Motion sequence numbers 002 and 003 are hereby consolidated for disposition.

Plaintiff seeks to recover disability benefits under a long-term disability plan that defendant Spear, Leeds and Kellogg established for its employees and traders. The Amended Verified Complaint sets forth two causes of action against Spear, Leeds & Kellogg for breach of contract and three causes of action against defendant First Unum Life Insurance Company (First Unum) for breach of contract, estoppel and declaratory relief. First Unum asserts a cross claim (denominated as a counterclaim) against Spear, Leeds & Kellogg for indemnification in the event that it is found liable on any of plaintiff's claims.

Defendant First Unum argues, in motion sequence 002, that summary judgment dismissing the plaintiff's claims against it is warranted for two reasons. First, First Unum contends that the undisputed facts establish that plaintiff was not covered by First Unum's insurance policy, because he did not provide a completed application for coverage and it never approved his incomplete application. Second, even if plaintiff had been covered by the policy, there is allegedly no dispute that the disability he claims is excluded from coverage under the policy as a pre-existing condition.

In motion sequence number 003, Spear, Leeds & Kellogg moves for summary judgment dismissing plaintiff's contract claims as well as First Unum's cross claim for indemnification.

Plaintiff commenced this action in January of 2002, naming only Spear, Leeds & Kellogg as a defendant. Spear, Leeds & Kellogg moved for dismissal of the complaint pursuant to CPLR 3211(a)(7). In February 2003, this Court (Gammerman, J.) denied the motion with respect to the first two causes of action based on breach of contract, ruling that plaintiff had properly stated a cause of action against Spear, Leeds & Kellogg for breach of an implied agreement to enroll him in their long-term disability plan and that whether an implied contract existed was an issue of fact. Plaintiff was also granted leave to serve an amended complaint adding First Unum as a [*2]defendant. No appeal from this order was taken.

Plaintiff filed an amended verified complaint in March 2003 adding First Unum as a defendant. First Unum removed the action to federal court, asserting federal question jurisdiction under the Employee Retirement Income Security Act (ERISA), 29 USC § 1001, et seq. In March 2005, Spear, Leeds & Kellogg's motion to remand the action back to this court was granted on the ground that the insurance policy at issue was not an employee welfare benefit plan within the meaning of ERISA. Ehrenspeck v Spear, Leeds & Kellogg, et al., 389 F Supp 2d 485 (SDNY 2005).

In support of its motion for summary judgment, First Unum relies on the following undisputed facts: In 1985, T&S Commodities, Inc. procured a Group Long Term Disability Insurance Policy, policy number 450140, from First Unum. The policy provided long-term disability coverage to the owners and employees of T&S; T&S paid all premiums without contribution from the insured individuals. In 1991, the policy was amended to include coverage on a 100% contributory basis for brokers who cleared their trades through T&S. After the principals of T&S joined Spear, Leeds & Kellogg in 1993, the policy name was changed to Spear, Leeds & Kellogg Futures Division, but all benefits and terms of the plan remained the same.

The policy states, in Section I(8), that "[c]overages for which contributions are required apply only if proper enrollment is made and the required contributions are made" (Brown Affirm., Exh. C). Section III(C) of the policy established different procedures for enrollment depending on when an employee sought to enroll. Id. For employees who applied for coverage more than 31 days after their eligibility date, evidence of insurability and approval by First Unum was required.

Since 1974, plaintiff has been a futures trader and a member of the Coffee, Sugar and Cocoa Exchange, Inc. (Exchange), which is a division of the New York Board of Trade. Plaintiff was the sole owner and president of Tyspec Commodities (Tyspec) until October 1997, when Tyspec ceased operations. Tyspec was a floor brokerage firm on the trading floor of the Exchange, executing futures contracts on behalf of public customers. Plaintiff also executed futures trades on his own behalf for his own proprietary account. Prior to 1993, all of plaintiff's proprietary trades were cleared through Geldman, Inc., a registered futures commission merchant.

On June 23, 1993, plaintiff opened an account at Spear, Leeds & Kellogg to clear his trades. It is undisputed that plaintiff did not apply for coverage under the policy when he first became eligible to do so in 1993, but submitted an application to enroll four years later when he signed an enrollment card on May 7, 1997. Between May 1997 and October 2000, Spear, Leeds & Kellogg deducted monthly premiums from plaintiff's trading account and paid them to First Unum.

