1. Association of life insurance counsel regional roundtable Life Insurance litigation update October 23, 2018
J. Bolus Introduction

3. Overview – 2018 Litigation Update
Lapse related litigation (California and New York);
Cost of Insurance litigation;
Beneficiary revocation;
Fiduciary Rule litigation;
Bristol-Myers Squibb 15 months later; and
SLUSA litigation.

4. Lapse Litigation - California
California Insurance Code Sections and :
Became effective January 1, 2013.
Do 3 things:
Policies issued or delivered in California must have a 60 day grace period;
Set forth notice of pending lapse and termination requirements; and
Require annual notice to policyholders of their right to designate someone other than themselves to receive lapse notices.
Ted Holt Discussion

5. Lapse Litigation – California
Individual and class actions
Primary question is whether statutes apply retroactively.
Inconsistent results;
Number of California policies that lapsed between 2013 and 2016 ≅ 460,000
Holt

6. Lapse Litigation – New York
Not legislatively driven;
Generally a matter of contract interpretation.
G. Lembrich Discussion

8. Cost of Insurance Litigation
Bases for litigation = Increase in COI rates or failure to decrease COI rates;
Two sets of plaintiffs
Individual policyholders; and
Investors who purchased policies intending to pay minimum premium to keep policies in force;
Results vary by contract and jurisdiction.
Vogt v. State Farm Ins., No. 2:16-cv (W.D. Mo.) (filed June 15, 2016)
Ted Holt Discussion

9. Bene Revocation-on-Divorce
Sveen v. Melin, 584 U.S. ___, 138 S.Ct (2018)
Held that application of Minnesota’s “revocation-on- divorce” statute retroactively did not violate the Constitution’s Contracts Clause.
Approximately half of the states have similar statutes;
Insurers should be vigilant in documenting all notices they receive regarding changes in an insured’s marital status and withhold payments accordingly.
J. Bolus Discussion

10. Fiduciary Rule Litigation
The Fiduciary Rule became effective June 9, 2017;
With some exemptions, the Rule required retirement plan advisors to offer advice to plans and plan participants that was free from conflicts of interest for the advisor;
June 21, 2018, the Fifth Circuit Court of Appeals finalized its judgment vacating the Department of Labor’s “Fiduciary Rule, finding that the Fiduciary Rule was inconsistent with ERISA’s definition of fiduciary.
DOL announced it would not be enforcing the Fid. Rule.
New investment advice rules forthcoming from SEC
G. Lembrich Discussion (recognizing that the Best Interest Rule had been a topic covered earlier in the day)

12. Bristol-Myers Squibb – 15 months later
Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct (2017).
California state courts lacked personal jurisdiction over claims asserted by out of state plaintiffs where plaintiffs did not claim they were harmed in California.
Split amongst district courts whether holding applies to class actions;
No Circuit Court opinions yet.
T. Holt Discussion

13. SLUSA Developments –
O’Donnell v. AXA – purported fraud on the NY Department of Financial Services could not be the basis of a SLUSA removal
Miller v. MetLife – alleged overcharges based upon smoker classification could support a SLUSA dismissal because
purchase of the variable policy itself was purchase of a security, and
overcharges coinciding with sales of securities to fund insurance charges met the “in connection with” test.
J. Bolus Discussion

14. Questions?