[00:00:03] Speaker 03:
Mr. Van Oort.

[00:00:05] Speaker 04:
Good morning, Your Honors, and may it please the Court.

[00:00:07] Speaker 04:
I'm Aaron Van Oort for Allianz.

[00:00:10] Speaker 04:
The central question presented by this appeal is whether people who knowingly and intentionally terminate their policies have to be treated separately from people who unknowingly and accidentally do so.

[00:00:26] Speaker 04:
If the answer is yes, if they have to be treated separately,

[00:00:31] Speaker 04:
then class certification has to be reversed because that's an individual process of sorting.

[00:00:37] Speaker 04:
And the answer is yes.

[00:00:39] Speaker 04:
The answer is yes because whether someone knowingly and intentionally terminated their policy is relevant to the elements of their contracts claims, it's relevant to the elements of the affirmative defenses, and it's relevant to the statute itself.

[00:00:56] Speaker 04:
And because it's relevant in all of those ways,

[00:00:59] Speaker 04:
Class certification must be reversed, not just on B3, but also on B2, because any relief has to go through liability, and these are individual issues.

[00:01:09] Speaker 03:
So let me back up.

[00:01:10] Speaker 03:
Ultimately, this is a state law issue, correct?

[00:01:13] Speaker 03:
The claims are state law questions, and as I understand it, the district court effectively reached its decision by saying that all you had to prove was harm.

[00:01:24] Speaker 03:
You didn't actually have to prove breach of contract.

[00:01:28] Speaker 03:
I'm just trying to figure out what we're really trying to decide, because it strikes me these are breach of contract claims, which I think is where you're coming from.

[00:01:38] Speaker 04:
Your Honor, the district court implicitly held lots of things without making explicit what it was doing.

[00:01:44] Speaker 04:
But let's just start with first principles in your right.

[00:01:47] Speaker 04:
There is no private right of action under these state regulations.

[00:01:50] Speaker 04:
It's 10,113, 71, and 72.

[00:01:53] Speaker 04:
There's no private right of action.

[00:01:55] Speaker 04:
That's undisputed in here.

[00:01:57] Speaker 04:
So the only way of enforcing it is through some other cause of action.

[00:02:01] Speaker 04:
The only cause of action that was certified for the B3 class is breach of contract.

[00:02:06] Speaker 04:
And so you have the breach of contract elements.

[00:02:08] Speaker 04:
you know, including breach and performance and injury and causation, all of which we say, it turns on whether it was a knowing and intentional termination.

[00:02:19] Speaker 04:
And the plaintiff said in response, and I think this is what the district court implicitly did, is it implicitly said, well, if you look at the statutory obligations, it wipes out all of those because it cuts through and basically mandates an ongoing policy, even if,

[00:02:38] Speaker 04:
the policy holder didn't want it, and even if both parties agreed to terminate it.

[00:02:44] Speaker 04:
That's the only way you can make injury and causation and performance irrelevant, because if it matters what both parties wanted,

[00:02:54] Speaker 04:
then you have to go through and figure out whether the policyholder was trying to do this.

[00:02:58] Speaker 00:
And there is some language in some of these provisions, not the ones that I think affects Miss Small, but other ones that talk about the policy not being effective.

[00:03:10] Speaker 00:
And so what does that language mean for those, I guess, would be other class members?

[00:03:16] Speaker 04:
Yeah.

[00:03:16] Speaker 04:
So you're right, Your Honor.

[00:03:18] Speaker 04:
First of all, there isn't any language.

[00:03:21] Speaker 04:
The language is the notice of termination.

[00:03:24] Speaker 04:
for non-payment of premiums will not be effective or shall not be effective.

[00:03:30] Speaker 04:
And there are variations on it.

[00:03:31] Speaker 04:
It's in 72C and 71B1.

[00:03:34] Speaker 04:
Their phrase is different, but it's just as to that, and it's just as to the notion of termination.

[00:03:39] Speaker 04:
And to me, what that says is that's speaking to what the insurance company can do unilaterally.

[00:03:45] Speaker 04:
It isn't placing any restrictions on what a policyholder can do.

