration proceeding, the determination as to that issue may be binding on subsequent court proceedings under the doctrine of collateral estoppel where the parties have had a full and fair opportunity to litigate the issue]). Thus, if a court makes an error and fails to properly apply collateral estoppel, the issue can be reviewed and corrected on appeal. By contrast, if an arbitrator erred in not applying collateral estoppel, the general limitation on judicial review of arbitral awards precludes a court from disturbing the decision unless the resulting arbitral award violates a strong public policy, is irrational, or clearly exceeds a specifically enumerated limitation on the arbitrator’s power.

Here, the prior (no-fault) arbitration award involved the same parties, the same accident, the same injuries, and resolution of the same issue (causation) as the subsequent (SUM) arbitration award. Respondent insurer, a party to the prior arbitration, lost on the causation issue. Petitioner, the prevailing party on that issue in the prior arbitration, reasonably argued that collateral estoppel should apply to bar relitigation of the causation issue in the subsequent SUM arbitration. The SUM arbitrator rejected petitioner’s argument, had the parties relitigate the causation issue and, contrary to the no-fault arbitrator’s determination, found in respondent insurer’s favor on the causation issue.

It is not for us to decide whether the SUM arbitrator erred in not applying collateral estoppel (i.e., not giving preclusive effect to the no-fault arbitrator’s determination on the issue of causation). Because the SUM arbitration award was not patently irrational or so egregious as to violate public policy, the instant SUM arbitration award (and whether the SUM arbitrator erred or exceeded his authority) is beyond this Court’s review powers.

Since the instant claim involves the doctrine of collateral estoppel, not res judicata, petitioner’s reliance on Appellate Division decisions barring subsequent arbitrations on res judicata grounds is misplaced.

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Pigott, J. (dissenting).

I respectfully dissent. In my view, the SUM arbitrator exceeded his authority in disregarding the no-fault arbitrator’s finding on the issue of causation and substituting his own, when the identical parties had previously litigated the identical issue.

Insurance Law § 5106, titled “Fair claims settlement,” was designed for its titled purpose: to provide a forum where persons sustaining injuries in auto accidents could quickly adjudicate whether or not their no-fault carriers would pay their claims (see Roggio v Nationwide Mut. Ins. Co., 66 NY2d 260, 264 [1985]). Here, petitioner applied for no-fault benefits and the insurer denied those benefits because its physician concluded that the shoulder injury was not related to the accident. Petitioner sought arbitration of that decision, taking a significant risk that a negative outcome on the causation issue would preclude her from bringing a civil suit to recover against her tortfeasor and, subsequently, her SUM carrier, for her shoulder injury (see Clemens v Apple, 65 NY2d 746, 748-749 [1985]).

Petitioner submitted her own medical evidence to counter the insurer’s, and prevailed at the no-fault arbitration. The arbitrator concluded that petitioner’s shoulder injury was causally related to the accident and awarded her approximately $4,300. The insurer did not move to vacate or modify the award even though Insurance Law § 5106 (c) provides that “[a]n award by an arbitrator shall be binding except where vacated or modified by a master arbitrator in accordance with simplified procedures to be promulgated or approved by the superintendent” (emphasis supplied).

Having lost at the no-fault arbitration and paying, in full, the sum awarded to petitioner for her shoulder injury, the insurer thereafter consented to petitioner’s settlement with the tortfeasor’s insurer for the face amount of the tortfeasor’s policy. However, the insurer again challenged causation relative to petitioner’s shoulder injury, this time during the SUM arbitration and over petitioner’s objection.

Apparently, what is sauce for the goose is no longer sauce for the gander. Had the arbitrator during the original no-fault arbitration found against the petitioner, any direct action against the tortfeasor would have been met with the defense of issue preclusion, with the tortfeasor relying on the no-fault arbitrator’s finding of no causation (see Clemens, 65 NY2d 746 [1985]). That, in turn, would have precluded petitioner from even bringing a SUM claim against her carrier, as it would have been impossible for her to succeed on such a claim without first exhausting the tortfeasor’s policy limits.

When a claim is initially denied, a no-fault claimant is faced with making the difficult choice: either (1) potentially losing at the no-fault arbitration and being precluded from bringing a

civil suit, or (2) not seeking arbitration of the no-fault carrier’s denial of benefits so that the claimant can preserve his or her ability to bring a civil suit at a later date against the tortfeasor, thereby transferring the cost of the claimant’s medical care to his or her private insurance carrier, public insurance, or delaying payment.

These results, however, contradict the primary legislative purpose behind the no-fault law, namely, to ensure “ ‘that every auto accident victim will be compensated for substantially all of his economic loss promptly and without regard to fault,’ ” such that the insurer has nothing to lose and everything to gain from denying no-fault claims (Norman H. Dachs and Jonathan A. Dachs, Time to Reconsider ‘Clemens v. Apple’?, NYLJ, Nov. 14, 1995, at 3, col 1, quoting Rep of Joint Legislative Comm on Insurance Rates, Regulation and Recodification of the Insurance Law, 1973 NY Legis Doc No. 18, at 7; Norman H. Dachs and Jonathan A. Dachs, Collateral Estoppel and Res Judicata in Arbitration, NYLJ, Feb. 13, 1990, at 3, col 1). Simply put, under the majority holding there is a great deal of incentive for a no-fault carrier to deny claims because even if it loses at arbitration, it can revisit the issue in a later SUM proceeding.

In my view, petitioner should be permitted to rely on the no-fault arbitration causation findings in support of any subsequent arbitration involving the same issue against the same party, just as the tortfeasor and insurer would have been able to rely on that initial finding had petitioner been unsuccessful and instituted a civil suit. It cannot be reasonably argued that the insurer did not have a full and fair opportunity to litigate causation in the no-fault proceeding. After all, it submitted medical proof from its own physician after he conducted an examination that petitioner was contractually obligated to attend.

Moreover, the majority’s holding directly contradicts the dictates of Insurance Law § 5106 (c) that arbitration awards are binding unless vacated or modified by a master arbitrator because it allows an unsuccessful insurer to do an end run around that statute to the extent that it effectively nullifies the findings of the no-fault arbitrator. By accepting the SUM arbitrator’s “discretion” to disregard the findings of an arbitrator on an identical issue between the same parties, this Court grants the arbitrator more authority than a trial court, appellate court, or this Court, none of which are accorded the power to review the arbitrator’s rejection of petitioner’s issue preclusion argument.

All of the cases cited by the majority involve arbitrations arising from the invocation of arbitration provisions contained in either collective bargaining agreements or inter-company insurance arbitration agreements—parties of equal size and nature who together agree to submit to the resolution of their claims in a non-judicial forum. Petitioner, like so many motorists, is forced by a sophisticated insurer to choose between arbitration and engaging, at her own expense, in the costly litigation that is itself discouraged by the statute. Having done so, she finds herself in a hall of mirrors where winning in arbitration is only the beginning, not the end of her travail.

Finally, I note that the mere finding of a causal relation between the accident and petitioner’s shoulder injury at the no-fault arbitration stage would not have necessarily resulted in a finding that petitioner was entitled to recover damages for non-economic loss in the SUM arbitration. Petitioner would still be required to prove that her damages exceeded the amount of any policy of insurance that covered the original tortfeasor (see Raffellini v State Farm Mut. Auto. Ins. Co., 9 NY3d 196, 205 [2007]). Indeed, that was the issue before the SUM arbitrator in this case, yet he never reached the “serious injury” threshold issue, opting instead to revisit the previously-determined causation finding and reach a different conclusion. Based on the foregoing, it is my view that the SUM arbitrator exceeded his authority by not granting the no-fault arbitrator’s causation finding preclusive effect, and I would therefore reverse.

Chief Judge Lippman and Judges Ciparick, Graffeo, Read and Smith concur with Judge Jones; Judge Pigott dissents and votes to reverse in a separate opinion.

Order affirmed, with costs.


source: Caselaw Access Project

author: Ciparick, J. Smith, J. (dissenting).

license: Public Domain

text:
    [940 NE2d 535, 914 NYS2d 709]
    Alice Kramer, Respondent, v Phoenix Life Insurance Co. et al., Defendants. Lifemark S.A., Intervenor-Appellant. (And Third-Party Actions.)
    Argued October 12, 2010;
    decided November 17, 2010

      POINTS OF COUNSEL

      Mayer Brown LLP (John J. Tharp, Jr., of the Illinois bar, admitted pro hac vice, Lawrence R. Hamilton, Katherine E. Agonis, Robert T. Howell and J. Bishop Grewell of counsel) and Mayer Brown LLP, New York City (Hector Gonzalez of counsel), for intervenor-appellant.
    I. Insurance Law § 3205 (b) allows an insured to freely transfer a policy procured on his own life and on his own initiative. (Roberts v Tishman Speyer Props., L.P., 13 NY3d 270; Matter of Crucible Materials Corp. v New York Power Auth., 13 NY3d 223; 2004 Stuart Moldaw Trust v XE L.I.F.E., LLC, 642 F Supp 2d 226; Matter of Medical Socy. of State of N.Y. v State of N.Y. Dept. of Health, 83 NY2d 447; Matter of Village of Chestnut Ridge v Howard, 92 NY2d 718; Matter of Chemical Specialties Mfrs. Assn. v Jorling, 85 NY2d 382; Pajak v Pajak, 56 NY2d 394; Scott v Massachusetts Mut. Life Ins. Co., 86 NY2d 429; Grigsby v Russell, 222 US 149; Steinback v Diepenbrock, 158 NY 24.) II. Public policy weighs against reading a “good faith” requirement into Insurance Law § 3205 (b). (New England Mut. Life Ins. Co. v Caruso, 73 NY2d 74; Carter v Continental Life Ins. Co., 115 F2d 947; Matter of Orens v Novello, 99 NY2d 180; Klostermann v Cuomo, 61 NY2d 525; People v Nicholas, 97 NY2d 24; Rocchigiani v World Boxing Council, Inc., 131 F Supp 2d 527.)