In September 1998, plaintiff submitted a claim against the policy for a claimed disability resulting from angina attacks, dizziness, shortness of breath and pain in his back, neck and chest. In September 1999, First Unum requested additional information from plaintiff and Spear, Leeds & Kellogg, including information about plaintiff's earnings, date of hire and his recent tax returns. When that information was allegedly not forthcoming, First Unum denied the claim on October 19, 1999. In October 2000, First Unum completed a review of its initial denial of [*3]coverage. It determined that plaintiff was improperly enrolled in the plan because he did not complete the evidence of insurability process and had not been approved for coverage by the company. The letter denying coverage stated that the policyholder, Spear, Leeds & Kellogg, was responsible for proper enrollment of its employees and traders in the plan.

Pursuant to a November 2004 settlement between First Unum and the New York State Superintendent of Insurance, First Unum was required to provide a claim reassessment process for claimants seeking review of a previous denial of long-term disability insurance coverage. Plaintiff requested reassessment of his claim pursuant to that process. By letter dated November 23, 2005, First Unum again denied plaintiff's claim, citing, as an additional reason, that even if plaintiff were covered by the policy, he was not entitled to long-term disability benefits because his alleged disability was caused by a pre-existing heart condition.

In support of its motion for summary judgment, First Unum contends that because plaintiff did not apply for coverage until years after he became eligible, his eligibility was governed by Section III(C)(3)(c)(I) of the policy. Section III(C)(3) of the policy, entitled "Eligibility and Effective Dates: Effective Dates of Insurance," provides in full:

3.An employee will be insured for contributory insurance on the latest ofthese dates:

a.the employee's eligibility date, if he has made written applicationfor insurance on or before this date; or

b.the date the employee makes written application for insurance, ifhe does it on or before the 31st day after his eligibility date; or

c.the date the Company gives its approval, if the employee:

I.makes written application for insurancemore than 31 days after his eligibility date;or

ii.terminated his insurance while continuing to be eligible.

In the case of I. and ii. above, the employee must submit anapplication and evidence of insurability[^[FN1]] to the Company for approval. This will be at the employee's expense.

(Brown Affirm., Exh. C) (emphasis added). The policy further provides that an employee becomes eligible for coverage on the first of the month after the date his employment began. Thus, plaintiff became eligible for the long-term disability insurance in 1993. Since plaintiff first applied for coverage on May 7, 1997, more than 31 days after his eligibility date, there is no dispute that he would not be covered by the policy unless and until he (a) submitted a written application with proof of his medical history; and (b) First Unum approved the application. Plaintiff has conceded that these conditions were applicable to him (Robert Ehrenspeck Dep. at 145-148), but that he never submitted evidence of insurability (id. at 60, 148) and that First Unum never approved his application (id. at 191-93).

In opposition to the motions for summary judgment, plaintiff alleges that in

April of 1993, he was approached by Sharon Jordan, an employee of Spear, Leeds & Kellogg, to [*4]discuss the possibility of clearing his trades through that firm. Plaintiff claims that he agreed to transfer his account from Geldman, Inc. based on Ms. Jordan's representations of reduced commissions and the availability of a full range of insurance plans, including a long-term disability plan.

In or about April of 1997, plaintiff asked Ms. Jordan about his eligibility to enroll in Spear, Leeds & Kellogg's long-term disability plan. During this conversation, plaintiff alleges he disclosed to Ms. Jordan than he was being treated for an existing medical condition, angina, and wished to know whether the long-term disability plan would cover this condition. He also requested information concerning premium payments and the benefits of the plan. Ms. Jordan allegedly reported that she did not know the answers offhand, but would find out and get back to him.