[00:03:49] Speaker 04:
There's no intent in either of these statutes to limit anything a policyholder can do.

[00:03:53] Speaker 04:
So suppose that Allianz didn't send this annual reminder that you can do a backup notice recipient.

[00:04:00] Speaker 04:
And a policyholder calls in and says, I want to terminate.

[00:04:03] Speaker 04:
There isn't any limitation on this statute on what the policyholder can do.

[00:04:08] Speaker 04:
And we have examples like this in our record that are in this class list.

[00:04:13] Speaker 04:
It's the ELISA page declaration, the excerpts of record 725 to 7

[00:04:18] Speaker 04:
27 have this and we have examples like recordings and letters of people do that plaintiffs in order for their theory to work They have to interpret this statute to say that if that annual reminder isn't given and a policyholder calls in and says I want to terminate They can't do it.

[00:04:34] Speaker 04:
It keeps going over their objection Because if they agree that the intent of the policyholder matters, then that's an individual question.

[00:04:42] Speaker 04:
We've got to go figure it out and

[00:04:44] Speaker 04:
And the record shows that those individual requestions are repeated.

[00:04:47] Speaker 00:
I guess their position is some of this could get sorted out in the opt-out process, at least for the B3 class.

[00:04:55] Speaker 04:
Yeah, that is their position, Your Honor.

[00:04:57] Speaker 04:
But it doesn't work.

[00:04:59] Speaker 04:
And it doesn't work for the same reasons that Judge Nelson, you explained in the Lara versus First National case.

[00:05:04] Speaker 04:
That was a similar case.

[00:05:05] Speaker 04:
It was an alleged violation of a Washington insurance regulation versus California.

[00:05:10] Speaker 04:
And the plaintiff said, well, that's just damages.

[00:05:12] Speaker 04:
We can take care of it in remedies.

[00:05:14] Speaker 04:
And what Your Honor said there, and it's equally true here, is no, it's liability.

[00:05:18] Speaker 04:
It's liability on contract.

[00:05:20] Speaker 04:
It's liability on anything else.

[00:05:21] Speaker 04:
Because, again, to go back to this, if the policy holder said, I want to end my policy, and the insurance company said, I agree, we're ending this, there's no liability.

[00:05:32] Speaker 04:
There isn't any liability unless you interpret this statute to take the extreme position, it says, even if both contracting parties agree that they're done, nonetheless, the contract will continue.

[00:05:47] Speaker 05:
That's the so-called strict compliance argument.

[00:05:50] Speaker 04:
Yeah, and it goes beyond that, Your Honor, because, and this is true, so there are a number of California cases that deal with notice requirements under auto insurance policies, property insurance policies,

[00:06:01] Speaker 04:
and commercial carrier properties.

[00:06:02] Speaker 04:
There are none other than all the district courts that are in simultaneous proceedings here.

[00:06:08] Speaker 04:
There are none addressing life insurance.

[00:06:10] Speaker 04:
But in auto and property, they have had strict compliance.

[00:06:14] Speaker 04:
Every single one of those cases, though, dealt with an unknowing accidental termination.

[00:06:20] Speaker 04:
The facts are all the same.

[00:06:22] Speaker 04:
A notice wasn't met.

[00:06:23] Speaker 04:
And then within some short period of time, an auto accident happened or a fire happened.

[00:06:28] Speaker 04:
The court said, unknowing and accidental strict compliance.

[00:06:31] Speaker 04:
None of them involved a situation where both parties said, we want to be done on that.

[00:06:37] Speaker 04:
Or where the policy holder said, we want to be done.

[00:06:39] Speaker 04:
So that scenario has not been addressed.

[00:06:43] Speaker 05:
you know i think my question was a little different uh... i'm trying to parse out the plaintiff's theories of liability and it seems to me that their theory of liability with regard to strict compliances and maybe you're saying the same thing if you don't comply with all these technical notice requirements if you don't advise the policyholder they can designate a third-person then there is a violation of the statute

[00:07:11] Speaker 05:
But the policy continues in existence without regard to the intent of the policyholder.

[00:07:17] Speaker 04:
That is their theory.