      Dorsey & Whitney LLP, New York City (Patrick J. Feeley, Christopher G. Karagheuzoff Joshua Colangelo-Bryan and Stephen M. Raab of counsel), for Phoenix Life Insurance Company, defendant.
    I. Insurance Law § 3205 prohibits stranger-originated life insurance (STOLI) schemes. (Colavito v New York Organ Donor Network, Inc., 8 NY3d 43; Retail Software Servs. v Lashlee, 71 NY2d 788; Fuentes v Board of Educ. of City of N.Y., 12 NY3d 309; Israel v Chabra, 12 NY3d 158; Rosner v Metropolitan Prop. & Liab. Ins. Co., 96 NY2d 475; Hota v Camaj, 299 AD2d 453; People v Aarons, 2 NY3d 547; People v Montanez, 90 NY2d 690; People v Cardona, 41 NY2d 333; Nixon v Federated Dept. Stores, 170 AD2d 659.) II. The Court should clarify that New England Mut. Life Ins. Co. v Caruso (73 NY2d 74 [1989]) does not shield stranger-originated life insurance (STOLI) schemes. (Yamaha Motor Corp., US A. v Calhoun, 516 US 199; City of New York v Beretta U.S.A. Corp., 524 F3d 384; Policano v Herbert, 7 NY3d 588; New England Mut. Life Ins. Co. v Doe, 93 NY2d 122; People v Bing, 76 NY2d 331; Paul Revere Life Ins. Co. v Fima, 105 F3d 490; Kentucky Cent. Life Ins. Co. v McNabb, 825 F Supp 269; Riggs v Palmer, 115 NY 506; Grigsby v Russell, 222 US 149.)

      Drinker Biddle & Reath LLP (Michael J. Miller, of the Pennsylvania bar, admitted pro hac vice, Stephen C. Baker, of the Pennsylvania bar, admitted pro hac vice, Charles J. Vinicombe, of the Pennsylvania bar, admitted pro hac vice, and Katherine L. Villanueva of counsel) for Lincoln Life & Annuity Company of New York, defendant.
    I. New England Mut. Life Ins. Co. v Caruso (73 NY2d 74 [1989]) and New York law do not support a result that rewards wrongdoers. (Spear v Guardian Life Ins. Co. of Am., 112 AD2d 904; New England Mut. Life Ins. Co. v Doe, 93 NY2d 122; Columbian Natl. Life Ins. Co. v Hirsch, 267 NY 605; Ilyaich v Bankers Life Ins. Co. of N.Y., 47 AD3d 614; Reliastar Life Ins. Co. of N.Y. v Leopold, 192 Misc 2d 385; Life Prod. Clearing, LLC v Angel, 530 F Supp 2d 646; Coppell v Hall, 74 US 542; McMullen v Hoffman, 174 US 639; Riggs v Palmer, 115 NY 506; Szerdahelyi v Harris, 67 NY2d 42.) II. The Lincoln Life & Annuity Company of New York policy was procured in violation of New York insurable interest law. (Majewski v Broadalbin-Perth Cent. School Dist., 91 NY2d 577; Leader v Maroney, Ponzini & Spencer, 97 NY2d 95; Matter of Washington Post Co. v New York State Ins. Dept., 61 NY2d 557; Robert C. Herd & Co. v Krawill Machinery Corp., 359 US 297; Matter of Statewide Roofing v Eastern Suffolk Bd. of Coop. Educ. Servs., First Supervisory Dist. of Suffolk County, 173 Misc 2d 514; Matter of New York Pub. Interest Research Group Straphangers Campaign v Reuter, 293 AD2d 160; St. Vincent’s Med. Ctr. of Richmond v Vincent E. Iorio, Inc., 78 Misc 2d 968; Matter of 121-129 Broadway Realty v New York State Div. of Human

      Rights, 43 AD2d 754; Holmes v Nationwide Mut. Ins. Co., 40 Misc 2d 894, 19 AD2d 947; Herman v Provident Mut. Life Ins. Co. of Phila., 886 F2d 529.)

      Friedman & Wittenstein, New York City (Andrew A. Wittenstein, Stuart I. Friedman and Rajeev E. Ananda of counsel), for Alice Kramer, respondent.
    I. A “good faith” standard has been an integral part of the insurable interest rule for over a century. (Warnock v Davis, 104 US 775; Olmsted v Keyes, 85 NY 593; Steinback v Diepenbrock, 158 NY 24; Grigsby v Russell, 222 US 149; Finne v Walker, 257 F 698; Travelers Ins. Co. v Reiziz, 13 F Supp 819; Life Prod. Clearing, LLC v Angel, 530 F Supp 2d 646; Herman v Provident Mut. Life Ins. Co. of Phila., 886 F2d 529.) II. The rules of statutory interpretation require that all parts of a statute be read together and that the intent of the Legislature is paramount. (People v Mobil Oil Corp., 48 NY2d 192; Abood v Hospital Ambulance Serv., 30 NY2d 295; People ex rel. City of New York v Hoar, 191 Misc 292; Life Prod. Clearing, LLC v Angel, 530 F Supp 2d 646; Matter of Hogan v Culkin, 18 NY2d 330; Park W. Vil. Assoc. v Chiyoko Nishoika, 187 Misc 2d 243; Long v State of New York, 7 NY3d 269; People v Santi, 3 NY3d 234; Williams v Williams, 23 NY2d 592; Matter of Allstate Ins. Co. v Libow, 106 AD2d 110.) III. The legislative history of Insurance Law § 3205 does not reflect a desire to abolish the “good faith” standard. (Olmsted v Keyes, 85 NY 593; Steinback v Diepenbrock, 158 NY 24; Grigsby v Russell, 222 US 149; Finne v Walker, 257 F 698; Travelers Ins. Co. v Reiziz, 13 F Supp 819; Iannotti v Consolidated Rail Corp., 74 NY2d 39; Warnock v Davis, 104 US 775; Seligman v Friedlander, 199 NY 373; Matter of Michaelson, 162 Misc 847; People v Giordano, 87 NY2d 441.) IV Lifemark S.A.’s public policy argument against the “good faith” standard should be rejected. (2004 Stuart Moldaw Trust v XE L.I.F.E., LLC, 642 F Supp 2d 226; Hota v Camaj, 299 AD2d 453; Corder v Prudential Ins. Co., 42 Misc 2d 423; 511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144; Dalton v Educational Testing Serv., 87 NY2d 384; Kelly v New York City Ry. Co., 119 App Div 223.) V The opinions of the New York State Insurance Department demonstrate that Lifemark S.A.’s position is without merit. (Matter of Howard v Wyman, 28 NY2d 434; Hota v Camaj, 299 AD2d 453.)

      Hanley Conroy Bierstein Sheridan Fisher & Hayes, LLP, New York City (Andrea B. Bierstein of counsel), Susman Godfrey LLP (Rebecca S. Tinio and Arun S. Subramanian of counsel) and Fein & Jakob (Peter Jakab of counsel) for Jonathan S. Berck and another, respondents.

