PHT Holding I LLC v. ReliaStar Life Insurance Company

Background

The plaintiffs asserted one claim for breach of contract. They alleged that ReliaStar breached universal life insurance policies by using cost-of-insurance rates that were not properly based on its expected future mortality experience and by charging rates for a waiver-of-monthly-deduction rider above the rates specified in the policies.

ReliaStar sought summary judgment, which asks whether the evidence leaves any important factual dispute for a trial. ReliaStar argued that the policy language defeated the cost-of-insurance claim, that Curtis’s claims were released by an earlier settlement, that Advance Trust lacked standing, and that the rider claim was barred by the statute of limitations or laches. The plaintiffs moved to certify classes of affected policy owners.

Summary Judgment

The court denied ReliaStar’s motion for summary judgment. Regarding cost-of-insurance rates, the court found that the phrase requiring rates to be “based on” expected future mortality experience could reasonably support the plaintiffs’ interpretation that the experience had to be considered exclusively, or at least could not be ignored. The court also found evidence from which a jury could conclude that ReliaStar impermissibly ignored that experience even under ReliaStar’s less restrictive interpretation. Genuine factual disputes therefore remained.

The court also found summary judgment inappropriate on Curtis’s claims because the record did not clearly establish the scope of the earlier settlement’s claims and release. The court rejected ReliaStar’s standing argument against Advance Trust, finding that the record showed Advance Trust owned the policy at issue and could assert claims on Life Partners’ behalf. The court further concluded that the alleged injury—a contract breach—was not hypothetical.

As to the rider-charge claim, the court accepted the theory that repeated monthly overcharges could constitute separate breaches with separate accrual dates. On the record before it, ReliaStar had not shown that the claim was barred by the statute of limitations. The court also concluded that ReliaStar had not shown that the claim was barred by laches, which concerns unreasonable delay combined with a detrimental change of position.

Class Certification

The court granted the plaintiffs’ motion for class certification consistent with the order. It certified a Cost of Insurance Class covering current and former owners of specified universal life policies insured by ReliaStar who were assessed cost-of-insurance charges during the specified class periods, subject to the listed policy-form, state, and other exclusions. It also certified a Rider Class covering current and former owners of ReliaStar universal life policies on policy forms 10830 and 10910 who were assessed waiver-rider charges during the class period, subject to the listed exclusions.

The court found that the proposed classes met the requirements for class treatment. It determined that the classes were numerous, that common questions included the meaning of the policy terms and whether ReliaStar used excessive charges, and that the plaintiffs’ claims were typical of the class claims. It also found that Advance Trust, Curtis, and their lawyers could adequately represent the classes. The court concluded that common issues predominated and that a class action was the superior method for resolving the claims.

Order

The court denied ReliaStar’s motion for summary judgment and granted the plaintiffs’ motion for class certification. It directed the parties to propose a procedure for notifying class members, appointed Advance Trust and Curtis as class representatives, and appointed Susman Godfrey as class counsel. Judge Donovan W. Frank signed the order on March 29, 2022.