Siino v. Foresters Life Insurance and Annuity Company

Background

Pamela Siino purchased a $100,000 term life-insurance policy from Foresters Life Insurance and Annuity Company effective January 26, 2010. The policy required an annual premium of $163 and provided a 31-day grace period. It stated that the policy would continue during the grace period but that coverage would terminate if the required premium remained unpaid after the grace period.

California Insurance Code sections 10113.71 and 10113.72, effective January 1, 2013, changed the grace-period and notice requirements for California life-insurance policies. The court explained that these provisions require, among other things, a 60-day grace period, an opportunity for the policy owner to designate at least one additional person to receive notices, and notice at least 30 days before termination for nonpayment. The California Supreme Court had held that these requirements apply to life-insurance policies that were already in force when the provisions took effect.

Siino paid the policy’s annual premiums from 2010 through 2017 but did not pay the premium due January 26, 2018. Foresters sent her a February 26, 2018 letter stating that the policy’s 31-day grace period had expired and that the policy had lapsed. The letter said she could reinstate the policy by paying the premium within 30 days. Siino stated that she did not receive the letter. She also stated that Foresters never told her between 2013 and 2018 that she could designate another person to receive notices. Foresters’s corporate representative could not confirm or deny whether such written notice had been provided.

Siino filed a putative class action asserting claims for declaratory relief, breach of contract, and violation of California’s Unfair Competition Law. The court had previously denied class certification. Siino then moved for summary adjudication, a ruling that resolves an issue or claim when there is no genuine dispute about a material fact and the moving party is entitled to judgment under the law. She sought declarations that Foresters had not complied with the policy or California law, that the policy remained valid and enforceable, and that Foresters could not require her to pay premiums accruing since January 2018 to revive the policy.

Declaratory Relief Was Available

Foresters argued that the requested declaratory relief was duplicative of the breach-of-contract claim and inappropriate. The court rejected that argument. It found an actual controversy because the parties disputed whether Foresters violated the statutes, whether the policy remained in force, and whether Siino had to pay back premiums. Although the requested relief overlapped with the contract claim, the court concluded that it was forward-looking because it would clarify the parties’ future obligations under the policy.

The court also rejected Foresters’s argument that Siino had to prove every element of a breach-of-contract claim, including causation and damages, to obtain declaratory relief. It held that the Declaratory Judgment Act does not create a cause of action where none exists, but that declaring the rights and obligations under an insurance policy is an appropriate use of declaratory relief. The court concluded that Siino was seeking a declaration about whether the policy had lapsed for nonpayment and therefore had a judicially remediable right independent of the breach-of-contract claim.

Foresters Did Not Validly Terminate the Policy

The court held that Foresters failed to strictly comply with California Insurance Code section 10113.71(b)(1). The February 26 letter described the policy as already lapsed and required payment to reinstate it. The court reasoned that a policy in its grace period is still in effect, while a policy that has already lapsed would need reinstatement. Because the letter could lead a policyholder or beneficiary to believe that the policy was no longer in effect and to decline to make a claim, the court held that the letter was not an effective pending-lapse notice.

The undisputed evidence also showed that Foresters neither gave Siino the opportunity to designate a third-party recipient for notices nor sent a termination notice to such a designee. The court held that Foresters violated section 10113.72(c) for that additional reason. It therefore concluded that Foresters’s termination of the policy was ineffective and that Siino was entitled to a declaration that Foresters did not validly terminate it.

Back Premiums

The court rejected Siino’s request for a declaration that she did not owe premiums accruing since January 2018. It treated that request as similar to specific performance, which is a court-ordered requirement that a party perform a contract. Under California law, a party seeking that relief generally must have performed, or offered to perform, the required conditions under the contract.

The court held that Siino must tender the back premiums to reinstate the policy. It directed the parties to meet and confer about a reasonable payment deadline and the amount of the premiums, and to submit either a stipulation or competing briefs by July 20, 2023.

Disposition

The court granted in part and denied in part Siino’s motion for summary adjudication. It ruled in Siino’s favor on whether Foresters’s termination was effective, but denied her requested declaration that she did not owe back premiums. The order was signed by United States District Judge Jon S. Tigar.