      Phillips Lytle LLP, New York City (Edward S. Bloomberg and Patricia A. Mancabelli of counsel), for T.D. Bank, N.A., respondent.
    I. The Court should not expand the certified question to include reconsideration of New England Mut. Life Ins. Co. v Caruso (73 NY2d 74 [1989]), which refused to find a public policy fraud exception to the two-year incontestability clause statutorily required in New York life insurance policies by Insurance Law § 3203 (a) (3). (New England Mut. Life Ins. Co. v Doe, 93 NY2d 122; Berkshire Life Ins. Co. v Fernandez, 71 NY2d 874; Killian v Metropolitan Life Ins. Co., 251 NY 44; Wright v Mutual Benefit Life Assn. of Am., 118 NY 237; Simpson v Phoenix Mut. Life Ins. Co., 24 NY2d 262; Matter of Metropolitan Life Ins. Co. v Conway, 252 NY 449; Berkshire Life Ins. Co. v Weinig, 290 NY 6; Columbian Natl. Life Ins. Co. v Hirsch, 267 NY 605; Ilyaich v Bankers Life Ins. Co. of N.Y., 47 AD3d 614; Reliastar Life Ins. Co. of N.Y. v Leopold, 192 Misc 2d 385.) II. If the Court overrules New England Mut. Life Ins. Co. v Caruso (73 NY2d 74 [1989]), or creates a public policy fraud exception to Insurance Law § 3203 (a) (3), the Court should apply the decision prospectively only to new life insurance policies. (Gager v White, 53 NY2d 475; People v Hill, 85 NY2d 256; People v Pepper, 53 NY2d 213; Banque Worms v BankAmerica Intl., 77 NY2d 362; Rocchigiani v World Boxing Council, Inc., 131 F Supp 2d 527; Atlantic Cement Co. v Fidelity & Cas. Co. of N.Y., 91 AD2d 412, 63 NY2d 798; Westview Assoc. v Guaranty Natl. Ins. Co., 95 NY2d 334; Matter of King v Cuomo, 81 NY2d 247; Matter of Hellerstein v Assessor of Town of Islip, 37 NY2d 1; Matter of O’Shea v Board of Assessors of Nassau County, 8 NY3d 249.)

      Rosenfeld & Kaplan, LLP, New York City (Tab K. Rosenfeld and Steven M. Kaplan of counsel), for intervenor-respondents.
    I. Section 3205 (b) of the Insurance Law must be construed consistent with its express terms which allow the unfettered transfer of a life insurance policy procured by an insured on his or her own life. (American Tr. Ins. Co. v Sartor, 3 NY3d 71; Matter of Chemical Specialties Mfrs. Assn. v Jorling, 85 NY2d 382; 2004 Stuart Moldaw Trust v XE L.I.F.E., LLC, 642 F Supp 2d 226; Hota v Camaj, 299 AD2d 453; Roberts v Tishman Speyer Props., L.P., 13 NY3d 270; Frank v Meadowlakes Dev. Corp., 6 NY3d 687.) II. The rights of an insured procuring a life insurance policy on his or her own life pursuant to Insurance Law § 3205 (b) (1) are not limited by the insurable interest requirements of section 3205 (b) (2). (Levine v Bornstein, 4 NY2d 241; Matter of Westchester County Dept. of Social Servs. v Robert W.R., 25 AD3d 62; Canal Carting, Inc. v City of N.Y. Bus.

      Integrity Commn., 66 AD3d 609; Rocovich v Consolidated Edison Co., 78 NY2d 509.) III. Public policy mandates against the grafting of a subjective “good faith” requirement onto Insurance Law § 3205 (b) (1). (People v Litto, 8 NY3d 692; Matter of Orens v Novello, 99 NY2d 180.)

      Proskauer Rose LLP, New York City (John E. Failla, William C. Komaroff and Nathan R. Lander of counsel), for Institutional Life Markets Association, amicus curiae.
    I. The certified question should be answered “no.” (Corder v Prudential Ins. Co., 42 Misc 2d 423; Gibson v Travelers Ins. Co., 183 Misc 678; Matter of Stein, 174 Misc 465; Matter of Crucible Materials Corp. v New York Power Auth., 13 NY3d 223; Matter of Washington Post Co. v New York State Ins. Dept., 61 NY2d 557; Matter of Schinasi, 277 NY 252; Hota v Camaj, 299 AD2d 453; Life Prod. Clearing, LLC v Angel, 530 F Supp 2d 646; Matter of Medical Socy. of State of N.Y.v State of N.Y. Dept. of Health, 83 NY2d 447; Matter of Chemical Specialties Mfrs. Assn. v Jorling, 85 NY2d 382.) II. New York’s well-settled contestability rule should not be modified. (Wright v Mutual Benefit Life Assn. of Am., 118 NY 237; New England Mut. Life Ins. Co. v Caruso, 73 NY2d 74; New England Mut. Life Ins. Co. v Doe, 93 NY2d 122; Matter of Schinasi, 277 NY 252; Klostermann v Cuomo, 61 NY2d 525.)

      Bracewell & Giuliani LLP, Houston, Texas (J. Brett Busby of counsel), and Edison, McDowell & Hetherington, LLP (David T. McDowell of counsel) for American Council of Life Insurers and another, amici curiae.
    I. Stranger-originated life insurance (STOLI) transactions conceal a lack of insurable interest and create serious public policy problems. (Life Prod. Clearing, LLC v Angel, 530 F Supp 2d 646; American Gen. Life Ins. Co. v Schoenthal Family, LLC, 555 F3d 1331; Wuliger v Manufacturers Life Ins. Co., 567 F3d 787; Lincoln Natl. Life Ins. Co. v Calhoun, 596 F Supp 2d 882; Warnock v Davis, 104 US 775.) II. Section 3205 (b) (1) and (2) of the Insurance Law prohibit investors from procuring insurance on a stranger’s life. III. New York law should not reward those who purposely conceal from an insurer a policy’s lack of insurable interest. (Connecticut Mut. Life Ins. Co. v Schaefer, 94 US 457; Grigsby v Russell, 222 US 149; Life Prod. Clearing, LLC v Angel, 530 F Supp 2d 646; Fowler v New York Indem. Ins. Co., 26 NY 422; Ruse v Mutual Benefit Life Ins. Co., 23 NY 516; Reed v Provident Sav. Life Assur. Socy., 190 NY 111; New England Mut. Life Ins. Co. v Caruso, 73 NY2d 74; Paul Revere Life Ins. Co. v Fima, 105 F3d 490; Kentucky Cent. Life Ins. Co. v McNabb, 825 F Supp 269; McConnell v Commonwealth Pictures Corp., 7 NY2d 465.)

      Arent Fox LLP, New York City (Julius A. Rousseau, III, and Eric A. Biderman of counsel), for Life Insurance Settlement Association, amicus curiae.
    I. New York law does not impose an unwritten intent standard in Insurance Law § 3205. (New England Mut. Life Ins. Co. v Caruso, 73 NY2d 74.) II. The Court should not limit the rule of New England Mut. Life Ins. Co. v Caruso (73 NY2d 74 [1989]) or reconsider public policy concerns that the New York Legislature decided to not address. (Wright v Mutual Benefit Life Assn. of Am., 118 NY 237; Life Prod. Clearing, LLC v Angel, 530 F Supp 2d 646.)
   OPINION OF THE COURT

Ciparick, J.

The United States Court of Appeals for the Second Circuit has certified the following question for our consideration:

“Does New York Insurance Law §§ 3205 (b)(1) and (b)(2) prohibit an insured from procuring a policy on his own life and immediately transferring the policy to a person without an insurable interest in the insured’s life, if the insured did not ever intend to provide insurance protection for a person with an insurable interest in the insured’s life?”

We now answer in the negative and hold that New York law permits a person to procure an insurance policy on his or her own life and immediately transfer it to one without an insurable interest in that life, even where the policy was obtained for just such a purpose.

This litigation involves several insurance policies obtained by decedent Arthur Kramer, a prominent New York attorney, on his own life, allegedly with the intent of immediately assigning the beneficial interests to investors who lacked an insurable interest in his life. In May 2008, Arthur’s widow, plaintiff Alice Kramer, as personal representative of her husband’s estate, filed an amended complaint in the United States District Court for the Southern District of New York seeking to have the death benefits from these insurance policies paid to her. She alleges that these policies, which collectively provide some $56,200,000 in coverage, violate New York’s insurable interest rule because her husband obtained them without the intent of providing insurance for himself or anyone with an insurable interest in his life.

As alleged in the plaintiffs complaint, defendant Steven Lockwood, the principal of Lockwood Pension Services, Inc. (Lockwood Pension), approached Arthur, presumably a sophisticated investor, about participating in a “stranger-owned life insurance” (SOLI or STOLI) scheme as early as 2003. They commenced such a scheme in June 2005, when Arthur established the first of two insurance trusts (the June trust) and named two of his adult children, Andrew and Rebecca Kramer, as beneficiaries. A present Lockwood Pension employee was named as trustee, succeeded by defendant Jonathan Berck. In June and July 2005, defendant Transamerica Occidental Life Insurance Co. funded the trust with one or more insurance policies with a total death benefit of approximately $18,200,000. Andrew and Rebecca then assigned their beneficial interests in the trust to a stranger investor, defendant Tall Tree Advisors, Inc. (Tall Tree). In 2007, Berck, as trustee, sold the ownership interests in the policies to a nonparty purchaser.

Arthur established a second trust in August 2005 (the August trust) and named a third adult child, Liza Kramer, as beneficiary. Hudson United Bank (Hudson) was named trustee, also succeeded by Berck. In July 2005, defendant Phoenix Life Insurance Co. (Phoenix) issued three insurance policies to fund the August trust, with a total death benefit of $28,000,000, and Liza likewise assigned her interest to Tall Tree. In November 2005, defendant Lincoln Life & Annuity Co. of New York (Lincoln) also issued a policy to the August trust with a death benefit of $10,000,000, and Liza assigned her interest to another stranger investor, defendant Life Products Clearing, LLC (Life Products). Intervenor Lifemark alleges that it purchased a Phoenix policy from the August trust in August 2007, just over two years after its issuance. Allegedly both trust agreements were prepared by counsel for Lockwood Pension, neither Arthur Kramer nor his children ever paid premiums on the policies, and the Kramer children were never “true beneficiaries” of the trusts after the policies were issued. Phoenix and Lincoln allege that Lockwood served as broker pursuant to an “Independent Producer Contract” he had with Phoenix and a “Broker Agreement” he had with Lincoln.