[00:07:18] Speaker 04:
Their theory is that a violation by the insurer puts limits not just on the insurer, but on the policyholder too.

[00:07:27] Speaker 04:
And McHugh, the California Supreme Court case that interpreted this, didn't say it.

[00:07:31] Speaker 04:
McHugh repeated, the purpose of this statute is to prevent inadvertent, unknowing,

[00:07:37] Speaker 04:
terminations.

[00:07:38] Speaker 04:
There's no indication in McHugh that it forces a contract to keep going when both parties agree it should be terminated.

[00:07:45] Speaker 05:
Well, I think your response to that with regard to the remedy as to damages would be there are no damages in that case because the insured was giving up the policy.

[00:07:56] Speaker 04:
Yeah, I agree.

[00:07:58] Speaker 04:
And like I said, I think that this issue of... Your Honors can wrestle this down to the ground and figure out where knowledge and intent matter.

[00:08:07] Speaker 04:
I think it matters to causation, it matters to injury, it matters to whether the statute applies because, like I said, the statute limits what insurers can do unilaterally.

[00:08:17] Speaker 04:
The statute does not limit what policyholders can do.

[00:08:20] Speaker 05:
Well, the concern I have from the appellate judge's standpoint is we now have district court opinions that are all over the board wrestling with

[00:08:30] Speaker 05:
these theories and it seems to me that we have an obligation to try and make some sense out of all of this and restore some order and give our district judges some clear guidelines as to how to handle these types of cases.

[00:08:46] Speaker 04:
So here's what I would say, Your Honor, and this goes back to McHugh.

[00:08:50] Speaker 04:
California's Supreme Court has already said what this is about.

[00:08:53] Speaker 04:
This is about preventing unknowing, unintentional lapses.

[00:08:57] Speaker 04:
It is not about restricting policyholders from canceling their policy when they want it.

[00:09:01] Speaker 04:
Like they get replacement coverage, and they don't want to double it up.

[00:09:05] Speaker 04:
They get a new employer who provides coverage.

[00:09:08] Speaker 04:
They don't want to pay separately on this.

[00:09:10] Speaker 04:
They want to take the money out.

[00:09:11] Speaker 04:
We have an example here of somebody who surrendered and got $2.5 million back, and plaintiffs said under their theory he couldn't do that.

[00:09:19] Speaker 04:
McHugh has already said that, and in footnote six, in McHugh had already acknowledged that there may be some policyholders who deliberately let their policy end.

[00:09:29] Speaker 04:
So I think you've got the... This is the Supreme Court decision.

[00:09:32] Speaker 04:
Yes.

[00:09:32] Speaker 04:
This is the California Supreme Court, McHugh interpreting this.

[00:09:35] Speaker 04:
So I think your honors have the guidance you need here to say that knowing and intentional determinations are different, knowing by the policyholder.

[00:09:47] Speaker 04:
Because figuring that out depends on individual evidence.

[00:09:51] Speaker 04:
Sometimes it's obvious in the files.

[00:09:53] Speaker 04:
We have the report of Dr. Merrill in our record where he did 100 policy sample.

[00:09:58] Speaker 04:
Roughly 80% had evidence even just in our records of intentional termination by the policyholder.

[00:10:05] Speaker 04:
But of course, that's just our records.

[00:10:08] Speaker 03:
To really litigate, you'd go and talk to people.

[00:10:12] Speaker 03:
The district court did, I guess that's what's before us, are these two subclasses that the district court certified.

[00:10:18] Speaker 03:
Is there leeway to do a subclass that's more narrow than that, that would still comply with these rules?

[00:10:23] Speaker 04:
I don't think so, Your Honor, because no matter what version of the subclass it would be... You're still asking individualized questions.

[00:10:31] Speaker 04:
Always you would ask, did the policyholder knowingly terminate?

[00:10:34] Speaker 04:
And if the answer is yes, there isn't any liability.

[00:10:38] Speaker 04:
on that, and that's true.

[00:10:40] Speaker 05:
Unless plaintiff is right that it's a strict compliance statute, and I guess this is probably a question for your opponent, but then the question would become, what's the measure of damage for violation of the compliance?

