Grundstrom v. Wilco Life Insurance Company

Background

Julie Grundstrom brought a putative class action against Wilco Life Insurance Company. She alleged that her father, Richard Appleton, purchased a life insurance policy from a company later acquired by Wilco. According to the complaint, Wilco sent Appleton a termination letter stating that the policy had lapsed for nonpayment of premiums. Appleton later died.

Grundstrom alleged that Wilco violated sections 10113.71 and 10113.72 of the California Insurance Code. Section 10113.71 addresses grace periods and advance notice before termination for nonpayment. Section 10113.72 requires policyholders to be given the right to designate someone to receive notice of a lapse or termination. Grundstrom sought declaratory relief, damages, and restitution.

The court previously stayed the case while the California Supreme Court considered whether these statutes applied to policies issued before 2013. After that court held that the statutes did apply to such policies, this court lifted the stay. Grundstrom then moved to certify a class. Before ruling on class certification, the court granted summary judgment to Wilco on Grundstrom’s declaratory-relief and elder-abuse claims and allowed her breach-of-contract claim to proceed.

Motion to Stay

Wilco moved to stay the proceedings until the Ninth Circuit resolved appeals in Farley v. Lincoln Benefit Life Co. and Small v. Allizanz Life Insurance Co. of North America. Those appeals involved class-certification questions concerning similar California life-insurance-policy terminations. Wilco argued that the appeals could affect issues in Grundstrom’s proposed class action and that proceeding before the appeals were decided could require the parties to spend resources on issues they might later need to revisit.

Grundstrom opposed a stay. She argued that delay could harm policyholders, that the proposed class action made delay especially problematic, and that the court should consider Wilco’s likelihood of success on the merits. The court declined to add likelihood of success as a factor under the circumstances presented.

Court’s Analysis

The court applied the three factors used to decide whether to stay a case: possible harm from granting the stay; hardship or unfairness from requiring a party to proceed; and whether a stay would promote the orderly administration of justice by simplifying the issues, evidence, or legal questions.

First, the court found that a limited stay would not cause a level of harm that outweighed its benefits. The court noted that injunctive relief was no longer at issue because the court had dismissed all claims other than breach of contract. The remaining relief was monetary, and delay in receiving monetary relief alone did not weigh against a stay. The court also found that Grundstrom had not shown that delay would make class members or evidence difficult to identify or reach.

Second, the court found that proceeding without a stay could force the parties to spend significant time and resources litigating class certification, only to have the Ninth Circuit’s decisions require changes to that work. The court treated that potential waste as sufficient hardship under the applicable standard.

Third, the court found that the related appeals substantially overlapped with the class-certification issues in this case. The issues included whether Grundstrom could represent a class containing both living policyholders and beneficiaries of deceased policyholders, whether she needed to propose a uniform method for calculating damages, and whether differences in policyholders’ intent or knowledge about policy lapses mattered. The court found that the Ninth Circuit’s decisions would likely provide binding or instructive analysis on several of these issues.

Disposition

The court granted in part and denied in part Wilco’s motion to stay. To the extent Wilco sought a stay of the case, the court granted the motion and stayed the case until December 4, 2024. To the extent Wilco sought a stay until the Farley and Small appeals were resolved, without the December 4, 2024 limitation, the court denied the motion.

The parties must submit a joint status report within two weeks after the Ninth Circuit issues a decision in either Farley or Small, or on December 4, 2024, whichever occurs first.