Following Arthur’s death in January 2008, Alice refused to turn over copies of the death certificate to investors holding beneficial interests in the policies. She filed this action alleging that these policies violated New York’s insurable interest rule and so should be paid to her, as the representative of the decedent’s estate. Defendants are the insurance companies that issued the policies, trustees, and various insurance brokers/ investors. They filed counterclaims, cross claims, and third-party complaints. As relevant here, Berck, as trustee, and Life Products filed nearly identical answers seeking to have the proceeds of the Lincoln policy awarded to them. Intervenor Lifemark, claiming to be a good faith purchaser for value, seeks to have the Phoenix policy proceeds paid to it. Phoenix and Lincoln brought claims against Lockwood for breach of contract and also seek a declaratory judgment declaring that the policies are void and that they are not required to pay policy proceeds to anyone.

District Court granted motions to dismiss many of the parties’ claims, but denied Lockwood’s motion to dismiss the insurers’ claims against him. Relying primarily on District Court precedent, the court stated that, according to the alleged facts:

“Lockwood breached provisions of the New York Insurance Law in that he caused to be procured directly or through assignment or other means, a contract of insurance upon the life of the decedent [Kramer] for the benefit of strangers who did not have an insurable interest in his life at the time the policy was obtained” (Kramer, 653 F Supp 2d at 388 [internal quotation marks omitted]).

The court also permitted Alice, Life Products, and Berck’s declaratory judgment claims, counterclaims, and cross claims to go forward.

District Court certified its order to allow for an interlocutory appeal to the Second Circuit pursuant to 28 USC § 1292 (b), noting that “there is indeed substantial ground for difference of opinion on the application of New York Insurance Law to SOLI arrangements of this type” (653 F Supp 2d at 398), and that “[n]umerous claims in this suit, including but not limited to the initial Declaratory Judgment action by Plaintiff, turn on the interpretation of’ Insurance Law § 3205 (id.). The Second Circuit granted Lifemark’s petition for leave to appeal District Court’s interlocutory order, and certified the question at issue to us.

New York’s insurable interest requirement is codified in Insurance Law § 3205 (b). Section 3205 (b) (1) addresses individuals obtaining life insurance on their own lives:

“Any person of lawful age may on his own initiative procure or effect a contract of insurance upon his own person for the benefit of any person, firm, association or corporation. Nothing herein shall be deemed to prohibit the immediate transfer or assignment of a contract so procured or effectuated.”

Section 3205 (b) (2) addresses a person’s ability to obtain insurance on another’s life and requires, in that circumstance, that the policy beneficiary be either the insured himself or someone with an insurable interest in his life:

“No person shall procure or cause to be procured, directly or by assignment or otherwise any contract of insurance upon the person of another unless the benefits under such contract are payable to the person insured or his personal representatives, or to a person having, at the time when such contract is made, an insurable interest in the person insured.”

An insurable interest is defined as, “in the case of persons closely related by blood or by law, a substantial interest engendered by love and affection” or, for others, a “lawful and substantial economic interest in the continued life, health or bodily safety of the person insured” (Insurance Law § 3205 [a] [1] [A], [B]).

The insurable interest requirement at common law was designed to distinguish an insurance contract from a wager on someone’s life (see Ruse v Mutual Benefit Life Ins. Co., 23 NY 516, 523 [1861] [“A policy, obtained by a party who has no interest in the subject of insurance, is a mere wager policy”]). From the first, an insurable interest was required only where a policy was “obtained by one person for his own benefit upon the life of another” (id.). This basic distinction between policies obtained on the life of another and those obtained on one’s own life is reflected in the twin provisions of section 3205 (b) (1) and (2). As we have explained:

“When one insures his or her own life, the wagering aspect is overridden by the recognized social utility of the contract as an investment to benefit others. When a third party insures another’s life, however, the contract does not have the same manifest utility and assumes more speculative characteristics which may subject it to the same general condemnation as wagers” (Caruso, 73 NY2d at 77-78).

Plaintiff and the insurers urge us to find that an individual who procures insurance on his own life with the intent of immediately assigning the policy to one without an insurable interest is subject to the insurable interest requirement articulated in section 3205 (b) (2), despite the fact that section 3205 (b) (1) contains no such requirement. They make three basic arguments: (1) that a policy obtained with the intent to assign it to a party lacking an insurable interest violates section 3205 (b) (2); (2) that this scenario is precluded by a common-law rule that an insured could only assign a policy to one without an insurable interest if the policy was obtained “in good faith” compliance with the insurable interest rule, not as a means of circumventing it; and (3) that one who obtains insurance on one’s own life in accordance with a prior arrangement with a third party, as alleged here, does not act “on his own initiative” within the meaning of the statute. In response, Lifemark, Life Products, Berck, Lockwood, and Lockwood Pension argue that the language of section 3205 (b) (1) confers great freedom on an insured in assigning life insurance benefits, including the freedom to obtain insurance for any reason and to immediately assign a policy to an investor with no insurable interest, and that this freedom cannot be reconciled with any older common-law “good faith” limitation.

The “starting point” for discerning statutory meaning is, of course, the language of the statute itself (see Roberts v Tishman Speyer Props., L.P., 13 NY3d 270, 286 [2009]). “[W]here the language of a statute is clear and unambiguous, courts must give effect to its plain meaning” (Matter of Crucible Materials Corp. v New York Power Auth., 13 NY3d 223, 229 [2009] [internal quotation marks omitted]).

Here, section 3205 (b) (1) clearly provides that, so long as the insured is “of lawful age” and acts “on his own initiative,” he can “procure or effect a contract of insurance upon his own person for the benefit of any person, firm, association or corporation.” This language is unambiguous and not limited by the statutory text. It thus codifies the common-law rule that an insured has total discretion in naming a policy beneficiary (see Olmsted v Keyes, 85 NY 593 [1881]). Our lower courts have long held that, under section 3205 (b), “[w]here the deceased effects the insurance upon her own life, it is well-established law that she can designate any beneficiary she desires without regard to relationship or consanguinity” (Corder v Prudential Ins. Co., 42 Misc 2d 423, 424 [Sup Ct, Erie County 1964]; see also Gibson v Travelers Ins. Co., 183 Misc 678 [Sup Ct, NY County 1944]).

It is equally plain that a contract “so procured or effectuated” may be “immediately] transfer [red] or assign[ed]” (Insurance Law § 3205 [b] [1]). The provision does not require the assignee to have an insurable interest and, given the insured’s power to name any beneficiary, such restriction on assignment would serve no purpose. This freedom of assignment is not limited by section 3205 (b) (2), which addresses procurement of an insurance policy on another’s life, either “directly or by assignment,” because section 3205 (b) (2) requires an insurable interest only “at the time when such contract is made,” that is, when such insurance is initially procured. The statute therefore incorporates the common-law rule that a policy valid at the time of procurement may be assigned to one without an insurable interest in the insured’s life and, relatedly, no insurable interest is required when one holds a policy on another’s life, so long as the policy was “valid in its inception” (Olmsted, 85 NY at 598). As one appellate court has summarized, “Insurance Law § 3205 (b) (1) permits any person of lawful age who has procured a contract of insurance upon his or her own life to immediately transfer or assign the contract, and does not require the assignee to have an insurable interest” (Hota v Camaj, 299 AD2d 453, 453 [2d Dept 2002]).

There is simply no support in the statute for plaintiff and the insurers’ argument that a policy obtained by the insured with the intent of immediate assignment to a stranger is invalid. The statutory text contains no intent requirement; it does not attempt to prescribe the insured’s motivations. To the contrary, it explicitly allows for “immediate transfer or assignment” (Insurance Law § 3205 [b] [1]). This phrase evidently anticipates that an insured might obtain a policy with the intent of assigning it, since one who “immediately” assigns a policy likely intends to assign it at the time of procurement.

The statutory mandate that a policy must be obtained on an insured’s “own initiative” requires that the decision to obtain life insurance be knowing, voluntary, and actually initiated by the insured. In common parlance, to act on “one’s own initiative” means to act “at one’s own discretion: independently of outside influence or control” (Merriam-Webster’s Collegiate Dictionary 602 [10th ed 1996]). The key point is that the policy must be obtained at the insured’s discretion. As the dissent acknowledges, common sense dictates that some outside influence is acceptable—advice from a broker or pension planner, for example. The notion of obtaining insurance and the details of the insurance contract need not spring exclusively from the mind of the insured. Rather, the insured’s decision must be free from nefarious influence or coercion.