In early May 1997, Ms. Jordan allegedly approached plaintiff on the floor of the Exchange and told him that his pre-existing condition was covered under the plan after six months. She also indicated that the premium would be $430 per month, with potential benefits of $20,000 per month. At that time, Ms. Jordan gave plaintiff an "LTD Enrollment Card" that had been filled out and which he signed and immediately returned to Ms. Jordan. It is undisputed that the card was filled out by another Spear, Leeds & Kellogg employee, Donna Scala, whose duties included maintaining the policy at issue. The card provides that the employee "must complete sections 4, 5, 6 and 7, while the employer completes the other items, including item no. 8, which asked for plaintiff's employment date. As stated above, the enrollment card mistakenly lists plaintiff's employment date as April 1, 1997, when, in fact, plaintiff began clearing trades for Spear, Leeds & Kellogg in June of 1993. This was the only document that plaintiff signed at the time of his purported enrollment, and he was not given any additional documents to sign or read at that time.

Plaintiff's initial monthly payment under the plan was $451.22. Although he considered this amount excessive, especially compared to the quotes in the $80-$150 range that plaintiff had previously received, he claims he was led to believe by Ms. Jordan that the significant difference in price was to ensure coverage of his existing medical condition.

Plaintiff alleges that in January 1998, he spoke to Ms. Donna Tamborino, the office manager at Spear, Leeds & Kellogg, about filing a claim under the policy. Ms. Tamborino allegedly advised plaintiff that, as a prerequisite to submitting a claim, he cease trading from his account for six months and that she would handle everything from there. Plaintiff admits that, in February or March 1998, in anticipation of filing a claim for long-term disability benefits, he requested a copy of the policy from Ms. Tamborino and was provided a copy of a booklet that contained a summary description of the policy and a certificate of insurance. In August 1998, after six months of no activity in his account, plaintiff contacted Ms. Tamberino to file his claim. She allegedly agreed that a sufficient time had passed and that she would do the paperwork on submitting his claim. Plaintiff contends that at no time did Ms. Tamberino indicate to him that he was not properly enrolled in the plan or not covered by the policy.

Turning first to the third cause of action of the amended complaint, which alleges a breach of contract by First Unum, the undisputed facts establish that plaintiff never provided a completed application for coverage and First Unum never approved his incomplete application, prerequisites to coverage under the policy. However, in the fourth cause of action of the [*5]amended complaint, plaintiff claims that First Unum is estopped to deny that he was not enrolled in the policy, because it accepted payments of contributory premiums for three and one-half years and never informed plaintiff that his application had not been approved until after he filed a claim under the policy. Plaintiff argues that the policy does not specify how and when applicants are to be notified as to whether an application was approved or disapproved, and that First Unum had a duty to notify him that his application was incomplete or that coverage had been denied before accepting any payment of premiums. Plaintiff relies on Gaines v The Sargent Fletcher, Inc. Group Life Ins. Plan (329 F Supp 2d 1198 [CD Cal 2004]), in which the court held that Hartford Life Insurance Company (Hartford) could not, under ERISA, deny coverage on the ground that the employee failed to submit evidence of insurability for supplemental life insurance on his wife where Hartford accepted premium payments from the employee and disputed coverage only after the wife died and he submitted a claim for benefits.

In order for First Unum to be equitably estopped from denying that coverage existed under the policy, plaintiff must show: (1) conduct by First Unum which amounts to a false representation which is calculated to convey the impression that the facts are otherwise than what First Unum asserts in this case; (2) First Unum's intention or expectation that its conduct would be acted upon by the plaintiff; and (3) First Unum's knowledge of the true facts. BWA Corp. v Alltrans Express U.S.A. Inc., 112 AD2d 850, 853 (1st Dept 1985). In addition, plaintiff must show with respect to himself a lack of knowledge of the true facts, reliance upon the conduct of First Unum, and a prejudicial change in position. Nassau Trust Co. v Montrose Concrete Products Corp., 56 NY2d 175, 184 (1982); River Seafoods, Inc. v JPMorgan Chase Bank, 19 AD3d 120, 122 (1st Dept 2005).

