Court Revives Suits Challenging MONY, Guardian Sales Tactics.

New York's highest court has expanded the state's consumer-protection law and revived class-action lawsuits against MONY Group Inc. and Guardian Life Insurance Company of America. At issue is whether the companies committed fraud when they sold vanishing premium policies in the late 1980s.

In a split ruling issued Dec. 20 addressing both lawsuits, the New York Court of Appeals upheld lower court rulings that the companies' defense is enough to "absolve" them of fraud in the sense that they purposely misrepresented facts about the policies. The court ruled, however, that policyholders could raise a "question of fact" over whether the companies' practices were deceptive under section 349 of New York's General Business Law, the state's consumer protection law. The ruling sends the lawsuits back to the lower courts.

MONY said it "continues to believe" it has "strong and meritorious defenses to the remaining claim and intends to defend itself vigorously." The ruling, which left the insurers facing one of nine claims, also significantly narrows MONY's exposure in the suit, MONY said. Guardian said it did not violate the consumer protection law.

The so-called vanishing premium policies promised policyholders that they wouldn't have to pay premiums after eight years, assuring them that dividend payments would cover the cost. But interest rates fell, along with dividends, and customers were forced to continue paying premiums. The companies, like other life insurers that have faced or settled similar lawsuits, told policyholders the interest rates weren't guaranteed. The court hinted that might not have been enough.

Judge Alfred Rosenblatt, in the majority decision, cited a training videotape that shows agents how to "cause the vanish to occur whenever your client wants to see it," and wrote that the companies "allegedly trained sales agents to make presentations in ways that would arguably deceive and mislead prospective policyholders." Four judges joined Rosenblatt, while one abstained.

In a dissenting opinion, Judge Joseph Bellacosa wrote that it's unrealistic to believe that using interest rates in illustrations for the policies is misleading.