[00:10:55] Speaker 04:
Yeah, and the plaintiffs aren't consistent with their theory.

[00:10:57] Speaker 04:
They don't take their own theory seriously, Your Honor.

[00:11:01] Speaker 04:
If they really think that what happens is if an annual reminder isn't sent,

[00:11:07] Speaker 04:
then the policyholders intent to cancel doesn't matter.

[00:11:09] Speaker 04:
And it has to keep going even though both parties don't want it to.

[00:11:13] Speaker 04:
If that's their theory, then their whole opt-out theory doesn't make any sense either because why should the intent matter now if it didn't matter then?

[00:11:21] Speaker 05:
I think I understand this, but let me ask you.

[00:11:24] Speaker 05:
I'm assuming most of these voluntary relinquishments are the result of term policies where the term, say it's a 10-year policy at the end of the 10th year, the insurance company says, we'll continue your million dollars worth of coverage, but your premium is going to be 10 times what you're paying now because you're older and maybe

[00:11:43] Speaker 05:
Yeah, our health some medical issues.

[00:11:46] Speaker 04:
So here's what the record says on that your honor The record on that says that about 93 percent of the term policies in this case terminated right when the terms the premiums fight So these are term for the part term no, but as between the two portions roughly two-thirds, maybe a little more are actually universal life and

[00:12:06] Speaker 04:
and only about a third or less are termed.

[00:12:08] Speaker 05:
And those premiums don't change, but you do start taking money out of the residual value of the policy, right?

[00:12:15] Speaker 04:
Yeah, they do change, but it's not as sharp a spike.

[00:12:19] Speaker 04:
And they build up cash value, and people can take that cash value and use it for things.

[00:12:24] Speaker 04:
So we have examples, again, in the page declaration of people who canceled and got money out, and they're in plaintiff's class on that.

[00:12:32] Speaker 04:
I'll reserve the rest of my time for rebuttal, Your Honor.

[00:12:35] Speaker 03:
Thank you.

[00:12:50] Speaker 01:
Good morning, your honors.

[00:12:50] Speaker 01:
Benjamin Siminoe on behalf of the plaintiff.

[00:12:53] Speaker 01:
I want to jump in on some of the things that we just heard because I think there's some good questions.

[00:12:58] Speaker 01:
Number one, Judge Nelson, you asked whether or not the district court's order basically just skipped past the causation issue and just focused solely on breach.

[00:13:08] Speaker 01:
And the answer to that is no.

[00:13:09] Speaker 01:
We are not at all running away from a causation standard.

[00:13:12] Speaker 01:
I know that at least two members of this panel have recently emphasized that, and we're not shy about that at all.

[00:13:17] Speaker 01:
I think what we need to do here is take a step back and zoom out and look at the class as follows.

[00:13:23] Speaker 01:
Number one, we've got a B2 subclass that consists entirely of living insurers.

[00:13:28] Speaker 01:
That's about 98% of this 1,800 person class of, let's just say, 1,700 people.

[00:13:33] Speaker 01:
Their issue is simply that they had policies that were terminated.

[00:13:37] Speaker 01:
Their interest, if any, is getting those policies reinstated.

[00:13:41] Speaker 01:
And as to them, we're only seeking a judicial declaration that says, hey, good news.

[00:13:45] Speaker 01:
This policy, five, six years ago, whenever, that lapsed, is reinstatable.

[00:13:51] Speaker 05:
At what premium?

[00:13:53] Speaker 05:
Whatever the premium would be.

[00:13:55] Speaker 05:
Well, the premium might be 10 times what it was before.

[00:13:58] Speaker 05:
And what are you going to do with a class member who says, I don't want to pay 10 times the premium?

[00:14:03] Speaker 01:
I say, hallelujah, that's the answer to what my friend just said a moment ago, which is that we need to treat these people separately.

[00:14:10] Speaker 05:
You would agree there's no harm there, no causation?

[00:14:12] Speaker 01:
Well, I would say we don't need to prove harm for a B2 class.

[00:14:16] Speaker 03:
All we need to do is... I think that's where I'm getting caught up, because help me understand why you don't have to prove harm.