Contrary to the dissent’s view, the initiative requirement, without more, does not prohibit an insured from obtaining a policy pursuant to a noncoercive arrangement with an investor (see dissenting op at 558). Under the dissent’s interpretation, a sophisticated party who approaches an investor about such an arrangement, drafts necessary documents, procures insurance on his own life, and assigns it for compensation is not acting “on his own initiative.” The language of the statute simply does not support such a reading.

Further, the insurable interest requirement of section 3205 (b) (2) does not alter our reading of section 3205 (b) (1) because it does not apply when an insured freely obtains insurance on his own life. Rather, it requires that when a person “procure[s] or cause[s] to be procured, directly or by assignment or otherwise,” an insurance policy on another’s life, the policy benefits must run, “at the time when such contract is made,” to the insured or one with an insurable interest in the insured’s life (Insurance Law § 3205 [b] [2]). Where an insured, “on his own initiative,” obtains insurance on his or her own life, the validity of the policy at its inception is instead governed by section 3205 (b) (1).

Our reading of the statutory language is buttressed by the legislative history of section 3205 (b). A forerunner to the current provision appeared in the 1939 recodification of the Insurance Law as a single paragraph (L 1939, ch 882, adding Insurance Law, art VII, § 146 [l]), and a 1984 recodification broke that single paragraph into the two provisions we have today. The sentence “[n]othing herein shall be deemed to prohibit the immediate transfer or assignment of a contract so procured or effectuated,” however, was not added until 1991. It was prompted by a United States Internal Revenue Service private letter ruling suggesting that if a person obtained an insurance policy with the intent of transferring it to a charitable organization lacking an insurable interest in his life, the transaction would violate section 3205 (b) (2) (see Mem of Assemblyman Lasher, Bill Jacket, L 1991, ch 334, at 6, reprinted in 1991 NY Legis Ann, at 179; IRS Private Letter Ruling [PLR] 9110016 [Mar. 8, 1991]). The legislative aim was to “correct [this] erroneous interpretation” (Mem of Assemblyman Lasher, Bill Jacket, L 1991, ch 334, at 6). Thus, it not only added, in terms not limited to charitable organizations, that a policy may be “immediate [ly] transfer [red] or assign[ed]” (Insurance Law § 3205 [b] [1]), but it did so to clarify the legislative understanding that a policy might be assigned regardless of the insured’s intent in procuring it.

In light of the overwhelming textual and historical evidence that the Legislature intended to allow the immediate assignment of a policy by an insured to one lacking an insurable interest, we are not persuaded by plaintiff and the insurers’ argument that section 3205 (b) is limited by the common-law requirement that an insured cannot obtain a life insurance policy with the intent of circumventing the insurable interest rule by immediately assigning it to a third party (see Steinback v Diepenbrock, 158 NY 24, 30-31 [1899]). To the extent that there is any conflict, the common law has been modified by unambiguous statutory language. We note further that if our Legislature had intended to impose such a limitation, it could easily have done so. The Legislature has been very active in this area, most recently in its redrafting of article 78 of the Insurance Law.

Finally, we recognize the importance of the insurable interest doctrine in differentiating between insurance policies and mere wagers (see Caruso, 73 NY2d at 77-78), and that there is some tension between the law’s distaste for wager policies and its sanctioning an insured’s procurement of a policy on his or her own life for the purpose of selling it. It is not our role, however, to engraft an intent or good faith requirement onto a statute that so manifestly permits an insured to immediately and freely assign such a policy.

Accordingly, the certified question should be answered in the negative.

Smith, J. (dissenting).

I would answer the certified question with a qualified yes: My view of New York law is that where, as in this case, an insured purchases a policy on his own life for no other purpose than to facilitate a wager by someone with no insurable interest, the transaction is unlawful.

I

“Stranger-originated life insurance” is a new name for an old idea. Transactions not basically different from the one before us have been known, and condemned, by courts for more than a hundred years.

In 1872, a young man named Henry Grosser took out a policy on his own life. On the same day, Grosser entered a contract with something called the Scioto Trust Association, in which Grosser agreed to assign the policy to Scioto, and Scioto agreed to pay the premiums on it. It was agreed that at Crosser’s death, Scioto would get 90% of the insurance proceeds. When Grosser died the following year, his administrator sued Scioto, claiming all the proceeds, and the United States Supreme Court, applying pre-Erie federal common law (see Erie R. Co. v Tompkins, 304 US 64 [1938]), held the Crosser-Scioto contract invalid. The Court said that what it called “wager policies” were “independently of any statute on the subject, condemned, as being against public policy” (Warnock v Davis, 104 US 775, 779 [1882]).

Warnock also stated a broader rule: “The assignment of a policy to a party not having an insurable interest is as objectionable as the taking out of a policy in his name” (104 US at 779). That rule was too broad. New York, as the Warnock court recognized, had already rejected it (see id. at 781-782, citing Saint John v American Mut. Life Ins. Co., 13 NY 31 [1855]), and a few decades later the United States Supreme Court rejected it also (Grigsby v Russell, 222 US 149 [1911]). In Grigsby, Justice Holmes explained that a contract taken out by a third party with no insurable interest in the insured’s life is generally more problematic than an assignment by the insured to such a person:

“A contract of insurance upon a life in which the insured has no interest is a pure wager that gives the insured a sinister counter interest in having the life come to an end. . . .
“But when the question arises upon an assignment, it is assumed that the objection to the insurance as a wager is out of the case. . . . The danger that might arise from a general license to all to insure whom they like does not exist. Obviously it is a very different thing from granting such a general license, to allow the holder of a valid insurance upon his own life to transfer it to one whom he, the party most concerned, is not afraid to trust” (222 US at 154-155).

Grigsby thus established the general rule, consistent with the New York common law of that day and with our current statutory law (Insurance Law § 3205 [b]), that while a third party without an insurable interest may not purchase a life insurance policy, an insured may do so and assign it to the third party, whether the third party has an insurable interest or not. That is the rule the majority applies here.

But this rule of free assignability has always had an exception—an exception for cases like Warnock, and like this case, where the insured, at the moment he acquires the policy, is in substance acting for a third party who wants to bet on the insured’s death. Justice Holmes explained the exception in Grigsby, and thus distinguished Warnock, but did not overrule its narrow holding:

“[C]ases in which a person having an interest lends himself to one without any, as a cloak to what is, in its inception, a wager, have no similarity to those where an honest contract is sold in good faith . . .
“(Warnock v Davis] was one of the type just referred to, the policy having been taken out for the purpose of allowing a stranger association to pay the premiums and receive the greater part of the benefit, and having been assigned to it at once.” (222 US at 156.)

There are good reasons why the common law, as reflected in both Warnock and Grigsby, invalidated stranger-originated life insurance. Even if we ignore the possibility that the owner of the policy will be tempted to murder the insured, this kind of “insurance” has nothing to be said for it. It exists only to enable a bettor with superior knowledge of the insured’s health to pick an insurance company’s pocket.

In a sense, of course, all insurance is a bet, but for most of us who buy life insurance it is a bet we are happy to lose. We recognize that the insurance company is more likely than not to make a profit on the policy, receiving more in premiums than it will ever pay out in proceeds, and that is the result we hope for; we pay the premiums in order to protect against the risk that we will die sooner than expected. But stranger-originated life insurance does not protect against a risk; it does not make sense for the purchaser if it is expected to be profitable for the insurance company. The only reason to buy such a policy is a belief that the insured’s life expectancy is less than what the insurance company thinks it is. Thus, we may be confident that the Scioto Trust Association, which acquired a policy on the life of 27-year-old Henry Grosser, was not surprised when Grosser died before he was 30. And we may be equally confident that the purchasers in this case thought, probably with good reason, that they knew something about Arthur Kramer’s health that the insurance companies did not know.

When Grigsby was decided, New York common law had anticipated the federal common law, adopting not only the rule of Grigsby—that life insurance policies are, in general, freely assignable—but also the exception recognized in Grigsby—that the assignment cannot be used as a “cloak to what is, in its inception, a wager.” In Steinback v Diepenbrock (158 NY 24, 31 [1899]), answering an objection to the rule of free assignability, we observed:

“[I]t is said that if the payee of a policy be allowed to assign it, a safe and convenient method is provided by which a wagering contract can be safely made. The insured, instead of taking out a policy payable to a person having no insurable interest in his life, can take it out to himself and at once assign it to such person. But such an attempt would not prove successful, for a policy issued and assigned, under such circumstances, would be none the less a wagering policy because of the form of it. The intention of the parties procuring the policy would determine its character, which the courts would unhesitatingly declare in accordance with the facts, reading the policy and the assignment together, as forming part of one transaction.”

Under New York common law, therefore, the purchasers of stranger-originated life insurance could not prevail in a case like this: the law would look through the form of the transaction, and “[t]he intention of the parties procuring the policy would determine its character.” It hardly seems open to doubt, on the facts before us, that the intention of the purchasers here was to bet on Arthur Kramer’s death, and that Kramer’s intention was to be compensated for helping them do so.

