SAN DIEGO (Legal Newsline) - The widow of a man who stopped making premium payments on a $1 million life insurance policy can collect because the insurer didn’t follow state law before canceling the policy, a federal judge ruled.
The decision in the lawsuit by Michelle Moriarty against American General Life Insurance leaves intact the earlier court ruling rejecting Moriarty’s request to make her case a class action on behalf of all life insurance customers in California, with potential multibillion-dollar implications for the industry.
Michelle Moriarty sued American General after her husband Heron died in May 2016, two months after his life policy expired for nonpayment. On March 24, 2016, the insurer sent a letter to Moriarty explaining his bank had refused payment because his account had been closed and warned the policy may lapse. It sent him notice the policy was canceled on May 22, and on May 31 Moriarty committed suicide.
Michelle Moriarty claimed American General violated state law by failing to inform her husband he had the right to designate a third party to receive nonpayment notices or send a termination notice to anyone but the policyholder. Plaintiff lawyers hoped to use her case to assemble a class action on behalf of anyone who bought policies in California that had been canceled for nonpayment, but the court refused to certify a class because it would be inconsistent with the U.S. Supreme Court’s landmark Walmart v. Dukes decision.
On her first trip to federal court, U.S. District Judge Ted Moskowitz denied Michelle Moriarty’s request for summary judgment on her claim. But the case was transferred to judge Jinsook Ohta, who reconsidered her request and granted summary judgment on Aug. 14. The judge rejected American General’s argument there was still a fact question as to whether anyone would have paid the premium had they received noticed. Heron Moriarty was having mental difficulties and was institutionalized when he committed suicide.
“This line of inquiry—that is, asking a jury to determine who is responsible for the lapse in the policy—and the associated disputes of fact identified by defendant are immaterial for the simple reason that the policy did not lapse,” the judge concluded. “Contrary to defendant’s arguments, there is no dispute regarding causation: defendant admittedly refused to pay the benefits of this policy.”