SAN DIEGO (Legal Newsline) - A federal judge refused to certify a class action that could have exposed life insurers to billions of dollars in damages, saying the proposed class was too broad and the lead plaintiff wasn’t typical of other claimants lawyers sought to bundle into one massive case.
The order by U.S. District Judge Ted Moskowitz ends one potentially devastating threat to the industry but insurers still face more potential class actions in state court in California. The California Supreme Court propelled the litigation forward last year with its decision in McHugh v. Protective Life, holding a state law requiring life insurers to give notice to customers before canceling their policies for nonpayment applied to every policy sold in California, not just policies sold after the law went into effect in 2013.
Lawyers for heirs of Heron D. Moriarty hoped to use that ruling to justify a class action against American General, seeking injunctive relief as well as money damages for any customers whose policies were cancelled without required notice. Moriarty’s life policy expired in March, 2016. He died in May and American General refused to pay a claim filed in June, saying it had been filed after a 60-day grace period had expired.
Judge Moskowitz denied class certification, however, saying the Moriarty plaintiffs were seeking money damages while many of the proposed class members would have received only injunctive relief, since they either hadn’t made claims or their policies hadn’t been canceled at all. The U.S. Supreme Court, in its landmark Walmart v. Dukes decision, held that damages claims can’t be certified as a class action under the section of Rule 23 covering equitable relief, or judicial orders requiring the defendant to comply with certain conditions.
“Plaintiff’s argument is creative, but certification would be inconsistent with – at the very least” Walmart v. Dukes, the judge wrote. “Simply put, Plaintiff’s proposed class action is fundamentally flawed because she is seeking damages and has no claim for equitable relief, whereas the proposed class members have no damages and would be seeking equitable relief.”
The judge also said the class would be too broad, because it would cover policies that haven’t been terminated as well as policyholders who have known for years that their policies had been canceled. Different state laws also might apply to some claimants, the judge said.