II

The majority holds, in effect, that Insurance Law § 3205 (b) has displaced the common law, and eliminated the exception recognized in Grigsby and Steinback to the rule of free assign-ability. I think this is an incorrect reading of the statute. I see no reason to believe the Legislature ever intended to abolish the anti-wagering rule.

While statutes relating to the insurable interest requirement in New York date at least to 1892 (L 1892, ch 690, adding Insurance Law § 55), it is enough for present purposes to go back to 1984, when Insurance Law § 3205 (very similar to a predecessor statute, Insurance Law § 146) was enacted, containing the following language:

“(b) (1) Any person of lawful age may on his own initiative procure or effect a contract of insurance upon his own person for the benefit of any person, firm, association or corporation.
“(2) No person shall procure or cause to be procured, directly or by assignment or otherwise any contract of insurance upon the person of another unless the benefits under such contract are payable to the person insured or his personal representatives, or to a person having, at the time when such contract is made, an insurable interest in the person insured.”

Thus the 1984 version of the statute protected the insured’s right to buy a policy and name any beneficiaiy he or she liked, but otherwise prohibited life insurance where the beneficiary had no insurable interest. It did not specifically address the question of an assignment by the insured to a person lacking an insurable interest; it did not restate the long-standing common-law rule that, in general, life insurance contracts were freely assignable, even to such assignees.

This omission became a problem in 1991, when the United States Internal Revenue Service ruled that a plan to procure a policy on one’s life with the intent to transfer the policy immediately to a charity would violate section 3205 (b) (2), so that any such assignment could not be treated as a charitable gift for tax purposes (see IRS Private Letter Ruling [PLR] 9110016 [Mar. 8, 1991]). The Legislature acted promptly to correct this “erroneous interpretation” of the New York Insurance Law (Mem of Assemblyman Lasher in Support of NY Assembly Bill A8586, Bill Jacket, L 1991, ch 334, at 6, reprinted in 1991 NY Legis Ann, at 179). It added a second sentence to Insurance Law § 3205 (b) (1), so that that paragraph now reads:

“Any person of lawful age may on his own initiative procure or effect a contract of insurance upon his own person for the benefit of any person, firm, association or corporation. Nothing herein shall be deemed to prohibit the immediate transfer or assignment of a contract so procured or effectuated.”

The 1991 amendment gave statutory form to the long-established New York rule that life insurance contracts may be freely assigned, even to someone without an insurable interest. But there was also, as I have explained, a long-established exception to the rule: Assignability could not be used to cloak a third-party wagering transaction. I see no reason to think that the Legislature, in codifying the general rule, meant to abolish the exception. The majority opinion offers neither any reason for the Legislature to consider abolishing it, nor any evidence that the Legislature thought it was doing so. Indeed, nothing in the history of the statute suggests that the Legislature intended to alter the common law of insurable interest in any way: the sponsor’s memorandum says its purpose was to “restate and clarify” it (id.).

As I read the 1991 amendment, it codified not only the free assignability rule, but also the anti-wagering exception to it— although I admit it could have expressed the exception much more clearly. The new second sentence of Insurance Law § 3205 (b) (1) refers, in the words “so procured or effectuated,” to the words of the first sentence, which says that a person “may on his own initiative procure or effect a contract of insurance.” “On his own initiative” is a rather mysterious phrase, which can hardly be taken literally. Life insurance does not become invalid because its purchase was initiated (in the sense of being proposed or suggested) by the insured’s spouse or an insurance agent. Rather, I see in the words “on his own initiative” an echo of the rule recognized in Steinback and Grigsby—that an insured may not, in procuring a policy, act as an agent for a third-party gambler without an insurable interest. So read, Insurance Law § 3205 (b) (1) is completely consistent with the preexisting common law of New York, and with the wise public policy underlying the common law.

The majority today rejects this analysis, and holds in substance that Insurance Law § 3205 (b) enacts the general rule of free assignability, while abolishing the “cloak for a wager” exception. For the reasons I have explained, I think this holding is unnecessary and unfortunate. I agree with the majority that there may be cases where a policy can be valid, even though the insured bought the policy intending to assign it to someone (perhaps a charity, or the insured’s domestic partner) without an insurable interest in the insured’s life. Thus, I would not answer with an unqualified yes the Second Circuit’s question whether an insured must have intended to “provide insurance protection for a person with an insurable interest.” But I think the answer should be yes when the question is limited to a case, like this one, in which the parties attempted the kind of wagering transaction forbidden by the common law.

The majority’s negative answer to the Second Circuit’s question, though I think it is wrong, may be of limited importance. Any harm done may have already been repaired by the 2009 enactment of a statutory prohibition on stranger-originated life insurance (see majority op at 549 n 5). The new statute may create its own problems; insurable interest rules, as our opinions in this case surely demonstrate, are tricky to handle. But I view the new statute as an attempt to implement what I think has always been the public policy of New York to condemn wagers on the early death of an insured.

Chief Judge Lippman and Judges Graffeo, Read and Jones concur with Judge Ciparick; Judge Smith dissents in a separate opinion in which Judge Pigott concurs.

Following certification of a question by the United States Court of Appeals for the Second Circuit and acceptance of the question by this Court pursuant to section 500.27 of the Rules of Practice of the New York State Court of Appeals (22 NYCRR 500.27), and after hearing argument by counsel for the parties and consideration of the briefs and the record submitted, certified question answered in the negative.

      . All facts here are drawn from allegations in the parties’ complaints, and are discussed in greater detail in the District Court opinion (see Kramer v Lockwood Pension Servs., Inc., 653 F Supp 2d 354 [SD NY 2009]).

      . Lincoln Life & Annuity Co. of New York alleges that, in January 2006, Hudson was acquired by and merged with TD Bank, N.A.

      . Other claims that survived the District Court order include Life Products and Berck’s counterclaims against Alice, in the alternative, for misrepresentation/breach of warranty; Life Products’ third-party claims against Liza for breach of express warranty and breach of contract; and Life Products and Berck’s cross claims against Lincoln for breach of contract.
      Notably, District Court determined that the insurers could not attempt to void the policies, as they had been issued over two years earlier and so are incontestible (see Insurance Law § 3203 [a] [3]; New England Mut. Life Ins. Co. v Caruso, 73 NY2d 74 [1989]). As a result, it dismissed the insurers’ counterclaims and cross claims for, among other things, fraud, fraudulent concealment, aiding and/or abetting fraud, and for a declaratory judgment.

      . The Second Circuit denied Phoenix and Lincoln’s petitions seeking to appeal District Court’s order “because an immediate appeal concerning the issues presented therein is unwarranted.” Nonetheless, the insurers urge us to expand the scope of the certified question and consider whether District Court properly dismissed their claims.
      We have considered Phoenix and Lincoln’s arguments relating to the incontestability issue, but decline their request to expand the scope of the certified question. Thus, we are denying Alice and Lifemark’s motions in this Court to strike the portions of the insurers’ briefs addressing whether the incontestability rule should apply here (15 NY3d 901 [2010] [decided today]).

      . In 2009, the Legislature added several new provisions to the Insurance Law regulating permissible “life settlement contracts,” i.e. agreements by which compensation is paid for
      “the assignment, transfer, sale, release, devise or bequest of any portion of:
      “(A) the death benefit;
      “(B) the ownership of the policy; or
      “(C) any beneficial interest in the policy, or in a trust . . . that owns the policy” (see Insurance Law § 7802 [k] [1]).
      In addition to regulating the Ufe settlement industry (see Insurance Law art 78), this new law prohibits “stranger-originated life insurance,” defined as
      “any act, practice or arrangement, at or prior to policy issuance, to initiate or facilitate the issuance of a policy for the intended benefit of a person who, at the time of policy origination, has no insurable interest in the life of the insured under the laws of this state” (Insurance Law § 7815 [a]).
      It also prohibits anyone from entering into a valid life settlement contract for two years following the issuance of a policy, with some exceptions (see Insurance Law § 7813 [j] [1]). Because these provisions did not go into effect until May 18, 2010, they do not govern this appeal.

