Grundstrom v. Wilco Life Insurance Company

Background

Julie Grundstrom sued Wilco Life Insurance Company individually, as successor-in-interest to Dr. Richard I. Appleton, and on behalf of a proposed class. She alleges that Appleton purchased a life insurance policy in or before 1991 from a company later acquired by Wilco. According to the complaint, Wilco sent Appleton a letter stating that the policy had lapsed as of July 14, 2018, and invited him to apply for reinstatement. Grundstrom alleges that Appleton could not qualify for reinstated coverage because of his terminal illness and died on September 27, 2018.

The complaint asserts five claims: relief under California’s declaratory-judgment law, relief under the federal Declaratory Judgment Act, breach of contract, unfair competition under California law, and financial elder abuse. All five claims are based on allegations that Wilco violated California Insurance Code sections 10113.71 and 10113.72 by failing to provide required lapse or termination notices and notice of the right to designate an alternative notice recipient. Grundstrom seeks declaratory and injunctive relief, restitution, and monetary damages.

Motion to Stay

Wilco asked the court to stay, meaning pause, the litigation while one of three related matters was resolved: McHugh v. Protective Life Insurance Co. in the California Supreme Court, or Thomas v. State Farm Insurance Co. or Bentley v. United of Omaha Life Insurance Co. in the Ninth Circuit. Those proceedings concerned whether the California Insurance Code provisions apply retroactively to life insurance policies issued before January 1, 2013, including whether a policy renews when the policyholder makes a premium payment.

The court applied a three-factor balancing test: possible damage from the stay, hardship or inequity from requiring a party to continue litigating, and whether a stay would promote the orderly handling of the case by simplifying legal or factual issues. The court rejected Grundstrom’s request to add a requirement that Wilco show a strong likelihood of winning. It found that delaying damages was not enough to establish harm, that no class-certification motion had yet been filed, and that Grundstrom’s concerns about preserving evidence and reaching class members were unsupported speculation. It also found that requiring Wilco to litigate the older-policy issue could impose a legitimate hardship and that decisions in the related matters would likely provide substantial guidance, including binding guidance from the California Supreme Court on California law.

Ruling

Judge Maxine Chesney granted Wilco’s motion to stay, and the action was stayed pending resolution of the appeal in McHugh, Thomas, or Bentley. The order did not decide the merits of Grundstrom’s claims. If no such resolution had occurred by October 13, 2021, the parties were directed to submit a joint status report by October 27, 2021. If a resolution occurred earlier, the parties were directed to submit a joint status report within 14 days addressing its effect on this case.