There can be no finding of estoppel against First Unum here, because it did not know of the true facts concerning plaintiff's employment history with Spear, Leeds & Kellogg before accepting the premium payments. This is because plaintiff and Spear, Leeds & Kellogg — whether intentionally or innocently — provided First Unum with the wrong date as to which plaintiff became eligible to enroll for coverage under the policy and failed to provide the required evidence of insurability form. There is no dispute that the enrollment card plaintiff signed to verify the accuracy of the information provided therein lists his employment date as April 1, 1997, a date that was off by four years. Section VI(E) of the policy which provides that if any relevant facts about an employee are inaccurate, "the true facts will decide if and in what amount insurance is valid under this policy." The fact that First Unum does not examine the dates on enrollment cards until after a claim is made (see Ollis Dep. at 23-25), is irrelevant, because even if First Unum had examined the enrollment card submitted by Spear, Leeds & Kellogg on plaintiff's behalf, it would not have been alerted to the fact that evidence of insurability and approval by First Unum was required.

Gaines v The Sargent Fletcher, Inc. Group Life Ins. Plan, 329 F Supp 2d 1198, upon which plaintiff relies, is distinguishable on its facts. Unlike the enrollment card plaintiff signed in this case, the Gaines court ruled that the employee's application for supplemental life insurance coverage for his wife and additional premium payment at the time of enrollment put Hartford on notice that a personal health insurance statement regarding the wife was required, and thus Hartford waived and/or was equitably estopped from enforcing this requirement by not requesting the medical evidence. Id. at 1222-23. Here, in contrast, First Unum did not know [*6]plaintiff's actual employment date or that it was four years earlier, rather than within 31 days as plaintiff and Spear, Leeds & Kellogg had represented on both the enrollment card and the form accompanying his initial premium payment.

Even if plaintiff was covered by the policy, the undisputed facts show that his claim is excluded as a pre-existing condition under Section IV of the policy. That section provides that First Unum "will not cover any disability caused by, contributed to by, or resulting from a pre-existing condition; and which begins in the first 12 months after an insured's effective date." The policy defines pre-existing condition as "a sickness or injury for which the insured received medical treatment, consultation, care or services including diagnostic measures, or had taken prescribed drugs or medicines in the three months prior to the insured's effective date."

Plaintiff signed an enrollment card applying for the insurance coverage on May 7, 1997. The enrollment card gives plaintiff's effective date of his insurance as May 1, 1997. The following undisputed facts establish that plaintiff's alleged disability began in September 1997:

— plaintiff submitted a Physician's Statement to First Unum, which states that plaintiff's symptoms were caused by angina and that he could not work because of this heart condition;

— plaintiff has testified that he stopped working in September or October 1997, and claimed he could not work because of angina (Robert Ehrenspeck Dep. at 216, 138-39);

— in the "Employee's Statement" plaintiff submitted to First Unum on or about July 28, 2005 in connection with his request for a reassessment of his claim, he asserted a disability date of September 1997 (Brown Affirm., Exh. I);

— plaintiff submitted a claim to another insurer, CNA, in which he asserted that he had stopped working on "9/30/97 (id., Exh. K);"

— CNA concluded that plaintiff became disabled as of September 30, 1997 (id., Exh. L); and

— plaintiff submitted a claim for social security disability benefits, and the Social Security Administration "found that [Ehrenspeck] became disabled under [its] rules on September 30, 1997 (id., Exh. J).

The undisputed evidence also establishes the second aspect of the pre-existing medical condition exclusion. Plaintiff's medical records establish that he received medical treatment for angina in the three months before May 1997. Plaintiff consulted a cardiologist on February 3, 1997 and April 23, 1997, in connection with the his ongoing treatment of plaintiff's cardiac condition, including hypertension, angina and shortness of breath (see Brown Affirm., Exhs. N-O).

Plaintiff fails to dispute that his disability began in the first year of the policy's coverage, and that it was caused by angina, a condition for which plaintiff received medical treatment during the three months preceding May 1, 1997. Accordingly, the First Unum's motion for [*7]summary judgment, as to the second, fourth and fifth (seeking declaratory relief) causes of action of the Amended Verified Complaint, is granted. Those causes of action are dismissed.

Plaintiff asserts two breach of contract claims against Spear, Leeds & Kellogg. In the first cause of action, he alleges that Spear, Leeds & Kellogg breached the purported oral agreement with Ms. Jordan in May 1997, for Spear, Leeds & Kellogg to provide him with long-term disability coverage in exchange for monthly premium payments. In the second, he argues that an implied contract with Spear, Leeds & Kellogg to provide him with long-term disability insurance was created when he agreed to clear his trades through Spear, Leeds & Kellogg in 1993. Spear, Leeds & Kellogg contends summary judgment dismissing both of these claims is warranted, because it never entered into a contract to provide insurance to plaintiff and, under New York law, an entity does not undertake a contractual obligation by making group insurance available as a mere gratuity, without consideration.