      . The 1939 statute read:
      “Any person of lawful age may on his own initiative procure or effect a contract of insurance upon his own person for the benefit of any person, firm, association or corporation, but no person shall procure or cause to be procured, directly or by assignment or otherwise any contract of insurance upon the person of another unless the benefits under such contract are payable to the person insured or . . . to a person having, at the time when such contract is made, an insurable interest in the person insured” (L 1939, ch 882, adding Insurance Law § 146 [1]).


author: Pigott, J. Ciparick, J. (dissenting).

text:
    [940 NE2d 899, 915 NYS2d 194]
    In the Matter of New York State United Teachers, Respondent, v Brighter Choice Charter School et al., Appellants.
    Argued October 13, 2010;
    decided November 18, 2010

      POINTS OF COUNSEL

      Bond, Schoeneck & King, PLLC, Albany (Nicholas J. D’Ambrosio, Jr., and Joanmarie M. Dowling of counsel), for appellants.
    I. The commercial or fund-raising purposes exception applies to public and charter school employees. (Matter of New York State Rifle & Pistol Assn., Inc. v Kelly, 55 AD3d 222; Matter of Federation of N.Y. State Rifle & Pistol Clubs v New York City Police Dept., 73 NY2d 92; Matter of Scott, Sardano & Pomeranz v Records Access Officer of City of Syracuse, 65 NY2d 294.) II. An unwarranted invasion of personal privacy exists when the requester seeks information that can be used to obtain names and addresses for commercial or fund-raising purposes. (Matter of Federation of N.Y. State Rifle & Pistol Clubs v New York City Police Dept., 73 NY2d 92; Matter of New York State Rifle & Pistol Assn., Inc. v Kelly, 55 AD3d 222; Matter of Siegel,

      Fenchel & Peddy v Central Pine Barrens Joint Planning & Policy Commn., 251 AD2d 670; Matter of Scott, Sardano & Pomeranz v Records Access Officer of City of Syracuse, 65 NY2d 294; Matter of Property Tax Reduction Consultants, Inc. v Township of Islip, 21 AD3d 376; Matter of Comps, Inc. v Town of Huntington, 269 AD2d 446.)

      Marilyn Raskin-Ortiz, Latham, and James R. Sandner for respondent.
    I. Public Officers Law § 89 (2) (b) does not apply where compliance with the Freedom of Information Law request would not disclose information about the personal activities of persons in their private lives. (Matter of Federation of N.Y. State Rifle & Pistol Clubs v New York City Police Dept., 73 NY2d 92; Matter of New York State Rifle & Pistol Assn., Inc. v Kelly, 55 AD3d 222; Matter of Scott, Sardano & Pomeranz v Records Access Officer of City of Syracuse, 65 NY2d 294; Matter of Goodstein v Shaw, 119 Misc 2d 400; Kwasnik v City of New York, 262 AD2d 171.) II. Appellants have failed to establish that New York State United Teachers’ Freedom of Information Law request for the names of their employees falls squarely within the ambit of the fund-raising exemption of Public Officers Law § 89 (2) (b) (iii). (Matter of Data Tree, LLC v Romaine, 9 NY3d 454; Matter of Empire Realty Corp. v New York State Div. of Lottery, 230 AD2d 270; Matter of Fink v Lefkowitz, 47 NY2d 567; Matter of Hanig v State of N.Y. Dept. of Motor Vehs., 79 NY2d 106; Matter of Federation of N.Y. State Rifle & Pistol Clubs v New York City Police Dept., 73 NY2d 92; Matter of New York Teachers Pension Assn. v Teachers’ Retirement Sys. of City of N.Y., 71 AD2d 250; Matter of Crucible Materials Corp. v New York Power Auth., 13 NY3d 223; Direen Operating Corp. v State Tax Commn., 46 AD2d 191.)
   OPINION OF THE COURT

Pigott, J.

Petitioner New York State United Teachers (NYSUT) submitted requests under the Freedom of Information Law (FOIL) to the six respondent Charter Schools seeking, among other things, payroll records showing the full names, titles, corresponding salaries, and home addresses of all persons employed as teachers, instructors and faculty (collectively referred to hereafter as teachers). The Charter Schools partially denied the request, stating that full compliance would constitute an unwarranted invasion of personal privacy under Public Officers Law § 89 (2) (b).

After its unsuccessful administrative appeals, NYSUT commenced these now-consolidated hybrid CPLR article 78/ declaratory judgment actions against the Charter Schools and their administrative officials seeking the teachers’ names, titles and salaries, claiming that non-disclosure of such information was arbitrary, capricious and in violation of law. As relevant to this appeal, the Charter Schools asserted in their answers that they withheld portions of the requested information based on the commercial and fund-raising exemption of Public Officers Law § 89 (2) (b) (iii).

The parties agreed that the only remaining issue before Supreme Court was disclosure of the teachers’ full names, the Charter Schools having agreed to provide the title and salary information. Supreme Court ordered the Charter Schools to disclose the names of their teachers and the Appellate Division unanimously affirmed, noting that although the Charter Schools submitted proof from which it could be inferred that NYSUT’s intent was to solicit members, the Charter Schools were required to disclose the names for two reasons, first, because NYSUT dropped its request for home address information, and second, because the Charter Schools were required to keep basic employee information pursuant to Public Officers Law § 87 (3) (b) (64 AD3d 1130, 1131-1132 [3d Dept 2009]). We now reverse.

Charter schools are clearly subject to FOIL (see Education Law § 2854 [1] [e]), meaning that they must maintain “a record setting forth the name, public office address, title and salary of every officer or employee” (Public Officers Law § 87 [3] [b]). There is a presumption that such records must be made “available for public inspection and copying” (Public Officers Law § 87 [2]). There is an exception, however. Under Public Officers Law § 89 (2), an entity subject to FOIL may deny access to records that “if disclosed would constitute an unwarranted invasion of personal privacy” (Public Officers Law § 87 [2] [b]), which, as relevant here, includes the “sale or release of lists of names and addresses if such lists would be used for commercial[] or fund-raising purposes” (Public Officers Law § 89 [2] [b] [in]).

In Matter of Federation of N.Y. State Rifle & Pistol Clubs v New York City Police Dept. (73 NY2d 92 [1989]), an organization requested the names and addresses of rifle and shotgun permit holders so it could mail them circulars describing its organization, its pursuits and the services it performed on behalf of its members, along with information concerning the organization’s annual membership dues (see id. at 96). The organization did not dispute that its main reason for conducting the mailings was to obtain membership dues to support its activities, meaning that the purpose of the mailings was to raise funds. We rejected the organization’s assertion that solicitation of funds to support an organization was distinctly different from a direct solicitation of contributions, noting that

“[i]t is the purpose of the solicitation which matters, not what it is called, the manner or form in which it is presented to the solicitees, or the incidental benefits available to those who make a payment . . . If . . . dues received are intended to support the general activities of the organization and to further its over-all objectives, the solicitation activity is ‘fund-raising’ ” (id. at 96-97).

Giving the term “fund-raising” its “natural and most obvious meaning” (Matter of Capital Newspapers, Div. of Hearst Corp. v Whalen, 69 NY2d 246, 251 [1987]), it is evident that NYSUT’s intent in requesting the teacher names is to expand its membership and, by extension, obtain membership dues. Counsel for NYSUT conceded as much during oral argument before Supreme Court.

We further note that ordering disclosure of the names would do nothing to further the policies of FOIL, which are to assist the public in formulating “intelligent, informed choices with respect to both the direction and scope of governmental activities” (Matter of Fink v Lefkowitz, 47 NY2d 567, 571 [1979]). If anything, “it is precisely because no governmental purpose is served by public disclosure” of this information that section 87 (2) (b)’s privacy exemption falls squarely within FOIL’S statutory scheme (Matter of Federation of N.Y. State Rifle & Pistol Clubs, 73 NY2d at 97). There is no indication that NYSUT intends to use the names to, for example, expose governmental abuses or evaluate governmental activities. It appears, instead, that NYSUT seeks the teachers’ names as a convenient mechanism for contacting prospective members. Although NYSUT certainly possesses a right to seek dues-paying members, it may not rely on FOIL to achieve that end.

The dissent notes the difference between Federation and this case, pointing out that the organization in Federation sought personal information about private citizens—as opposed to personal information about public citizens. But the exemption is blind to the distinction between the privacy of public employees and private citizens. Rather, it is the purpose for which the information is sought that drives the analysis.

The dissent’s reliance on Education Law § 2854 (3) (c-1) (i) is similarly misplaced (dissenting op at 568); the issue before us is whether the Charter Schools must disclose the teachers’ names pursuant to FOIL, not whether the Charter Schools are denying NYSUT access to school employees. Merely because charter schools must afford employee organizations access under the Education Law, it does not follow that the employee organizations may circumvent the FOIL exemptions in achieving those ends. Nor, as the dissent suggests, does Public Officers Law § 89 (7) mandate presumptive disclosure of employee records (dissenting op at 569); that provision permits disclosure of names if “otherwise available under [FOIL].”

Contrary to the holding of the Appellate Division, the fact that the Charter Schools must comply with the mandates of section 87 (3) (b) does not imply that they must, ipso facto, disclose that information without first considering whether it falls within a denoted exemption; FOIL clearly states that an agency must make records (or portions thereof) available for public inspection and copying unless the disclosure would constitute an unwarranted invasion of personal privacy under section 89 (2) (see Public Officers Law § 87 [2]). Simply because the record is required to be maintained under section 87 (3) (b) does not mean that it must be disclosed, particularly in circumstances where an exemption applies.

Nor is there merit to NYSUT’s contention that it is entitled to the teachers’ names because it dropped its request for “names and addresses” and seeks only the names. Section 89 (2) (b) (iii) would have little meaning if entities could circumvent the fund-raising exemption by gaining access to only the names and then linking them to a home address. The policy concerns underlying the personal privacy exemption are no less implicated under that scenario.

Accordingly, the order of the Appellate Division should be reversed, with costs, and that part of the petition seeking disclosure of the names of the teachers employed by the Charter Schools should be denied.

