As we explained in our case summary, the question in this case was whether an insurance company that provided health insurance coverage to New York City employees and retirees engaged in “consumer-oriented conduct” for the purposes of the State’s deceptive acts and practices statute by distributing misleading plan marketing materials to potential enrollees. The Court (Stein, J.) unanimously held that it had.
As framed by the Third Circuit, this case fell between two Court decisions about what constitutes consumer-oriented conduct. In New York University v. Continental Insurance Company, 87 N.Y.2d 308 (1995), the Court held that “a private contract dispute over policy coverage” between two sophisticated parties did not involve consumer-oriented conduct. In Gaidon v. Guardian Life Insurance Company of America, 94 N.Y.2d 330 (1999), the Court held that a dispute between an insured and an insurer could involve consumer-oriented conduct where the plaintiff’s claims targeted an “extensive marketing scheme that had a broader impact on consumers at large.”
This case fell between NYU and Gaidon in that it involved an insurance contract between two sophisticated parties that also alleged misleading marketing materials to hundreds of thousands of city employees. The City contracted with defendant and other insurance companies directly to allow them to offer health insurance coverage to city employees and retirees. Those insurance companies then marketed their services to potential enrollees directly, in effect competing against each other to enroll city employees and retirees. Plaintiff alleged that defendant’s marketing materials were misleading.
The Court had no difficulty finding that defendant’s conduct was consumer-oriented. True, defendant was only able to offer insurance coverage as a result of a contract it negotiated with the City. But once defendant was given the opportunity, it competed with the other authorized insurers for eligible enrollees through “marketing resembling a traditional consumer sales environment.” Plaintiff alleged that it was these marketing efforts, not the contract between the City and defendant, that was misleading in violation of state law. And plaintiff alleged that defendant used this misleading marketing to edge out other authorized insurers to attract potential enrollees. The Court emphasized that conduct need not be “directed to all members of the public” to be considered consumer-oriented, and held that the activity in the marketplace created by the City’s insurance program, closed though it may be, was nevertheless consumer-oriented to warrant the protections afforded by the State’s unfair and deceptive acts and practices statute.
Return to the case page for Plavin v. Group Health Incorporated.