Lincoln Benefit Life Company v. Alexander Dallal, 21-55152

Background:

Lincoln Benefit Life sued Alexander and Claire Dallal after discovering a long-running scheme in which the Dallals forged records and had Mr. Dallal feign severe physical/cognitive incapacity to obtain insurance benefits from ~2004–2016.
A jury awarded Lincoln $619,290.49 in compensatory damages and $300,000 in punitive damages; the district court also granted equitable relief including cancellation of the policy.
The district court excluded the Dallals’ expert (Dr. Chow) as an untimely and unsupported Rule 26(a)(2)(B) disclosure; the Dallals’ motion for a new trial was denied.
On appeal the Dallals challenged: (1) exclusion of the expert, (2) a jury instruction applying California’s discovery rule and the December 16, 2013 accrual cutoff, (3) sufficiency of evidence supporting the discovery-rule finding and fraud verdict, (4) excessiveness of punitive damages, and (5) equitable cancellation of the policy.
The Ninth Circuit affirmed in all respects, finding no abuse of discretion, no reversible jury-instruction error, substantial evidence for the verdict, and that the punitive award and policy cancellation were proper.

Issues:

Issue	Plaintiff's Argument (Lincoln)	Defendant's Argument (Dallals)	Held
Exclusion of expert (Dr. Chow)	Exclusion proper: disclosure untimely and no Rule 26 report	Exclusion erroneous and prejudicial	Affirmed — exclusion within district court's discretion (untimely, no report; not justified or harmless)
Jury instruction re: discovery rule and accrual date	December 16, 2013 is controlling accrual cutoff; instruction correctly required lack of facts that would make a reasonable insurer suspect harm	Instruction misstated accrual date and failed to require reasonable diligence/investigation	Affirmed — no plain error; date correct and instruction adequate (no duty to assume fraud absent evidence)
Sufficiency of evidence on fraud/discovery-rule issue	Overwhelming evidence (forged records; feigned incapacity; multiple assessments) supports jury finding that Lincoln lacked reason to suspect earlier	Evidence insufficient to trigger discovery earlier	Affirmed — substantial evidence supports jury verdict on concealment and accrual timing
Punitive damages excessiveness (state and constitutional)	Award justified by lengthy, systematic fraud, defendants’ wealth, and statutory/criminal exposure	Award excessive under California law and U.S. Constitution	Affirmed — punitive award not excessive under California factors or State Farm constitutional framework
Equitable cancellation of policy	Cancellation necessary because fraud irreparably damaged insurer’s trust and no adequate legal remedy existed	Cancellation an abuse of discretion; separate insureds preclude total cancellation	Affirmed — no abuse of discretion; equity appropriate given irreparable harm and lack of legal remedy

Key Cases Cited

Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137 (1999) (abuse-of-discretion standard for trial-court decisions on expert testimony)
Yeti by Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101 (9th Cir. 2001) (untimely expert disclosure may be excluded under Rule 37 absent substantial justification or harmlessness)
Bearchild v. Cobban, 947 F.3d 1130 (9th Cir. 2020) (plain-error review for unobjected-to jury instructions)
Fox v. Ethicon Endo-Surgery, Inc., 110 P.3d 914 (Cal. 2005) (California discovery rule and duty to act with reasonable diligence)
Norgart v. Upjohn Co., 981 P.2d 79 (Cal. 1999) (when a plaintiff ‘‘suspects’’ wrongdoing for accrual under the discovery rule)
State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003) (constitutional limits on punitive damages; three-factor guide)
Neal v. Farmers Ins. Exch., 582 P.2d 980 (Cal. 1978) (California factors for reviewing punitive damages)
Cooper Indus., Inc. v. Leatherman Tool Grp., Inc., 532 U.S. 424 (2001) (de novo review of whether punitive damages are excessive)