An employer who secures group long-term disability insurance for its employees as a mere gratuity is not a party to the contract of insurance between the participant in the plan and the insurance company. Lipton v Unumprovident Corp., 10 AD3d 703, 706 (2d Dept 2004); Georgas v Kreindler & Kreindler, 41 F Supp 2d 470, 473 (SDNY 1999); 71 NY Jur 2d Insurance § 2243 (1998). Thus, as Spear, Leeds & Kellogg correctly argues, no breach of contract claim lies against it for First Unum's refusal to pay plaintiff disability benefits under the policy. Id. However, as Justice Gammerman recognized, "plaintiff is not claiming a breach of either the Plan or Policy, but rather a breach of a different agreement really, an implied agreement to procure long-term disability coverage for him" (Feb. 13, 2003 Tr. at 8). Indeed, there is a common law duty of due care and good faith owed by an employer to an employee in administering a group insurance plan. Lipton, 10 AD3d at 706-07; Rey v St. Francis Hospital, 86 AD2d 656 (2d Dept 1982); McGinnis v Bankers Life Co., 39 AD2d 393, 398 (2d Dept 1972); Van Ostrand v National Life Assur. Co. of Canada, 82 Misc 2d 829, 834 (Sup Ct, Tompkins County 1975); Antinora v Nationwide Life Ins. Co., 76 Misc 2d 599, 606 (County Ct, Monroe County 1973).

Thus, once Spear, Leeds & Kellogg undertook, in 1997, to enroll the plaintiff in its long-term disability plan, it undertook an implied contractual duty to plaintiff to exercise due care and good faith in performing "whatever functions are reasonable and necessary in order to keep the policy in effect: making payroll deductions, paying premiums to the insurance company, and any other activities inherent in the administration of the policy." Van Ostrand, 82 Misc 2d at 834. Spear, Leeds & Kellogg's duty to administer the plan in good faith required it to provide the plaintiff with accurate information about his eligibility to participate in the plan and the requirements for proper enrollment. Lipton, 10 AD3d at 707.

The fact that Section III(1)(c) of the policy states that the employee must bear the expense of submitting an application and evidence of insurability to First Unum is not conclusive support for Spear, Leeds & Kellogg's argument that plaintiff was solely responsible for submitting the requisite evidence of insurability form. Indeed, the form itself directs the employee to return the form either to the "plan administrator," here, Spear, Leeds & Kellogg, or directly to First Unum (Brown Affirm., Exh. S). Likewise, the deposition testimony of Steven Lucky, who performed the claim reassessment for First Unum in 2005, does not fairly support Spear, Leeds & Kellogg's position that plaintiff was solely responsible for submitting the required evidence of insurability. [*8]Mr. Lucky merely testified that First Unum was responsible for approving applicants and that Spear, Leeds & Kellogg was not responsible for "ensuring" that each applicant for insurance satisfy all prerequisites for coverage (see Lucky Dep. at 75-86), which is different from correctly advising applicants of the application process and supplying them with the requisite forms. John Ollis, a First Unum sales representative, testified that the policy was a "self-accounting" policy, meaning that it was the employer's responsibility to enroll people within the time frame and to make sure that those that are not enrolled within the time frame provide evidence of insurability (id.). There is documentary evidence showing that Spear, Leeds & Kellogg's benefits staff was fully cognizant of the evidence of insurability requirement (see Ollis Dep. at 23; Brown Affirm., Exhs. Q-S).

Valid consideration for an implied contract was created when Spear, Leeds & Kellogg offered services to plaintiff, including a reduced commission rate and a full line of insurance coverage, as an inducement for him to trade with Spear, Leeds & Kellogg rather than any other clearing firm. See Antinora v Nationwide Life Ins. Co., 76 Misc 2d at 605 ("real consideration" for contributory group health insurance was employee working for the defendant employer).