[00:14:24] Speaker 03:
It's not intuitive to me that you never have to prove harm

[00:14:28] Speaker 03:
It's breach of contract claim, right?

[00:14:31] Speaker 01:
Well, the reason we don't have to prove harm ultimately is because we're not asking for money damages with the B2 subclass.

[00:14:39] Speaker 00:
That can't be right, though.

[00:14:41] Speaker 00:
I mean, the B2 class is premised on a legal violation.

[00:14:46] Speaker 00:
If the theory is a breach of contract, you have to have met the elements of that claim to get the relief that follows from it.

[00:14:56] Speaker 00:
I mean, that gets back to the question of is it enough to just claim that the notice provisions were violated?

[00:15:02] Speaker 00:
And I thought your position was, well, no, we do have to show causation and these other elements.

[00:15:07] Speaker 01:
Yeah, because then I'll attack it this way.

[00:15:10] Speaker 01:
The causation inquiry isn't if we had done all the things that the statute required us to do, would you have made your payment timely, yes or no.

[00:15:16] Speaker 01:
That's the causation inquiry they want.

[00:15:18] Speaker 01:
That is not the causation inquiry.

[00:15:20] Speaker 01:
The causation inquiry is,

[00:15:23] Speaker 01:
Assuming we canceled a policy that the carrier canceled a policy they were not legally allowed to cancel Did we deprive you of something of value either?

[00:15:31] Speaker 01:
Insurance benefits or a policy that you wanted if the answer to that is yes, then there is breach causation harm We light up the Christmas tree.

[00:15:39] Speaker 03:
So let me You're saying that what they were deprived of is the opportunity to decide

[00:15:45] Speaker 03:
Correct.

[00:15:46] Speaker 03:
That's your point.

[00:15:48] Speaker 03:
And they may have decided to cancel it.

[00:15:50] Speaker 03:
They may have not decided to cancel it.

[00:15:52] Speaker 03:
But they were deprived of that opportunity.

[00:15:54] Speaker 03:
And that's enough to show a breach.

[00:15:59] Speaker 01:
To at least give them the opportunity to now make that election.

[00:16:02] Speaker 03:
I'm just not sure that that satisfies all of the breach of contract provisions, though.

[00:16:08] Speaker 01:
Well, but in a scenario where someone gets that in the mail, and they say, oh my goodness, I remember this, and I did want that policy, and I was so disappointed when I found out that it lapsed.

[00:16:18] Speaker 01:
Fantastic.

[00:16:19] Speaker 01:
Yes, I could not wait to send this in.

[00:16:20] Speaker 03:
Do you have any indication of how many of the, would you say, 1,700 would fall within that category that you just described?

[00:16:29] Speaker 03:
I don't know.

[00:16:30] Speaker 01:
I don't know.

[00:16:30] Speaker 05:
I thought he said 93%.

[00:16:33] Speaker 01:
No, sorry.

[00:16:35] Speaker 01:
Maybe I misunderstood the question.

[00:16:37] Speaker 03:
I think there are two different questions.

[00:16:38] Speaker 03:
This question is how many would fall within the category of, oh, I really would like to have that policy.

[00:16:45] Speaker 03:
But that's the problem for me, is it seems unanswerable.

[00:16:48] Speaker 03:
Because it goes to questions that Judge Tallman was asking, which is if this was five years ago, then all of a sudden they're going to have to readjust a much higher premium, or 10 years ago.

[00:16:58] Speaker 03:
So all this seems to point to individualized inquiry.

[00:17:04] Speaker 01:
Let me speak to that, if I may, Your Honor.

[00:17:06] Speaker 01:
Because I think that the problem that they're really articulating is one of over-inclusivity, OK?

[00:17:11] Speaker 01:
That you're going to scoop up all these people who have these policies terminated, you say illegally and in breach, and some of those people actually wanted to get rid of this policy and don't want it.

[00:17:21] Speaker 01:
If you would agree with.

[00:17:23] Speaker 01:
Well, I would agree that there's some people there.

[00:17:25] Speaker 01:
And my answer to that is, fine.