Ciparick, J. (dissenting).

Because I believe the information requested by New York State United Teachers (NYSUT) was required to be disclosed by the Freedom of Information Law (FOIL), I respectfully dissent.

When it enacted the Charter Schools Act in 1998, the Legislature specifically subjected charter schools to FOIL (see Education Law § 2854 [1] [e] [“charter school(s) shall be subject to the provisions of articles six (FOIL) and seven (Open Meetings Law) of the public officers law”]). Thus, for FOIL purposes, a charter school is equivalent to any public agency or public school.

FOIL “provides the public with broad access to the records of government” (Matter of Data Tree, LLC v Romaine, 9 NY3d 454, 462 [2007] [internal quotation marks and citation omitted]). An agency must make available for public inspection and copying all records unless the agency can establish that a particular request falls squarely within one of FOIL’S specifically enumerated categories of materials exempted from disclosure (see id.; see also Matter of Scott, Sardano & Pomeranz v Records Access Officer of City of Syracuse, 65 NY2d 294, 296-297 [1985]). Although FOIL generally does not require that an agency subject thereto create records other than those generated in the normal course of agency business (Public Officers Law § 87 [3]), it does require that each agency maintain “a record setting forth the name, public office address, title and salary of every officer or employee of the agency” (Public Officers Law § 87 [3] [b]).

To effectuate FOIL’S overriding policy—which is that “the public is vested with an inherent right to know and that official secrecy is anathematic to our form of government” (Matter of Fink v Lefkowitz, 47 NY2d 567, 571 [1979]; see also Public Officers Law § 84)—the enumerated list of records exempt from FOIL disclosure is interpreted narrowly (see Matter of Russo v Nassau County Community Coll., 81 NY2d 690, 697 [1993]). Moreover, the burden for establishing the applicability of an exemption rests on the agency, which must “articulat[e] a particularized and specific justification for denying access” to the requested documents (Matter of Capital Newspapers Div. of Hearst Corp. v Burns, 67 NY2d 562, 566 [1986]; see also Matter of West Harlem Bus. Group v Empire State Dev. Corp., 13 NY3d 882, 885 [2009]).

As relevant here, FOIL exempts from disclosure “records or portions thereof that ... if disclosed would constitute an unwarranted invasion of personal privacy under the provisions of subdivision two of section eighty-nine of this article” (Public Officers Law § 87 [2] [b]). Section 89 states that “[a]n unwarranted invasion of personal privacy includes” the “sale or release of lists of names and addresses if such lists would be used for commercial[] or fund-raising purposes” (Public Officers Law § 89 [2] [b] [in]).

The majority, relying on Matter of Federation of N.Y. State Rifle & Pistol Clubs v New York City Police Dept. (73 NY2d 92 [1989]), concludes that “NYSUT’s intent in requesting the teacher names [was] to expand its membership and, by extension, obtain membership dues” and, therefore, the release of teacher names requested by NYSUT was justifiably denied as an unwarranted invasion of personal privacy (majority op at 564). I disagree.

In the Federation case, as the majority explains, an organization sought the names and addresses of citizens holding rifle and shotgun permits (see 73 NY2d at 94). The purpose of the request was to send those permit holders information on the organization, including information about the organization’s annual membership rates (see id. at 96). Because the organization did not dispute that the purpose of its mailings was to solicit new members and thereby receive funding, we concluded that the FOIL request for permit holders’ names and addresses was properly denied under the fund-raising exemption (see id. at 96-97). Specifically, we observed that “direct-mail membership solicitation [as] proposed [by the Federation] would constitute ‘fund-raising’ if that term is given its natural and most obvious meaning” (id. at 96).

However, we also noted in the Federation case: “It is precisely because no governmental purpose is served by public disclosure of certain personal information about private citizens that the privacy exemption of section 87 (2) (b) fits comfortably within FOIL’S statutory scheme” (id. at 97 [some emphasis added]). Two important points follow from this statement, which distinguish Federation from this case. First, here, the public disclosure of personal information is not about private citizens, but about public employees—employees for whom charter schools are specifically required by FOIL to maintain certain information (see Public Officers Law § 87 [3] [b]; see also Education Law § 2854 [1] [e]).

Second, there is unquestionably a public purpose served by permitting NYSUT to obtain the names of charter school teachers: there is a strong public policy, embodied in the Taylor Law (Civil Service Law art 14), in favor of organization and collective bargaining by public employees (see also NY Const, art I, § 17 [“Employees shall have the right to organize and to bargain collectively through representatives of their own choosing”]). Rather than negating that public policy in the creation of charter schools, the Legislature reinforced it (see Education Law § 2854 [3] [c-1] [i] [“If employees of the charter school are not represented, any charter school chartered pursuant to this article must afford reasonable access to any employee organization during the reasonable proximate period before any representation question is raised” (emphasis added)]; see also Education Law § 2854 [3] [c-2] [subjecting charter schools to the employer neutrality provisions of the Civil Service Law]). For these reasons, Federation is distinguishable from this case and the majority’s reliance on it is misplaced.

Additionally, the charter schools failed to carry their burden to “articulat[e] a particularized and specific justification for denying access” to the requested documents (Matter of Capital Newspapers, 67 NY2d at 566; West Harlem, 13 NY3d at 885; see also Data Tree, 9 NY3d at 462-463). In West Harlem, the records access officer for the Empire State Development Corporation (ESDC) relied on the statutory language of Public Officers Law § 87 (2) (c) as the basis for denying the West Harlem Business Group’s (WHBG) request for certain records, and ESDC’s appeals officer “merely parroted the same language” in a letter denying the appeal (13 NY3d at 884). We concluded that this, without more, constituted a failure by ESDC to “fully explain in writing” to WHBG the reasons for further denial as required by FOIL (id. at 885, quoting Public Officers Law § 89 [4] [a]). We ultimately held that ESDC had “failed to meet its burden of proof relative to the exemptions” it sought to invoke to deny disclosure, thereby justifying Supreme Court’s decision to order the documents released (id. at 886). Here, as in West Harlem, the charter schools initially denied NYSUT’s request by invoking the statutory language of Public Officers Law § 89 (2) (b), stating that the disclosure of the information sought “would constitute an unwarranted invasion of personal privacy.” Each of the schools used identical language in denying the initial FOIL request. Moreover, the record reflects that, to the extent the charter schools responded to NYSUT’s appeal of the initial denials, they “merely parroted the same language” in their response. The charter schools first invoked the specific exemption for fund-raising during the course of this CPLR article 78 proceeding, in response to NYSUT’s petition. It is unclear why the majority excuses this failure by the charter schools when we did not excuse the failure of ESDC in West Harlem on virtually identical facts.

In short, the majority’s reliance on Federation is misplaced and, in any event, the charter schools’ failure to articulate a specific reason for the denial of NYSUT’s request constituted a sufficient basis for the courts below to conclude that the requested information was not exempt under the personal privacy/fund-raising exemption. Aside from ignoring that the charter schools failed to meet their burden of justifying their decision to withhold information, the majority has, in effect, created a rule that unions and other organizations that rely on membership dues can never obtain the names of public employees, because such organizations may, at some future time, seek dues-paying members. This is particularly troublesome in a case, such as this, where a union, which should be afforded “reasonable access” to public employee records (Education Law § 2854 [3] [c-1] [i]; Public Officers Law § 89 [7]), is denied such access under the guise of the fund-raising exemption. For these reasons, I respectfully dissent.

Judges Graffeo, Read and Smith concur with Judge Pigott; Judge Ciparick dissents in a separate opinion in which Chief Judge Lippman and Judge Jones concur.

Order reversed, etc.

      . Those charter schools are Brighter Choice, Henry Johnson, KIPP: Tech Valley, Albany Community, Albany Preparatory and Achievement Academy. None of the Charters Schools’ teachers are members of a labor union.

      . The dissent erroneously relies on Matter of West Harlem, Bus. Group v Empire State Dev. Corp. (13 NY3d 882 [2009]) in claiming that the Charter Schools did not articulate a particularized and specific justification for denying NYSUT access to the names (dissenting op at 568-569). Although, in a statement that can be considered only dicta, this Court in West Harlem criticized the records access officer for not complying with that standard, the Court upheld disclosure of the documents on a different ground (see 13 NY3d at 885).

      . This is the wording of the exemption at the time NYSUT made its FOIL requests. However, by the time the parties argued before Supreme Court, a statutory amendment had gone into effect and the word “commercial” had been replaced by the word “solicitation” (see L 2008, ch 223, § 4 [eff Aug. 6, 2008]). The parties do not contend that the amended language controls.

      . Education Law § 2854 (3) (c-1) (i) states: “If employees of the charter school are not represented, any charter school chartered pursuant to this article [article 56: ‘Charter Schools’] must afford reasonable access to any employee organization during the reasonable proximate period before any representation question is raised.”

       As the majority notes, the statute has been amended to replace “commercial” with “solicitation”; the older version of the státute is at issue here (see majority op at 564 n 3).