Spear, Leeds & Kellogg contends that summary judgment is warranted on the second cause of action because plaintiff admitted at his deposition that he did not recall specifically discussing the availability of long-term disability insurance with Ms. Jordan in 1993 prior to switching from Geldman, Inc. to Spear, Leeds & Kellogg (Robert Ehrenspeck Dep. at 46-47, 52). However, this ignores plaintiff's other deposition testimony in which he claims that he was influenced to move to Spear, Leeds & Kellogg by the better commission rate Ms. Jordan was offering and that he "asked about general hospitalization coverage, medical coverage, dental coverage, life insurance. All the insurance down the line. And she said they had a full array of everything that I needed" (id. at 46-47). Nor does the Customer Futures Option Agreement that plaintiff signed in 1993 bar plaintiff's contract claims as a matter of law. Section 21 of this agreement merely provides that it "constitutes the entire agreement between [plaintiff] and SLK with respect to the subject matter hereof," which is the clearance and execution of plaintiff's futures contracts, and makes no reference to insurance benefits provided by the company. Moreover, a trier of fact could find that the enrollment card plaintiff was asked to sign, which authorizes Spear, Leeds & Kellogg to deduct premiums from his trading account, constitutes a writing sufficient to satisfy Section 16 of the agreement which provides that it may only be "altered, modified or amended by mutual written consent of the parties" (Dell Aff., Exh. 2).

The court is equally unpersuaded by Spear, Leeds & Kellogg's argument that the evidence in this case shows that Spear, Leeds & Kellogg fully performed its obligations of due care and good faith to plaintiff, and that plaintiff has not been damaged by Spear, Leeds & Kellogg's alleged improper actions. There are triable issues of fact as to whether Spear, Leeds & Kellogg's professional benefits staff made negligent or even intentional misrepresentations to plaintiff about his eligibility for coverage, particularly whether his pre-existing angina condition was covered under the policy. Other triable issues of fact include whether plaintiff was ever properly informed by Spear, Leeds & Kellogg that he was required to submit evidence of insurability to First Unum; why the enrollment card Spear, Leeds & Kellogg's employee filled out incorrectly listed plaintiff's employment date as May 1, 1997; and why plaintiff was told he must cease trading for six months before filing a claim for benefits. [*9]

Spear, Leeds & Kellogg makes the additional argument that plaintiff was not injured as a result of any breach of contract to procure long-term disability insurance from First Unum since plaintiff's claim is excluded from coverage under the policy as a pre-existing condition. However, as Justice Gammerman also recognized, plaintiff was damaged, at a minimum, by the fact that he paid premiums for three and one-half years for disability coverage that did not exist. Nor is there any evidence to establish, as a matter of law, that plaintiff could not have obtained other or increased disability insurance elsewhere that would have covered his angina condition had he, as he claims, been properly advised of the terms and conditions of enrollment into Spear, Leeds & Kellogg's plan and its exclusions.

The remaining portion of Spear, Leeds & Kellogg's motion, seeking summary judgment dismissing First Unum's counterclaim seeking indemnification from Spear, Leeds & Kellogg, is denied as moot, since indemnification is sought only in the event plaintiff is found to be insured under the policy, by estoppel or otherwise, and plaintiff's claims against First Unum have been dismissed. Searching the record (CPLR 3212[b]), the court dismiss Spear, Leeds & Kellogg's cross claim against First Unum, as that claim, too, is based on a finding of coverage under the policy, by estoppel or otherwise.

For the foregoing reasons, it is hereby

ORDERED that defendant First Unum's motion (seq. no. 002) for summary judgment dismissing the third, fourth and fifth causes of action of the Amended Verified Complaint is granted, and those causes of action and the cross claim of defendant Spear Leeds & Kellogg are dismissed with prejudice as against First Unum Insurance Company; and it is further

ORDERED that the motion of defendant Spear, Leeds & Kellogg (seq. no. 003) for summary judgment dismissing the first and second causes of action is denied, and that portion of the motion seeking summary judgment dismissing the cross claim of defendant First Unum Life Insurance Company is denied as moot.

Dated: January 29, 2007

ENTER:

_____________/s/________________

J.S.C.