122 F.4th 1182
9th Cir.2024Background
- California Insurance Code §§ 10113.71 and 10113.72 require strict notice procedures before life insurance policies can lapse for nonpayment, including a 60-day grace period, 30-day pre-lapse notice, and notice of the right to designate a third-party recipient of lapse notifications.
- In 2021, California Supreme Court (McHugh II) held these notice requirements apply retroactively to all life insurance policies in force as of 2013.
- Plaintiff LaWanda Small, as beneficiary of a lapsed policy denied for noncompliance with these statutes, sought class certification for all similarly situated policyholders and beneficiaries.
- District court certified a class under Rule 23, dividing it into “Living Insured” (seeking reinstatement) and “Beneficiary” (seeking damages) subclasses, and ruled for the class on summary judgment before opt-out notices went out.
- Allianz appealed, arguing the class failed Rule 23 requirements, and also that the district court’s process violated the rule against “one-way intervention.”
- Ninth Circuit reviewed whether class certification was proper and which causation standard applied to breach-of-contract claims based on statutory notice violations.
Issues
| Issue | Plaintiff’s Argument | Defendant’s Argument | Held |
|---|---|---|---|
| Does plaintiff need to show harm from notice violation? | Only statutory violation is required for relief. | Must prove violation caused actual harm. | Causation is required; harm must result from violation. |
| Do individual questions of intent defeat class certification? | Certification appropriate; common issues predominate. | Individualized causation and intent issues require case-by-case inquiry. | Individualized issues predominate; class certification inappropriate. |
| Can beneficiary of lapsed policy represent both subclasses? | Small can represent both subclasses. | Small is not adequate/typical for all subclasses. | Small is not adequate or typical for both subclasses. |
| Was “one-way intervention” bar violated by the sequence of summary judgment? | N/A | Certification should be denied for improper sequence. | Moot as judgment vacated for other reasons. |
Key Cases Cited
- McHugh v. Protective Life Ins. Co., 494 P.3d 24 (Cal. 2021) (retroactively applies statutory notice requirements to life policies in force as of 2013)
- Troyk v. Farmers Grp., Inc., 171 Cal. App. 4th 1305 (Cal. Ct. App. 2009) (causation and damages are required elements in breach of contract claims)
- Vu v. Cal. Com. Club, Inc., 58 Cal. App. 4th 229 (Cal. Ct. App. 1997) (causation between breach and damages must be reasonably certain)
- Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) (describes Rule 23 class action requirements and the need for rigorous analysis)
- Olean Wholesale Grocery Coop., Inc. v. Bumble Bee Foods LLC, 31 F.4th 651 (9th Cir. 2022) (standards for class certification review)