[00:17:27] Speaker 01:
Do what you should have done back then.

[00:17:29] Speaker 01:
Send everybody these notices.

[00:17:30] Speaker 01:
And if you're right, that there's a bunch of people who look at that number and go, no, thank you, then they're not going to respond.

[00:17:35] Speaker 01:
They're not going to take it.

[00:17:36] Speaker 01:
There's going to be some subset who do.

[00:17:38] Speaker 01:
And I would venture to guess.

[00:17:41] Speaker 03:
Look, I give you that there's something

[00:17:43] Speaker 03:
inherent here that you want to redo.

[00:17:46] Speaker 03:
But the problem with this is putting anybody back in the position that they were.

[00:17:50] Speaker 03:
First of all, the law wasn't clear at the time.

[00:17:53] Speaker 03:
Then you have the Supreme Court decision

[00:17:56] Speaker 03:
basically three years ago that says, oh no, this goes to anything that was in existence at the time.

[00:18:01] Speaker 03:
So now everybody's trying to reconstruct this, but it still doesn't state a claim.

[00:18:07] Speaker 03:
I mean, you have some relief, I understand that you're seeking, but I don't know how it fits within a theory of a breach of contract.

[00:18:16] Speaker 01:
Because that turns entirely on whether or not the people wanted the policy and they wanted the benefits.

[00:18:21] Speaker 01:
And all I'm saying is they were deprived of that opportunity by the letter of the law.

[00:18:25] Speaker 01:
I agree.

[00:18:25] Speaker 03:
Everybody was deprived of that opportunity.

[00:18:27] Speaker 03:
But after that, it branches.

[00:18:30] Speaker 03:
That isn't what states a breach of contract claim in and of itself.

[00:18:35] Speaker 03:
And so all the other things make this an individualized inquiry.

[00:18:40] Speaker 01:
That's where we disagree your honor just because I think it's you know individualized that it may vary from class member to class member I guess technically yes, but but

[00:18:51] Speaker 02:
Isn't that the question that the cases ask us to look at?

[00:18:55] Speaker 01:
No, because the question is, does the individualized inquiry, that's sort of the start.

[00:19:00] Speaker 01:
The question is, is it going to get a mini trial?

[00:19:01] Speaker 01:
And here it's not, because it's a binary answer.

[00:19:04] Speaker 05:
Wouldn't there also be a subset of the 1,700 who have the policy reinstated, agree to pay the back premiums that were due and owing but not paid,

[00:19:19] Speaker 05:
But they still are living.

[00:19:21] Speaker 05:
So the policy has not yet triggered the payout requirement.

[00:19:28] Speaker 05:
And I understand the insurance companies are now complying with the statute and giving all of these notifications.

[00:19:37] Speaker 05:
Where's the harm to that subclass of policyholders?

[00:19:42] Speaker 05:
from the prior failure from January 2013 to, I don't know, when the lawsuit got filed or today, to the policyholder.

[00:19:55] Speaker 01:
Where's the harm to the people that still have policies?

[00:19:57] Speaker 05:
The living policyholder that

[00:20:00] Speaker 05:
They're not going to get the payout because it's a life insurance policy.

[00:20:03] Speaker 05:
Somebody's got to, the insured has to die before the insurance company is obligated to pay out on the policy.

[00:20:10] Speaker 01:
Well, the harm to them is that they lost, that goes to the core of why the statutes were drafted, that they've lost policies that they then had to go potentially secure alternative coverage.

[00:20:19] Speaker 05:
I don't think you're answering my question.

[00:20:20] Speaker 05:
Maybe I didn't frame it very well.

[00:20:23] Speaker 05:
there is a certain subclass of people who on January 2013 when the law went into effect

[00:20:31] Speaker 05:
And the insurance companies were not complying with the statutory requirements.

[00:20:36] Speaker 05:
Up to some later point in time, say today, where we are assured that the insurance companies are complying with the statute, if those policies are reinstated and they pay all the back premiums that are owed, then they're not harmed, are they?

[00:20:53] Speaker 05:
They still have insurance coverage at a higher rate.

