Holland-Hewitt v. Allstate Life Insurance Co.

SUSAN L HOLLAND-HEWITT, individually, and as agent and attorney-in-fact to James L. Holland, and on behalf of the class, Plaintiff, v. ALLSTATE LIFE INSURANCE COMPANY, Defendant.

No. 1:20-cv-00652-DAD-SAB

United States District Court, E.D. California

June 22, 2021

ORDER GRANTING IN PART DEFENDANT'S MOTION TO DISMISS OR STAY THIS ACTION AND STAYING THIS ACTION (DOC. NO 8)

This matter is before the court on the motion to dismiss or stay this action filed by defendant Allstate Life Insurance Company on July 1, 2020. (Doc. No. 8.) Pursuant to General Order No. 617 addressing the public health emergency posed by the COVID-19 pandemic, defendant's motion was taken under submission on the papers. (Doc. No. 10.) For the reasons explained below, the court will grant defendant's motion to stay the proceedings in this action pending the issuance of a decision by the California Supreme Court in McHugh v. Protective Life Insurance (No. S259215) and pending the issuance of a decision by the Ninth Circuit in either Bentley v. United of Omaha Life Insurance Company (Nos. 20-55435 and 20-55466) or Thomas v. State Farm Life Insurance Company (No. 20-55231). In light of the stay ordered herein, the court will not address defendant's motion to dismiss until the stay has been lifted.

BACKGROUND

On May 8, 2020, plaintiff Susan L. Holland-Hewitt filed a putative class action complaint alleging that defendant Allstate Life Insurance Company (“Allstate” or “defendant”) refuses to comply with the statutory requirements set forth in § 10113.71 and § 10113.72 of the California Insurance Code (“the Statutes”) with regard to procedures for termination and lapse of life insurance policies. (Doc. No. 1 at ¶¶ 1, 2, 13.) In particular, plaintiff alleges that since January 1, 2013-the effective date of the Statutes-Allstate has systematically and purposely failed to comply with the Statutes' requirements that insurers provide proper notices of lapse or termination of life insurance policies, notify policyholders of their right to designate another person to receive those notices, and provide a 60-day grace period from the due date of insurance premiums during which the policy remains in force. (Id. at ¶¶ 2, 14-19.)

In her complaint, plaintiff alleges the following. In 1997 plaintiff's father Mr. Holland purchased a life insurance policy from Allstate in which he is the sole named policy owner and the sole named insured (“the Policy”). (Id. at ¶¶ 9, 27.) Plaintiff is the beneficiary of the Policy and brings this action in her individual capacity and as the agent and attorney-in-fact for her father, the insured. (Id. at ¶ 8.) The premium payment under the Policy was about $130 per month and “the value of the Policy is $50, 000 or more.” (Id. at ¶ 29.) The Policy provides a 60-day grace period and states that Allstate “will provide written notice at least 31 days prior to the day coverage stops.” (Id.)

In or around September 2016, one premium payment for the Policy was missed. (Id. at ¶ 31.) At that time, “the effects of Mr. Holland's Alzheimer's were intensifying” and his wife was very ill. (Id.) Before missing this one payment, Mr. Holland had made premium payments on the Policy consistently for nearly 20 years. (Id.) Allstate “attempted to lapse or terminate coverage in or around November 2016” and denied plaintiff's request to have the Policy reinstated in 2017 because, given his Alzheimer's, Mr. Holland “was no longer insurable at the same rate as prior to the termination of the Policy.” (Id. at ¶¶ 31, 32.) ///// /////

Plaintiff alleges that Allstate's termination of the Policy “was illegal and ineffective” because Allstate did not comply with the requirements of the Statutes. (Id. at ¶ 31-35.) In that regard, plaintiff alleges that she “has no record of her or Mr. Holland receiving notices of any missed premium payment in 2016 or of any impending lapse or the triggering of any mandatory 60-day grace period or of any right to designate an individual to receive notices.” (Id. at ¶ 31.) Because Allstate's handling of the Policy and alleged violations of the Statutes is consistent with its standard policies and procedures, plaintiff seeks to represent a class of all owners and beneficiaries of Allstate's life insurance policies in force on or after January 1, 2013 where those policies similarly underwent lapse, termination, and/or reinstatement without Allstate complying with the Statutes' notice and grace period requirements. (Id. at ¶¶ 36-41.)