[00:20:56] Speaker 05:
They've chosen to keep it, but the policy hasn't kicked in yet in the sense that the insurance company's not obligated to pay the face amount of the policy because the insurance has yet to die.

[00:21:08] Speaker 05:
So where is the harm in my hypothetical?

[00:21:12] Speaker 01:
It may be me that's misunderstanding, Your Honor, and if so, I apologize.

[00:21:15] Speaker 01:
But it sounds to me like you're asking me, where is this B2 subclass, the 1,700, harmed if they get policies reinstated?

[00:21:23] Speaker 01:
and they choose to pay it at a higher price.

[00:21:25] Speaker 01:
And my answer is, that's the relief that I'm seeking.

[00:21:28] Speaker 01:
That's why I'm here, is to get that exact reinstatement.

[00:21:30] Speaker 01:
And it sounds like I may not be doing well on that score.

[00:21:33] Speaker 01:
But that's my goal.

[00:21:34] Speaker 05:
So if that- Hasn't the insurance company offered that now in compliance with the statute?

[00:21:41] Speaker 01:
No.

[00:21:41] Speaker 05:
They're just taking the position that the policies lapse, then we no longer have any responsibility.

[00:21:46] Speaker 01:
Correct.

[00:21:47] Speaker 05:
And that's us- So you still need a declaratory judgment to that effect.

[00:21:50] Speaker 01:
Correct.

[00:21:50] Speaker 01:
And that's us all day.

[00:21:51] Speaker 01:
That's Ms.

[00:21:52] Speaker 01:
Small all day because she actually did try to reinstate the policy and processed an application.

[00:21:57] Speaker 05:
She's got a claim under the policy, right?

[00:22:00] Speaker 05:
The insured died.

[00:22:01] Speaker 01:
She's got both, actually.

[00:22:02] Speaker 01:
And that's one quirk that they emphasize that I did want to touch on for typicality adequacy purposes is that she actually wears both hats as, well, three, really.

[00:22:11] Speaker 03:
Trying to reinstate whether we're living, but also have a claim for the deceased.

[00:22:15] Speaker 01:
Correct.

[00:22:15] Speaker 01:
She is a beneficiary for her husband, her late husband on that policy.

[00:22:19] Speaker 01:
She's also the owner and insured of a policy on herself.

[00:22:23] Speaker 01:
So she's wearing both hats.

[00:22:25] Speaker 05:
She has two policies.

[00:22:27] Speaker 05:
She's claiming as beneficiary under the husband's policy, but she has her own life insurance policy on herself.

[00:22:35] Speaker 01:
Correct it's a family policy so it may technically be one policy with the other coverage like tacked on but more than one insured I think that's fair to the extent that matters, but but I did want to touch on the

[00:22:50] Speaker 01:
issue that I heard, I think it was you, Judge Bress mentioned about the text may not cover the anti-lapse provisions.

[00:22:59] Speaker 01:
So my two responses to that, one is that there's a whole wealth of common law that goes back 40 years on this that I think we cited

[00:23:06] Speaker 01:
at page 19 of our brief that basically says when there's an anti-lapse provision with or without the text, the only way to construe those, at least in California, is that if you don't strictly comply with them, the policy remains in force.

[00:23:20] Speaker 01:
And then we do read the text to incorporate this third-party designee, right?

[00:23:25] Speaker 01:
And we think that that's just a pretty plain reading of the statute.

[00:23:29] Speaker 01:
It would be impossible.

[00:23:30] Speaker 01:
It's expressly included in the

[00:23:32] Speaker 01:
You don't send the notice, it doesn't terminate language in .71B1 and .72C.

[00:23:39] Speaker 01:
But there's no way to read that as being fulfilled if they haven't done the first step, which is to give the right to designate in the first place.

[00:23:46] Speaker 01:
So if they haven't done that, then those notices are just not operative, and therefore that text kicks in.

[00:23:52] Speaker 00:
So how do we, I mean, the difficulty obviously is that there are people in the class

[00:23:57] Speaker 00:
who seemingly took affirmative action to get out of the policy.

[00:24:02] Speaker 00:
So how do we deal with those people?