Based on her allegations that Allstate has failed to comply with the Statutes' requirements, plaintiff asserts the following five causes of action: (1) a claim for declaratory judgment or relief under California Civil Code §§ 1060, et seq.; (2) a claim for declaratory judgment or relief under 28 U.S.C. §§ 2201, et seq.; (3) a claim for breach of contract; (4) a claim for unfair competition under California Business and Professions Code §§ 17200, et seq.; and (5) a claim for financial elder abuse under California Welfare and Insurance Code § 15610.30. (Doc. No. 1.)

On July 1, 2020, defendant filed a motion to dismiss or stay this action, arguing that a temporary stay is warranted because the question of whether the Statutes apply to life insurance policies issued or delivered before the January 1 2013 effective date of the Statutes has been presented to the California Supreme Court and the Ninth Circuit in three cases currently pending on appeal. (Doc. Nos. 8, 8-1.) On August 4, 2020, plaintiff filed her opposition to the pending motion. (Doc. No. 12.) On August 11, 2020, defendant filed its reply thereto. (Doc. No. 13.)

While defendant's motion has been pending before the court, the parties have filed several notices of supplemental authority to bring to the court's attention the fact that numerous district courts throughout the state have considered motions to stay proceedings in cases that similarly turn on the issue of retroactive application of the Statutes-an issue currently under review by both the California Supreme Court and the Ninth Circuit. Defendant requested leave to notify the court that district courts have granted those motions to stay proceedings in eight cases.^[1] (Doc. Nos. 18, 19, 20.) In comparison, plaintiff notified the court that a district court has denied such a motion to stay in only one case.^[2] (Doc. No. 16.) The court grants the parties' respective requests to provide supplemental authority and has considered those supplemental authorities.

LEGAL STANDARD

“[T]he power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254 (1936); accord Stone v. INS, 514 U.S. 386, 411 (1995) (Breyer, J., dissenting) (“[W]e have long recognized that courts have inherent power to stay proceedings and ‘to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants.'”) (quoting Landis, 299 U.S. at 254). Deciding whether to grant a stay pending the outcome of other proceedings “calls for the exercise of judgment, which must weigh competing interests and maintain an even balance.” Landis, 299 U.S. at 254-55. The party seeking such a stay must “make out a clear case of hardship or inequity in being required to go forward, if there is even a fair possibility that the stay for which he prays will work damage to some one [sic] else.” Id. at 255.

In considering whether to grant a stay, this court must weigh several factors, including “[1] the possible damage which may result from the granting of a stay, [2] the hardship or inequity which a party may suffer in being required to go forward, and [3] the orderly course of justice measured in terms of the simplifying or complicating of issues, proof, and questions of law which could be expected to result from a stay.” CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962) (citing Landis, 299 U.S. at 254-55). A stay may be granted regardless of whether the separate proceedings are “judicial, administrative, or arbitral in character, and does not require that the issues in such proceedings are necessarily controlling of the action before the court.” Leyva v. Certified Grocers of Cal., Ltd., 593 F.2d 857, 864 (9th Cir. 1979).

ANALYSIS

In the pending motion, defendant “requests that the Court stay this action pending the resolution of appeals in which the California Supreme Court and the United States Court of Appeals for the Ninth Circuit are confronting the issues presented in this case (i.e., whether the Statutes apply to policies issued prior to January 1, 2013).” (Doc. Nos 8 at 2; 8-1 at 8.) Specifically, defendant seeks a stay of this action pending decisions in the following cases on appeal: (1) McHugh v. Protective Life Ins. Co., 40 Cal.App. 5th 1166 (2019), review granted, 456 P.3d 933 (Cal. Jan. 29, 2020) (No. S259215); (2) Bentley v. United of Omaha Life Ins. Co., 371 F.Supp.3d 723 (C.D. Cal. 2019), appeals docketed, No. 20-55435 (9th Cir. Apr. 27, 2020) & No. 20-55466 (9th Cir. Apr. 29, 2020); and (3) Thomas v. State Farm Ins. Co., 424 F.Supp.3d 1018 (S.D. Cal. 2019), appeal docketed, No. 20-55231 (9th Cir. Mar. 2, 2020). (Doc. No. 8-1 at 18-21.)

As to McHugh, the California Supreme Court is currently reviewing the decision by the California Court of Appeal holding that the Statutes do not apply to life insurance policies issued or delivered before the January 1, 2013 effective date. McHugh, 40 Cal.App. 5th at 1171. The California Supreme Court heard oral arguments in McHugh on June 2, 2021.^[3]

As to Bentley, the Ninth Circuit is reviewing the district court's order finding that the...