[00:24:05] Speaker 01:
So two things there.

[00:24:06] Speaker 01:
One is it's and this is a little bit of confusion that I want to clear up.

[00:24:09] Speaker 01:
So I'm glad you asked.

[00:24:10] Speaker 01:
There are some people who did affirmatively call the carrier and say, hey, I don't want this policy anymore.

[00:24:16] Speaker 01:
And they send them a surrender paperwork and they fill it out and that's done.

[00:24:20] Speaker 01:
We don't want those people.

[00:24:21] Speaker 01:
Those people we can readily ascertain.

[00:24:23] Speaker 01:
They're out.

[00:24:23] Speaker 01:
We're not interested.

[00:24:24] Speaker 00:
We'll come back to that in a second, because it seems that they're covered by the class definition, and that would be somewhat problematic.

[00:24:31] Speaker 01:
If so, we can fix that.

[00:24:33] Speaker 01:
That's a glitch.

[00:24:34] Speaker 00:
I don't know about that, but okay, go ahead.

[00:24:36] Speaker 01:
But the other pieces, and I think the one that we've been discussing, is what we call the soft surrenders, which are the people who call up and

[00:24:44] Speaker 01:
I'm sorry don't take any affirmative action, but they just take their foot off the gas Ostensibly because the premiums are going to go up and those are the people that were what do we do with them again?

[00:24:53] Speaker 01:
You know why throw the baby out with the bath water and say well We know that there's some people who are just right down the main street of what this statute protects But we've got these soft surrender people so

[00:25:02] Speaker 01:
you know, sorry, everybody loses.

[00:25:03] Speaker 01:
Carrier, you gotta keep your money.

[00:25:05] Speaker 01:
Instead, we say, take care of everybody.

[00:25:07] Speaker 01:
Send everybody a notice.

[00:25:08] Speaker 01:
If they're one of those unintentional, core, Main Street people who did not want to lose their policy, they can take action to do it.

[00:25:15] Speaker 01:
That class, by the way, the people who respond, is gonna be under-inclusive of the people who probably were actually affected, however many years ago, because they've moved on, or they don't respond.

[00:25:23] Speaker 01:
I mean, response rates are low in general.

[00:25:25] Speaker 01:
And then the so-called soft surrender people who didn't want this are going to look at that and go, whoa, I wasn't interested in that six years ago.

[00:25:32] Speaker 01:
I'm less interested now.

[00:25:33] Speaker 01:
No, thank you.

[00:25:34] Speaker 01:
And we've tailored this class perfectly to the people who deserve to benefit from it.

[00:25:41] Speaker 01:
And so I'm not sure why we would blind ourselves to the reality of that mechanism.

[00:25:44] Speaker 05:
Is that your response to the insurers claim that it's going to take hours to go through each individual policy file in order to make that determination?

[00:25:56] Speaker 05:
We'll just send them another notice and then they can either opt in or opt out.

[00:26:01] Speaker 01:
I don't think we need to do any of that stuff for the B2 people.

[00:26:05] Speaker 01:
The B2 people, it's just your legal rights were violated, the terms of your statute were breached.

[00:26:10] Speaker 01:
Do you want this or do you not want this?

[00:26:12] Speaker 01:
Give them 30, 60 days, like we would sort of re-redo it as they should have done it.

[00:26:16] Speaker 01:
It's going to be more than that.

[00:26:18] Speaker 01:
do you want this if you pay x dollars correct yeah put the price on there i'm happy with that and then they'll get their complete piece instead of where we are now which is these cases could keep cropping up they get the complete piece everything's put to bed they are doing everything they should be doing now so we shouldn't have any problems i guess i don't understand how the b2 is supposed to work because b2 is a

[00:26:38] Speaker 00:
Is not an opt-out class.

[00:26:40] Speaker 00:
So how do you envision this actually happening?

[00:26:43] Speaker 00:
Because you're talking about people getting a notice and then opting out.

[00:26:46] Speaker 00:
But a B2 class binds you.

[00:26:47] Speaker 00:
You're in, and the implication here is that an order would be issued by a court saying, you are in an insurance policy now.

[00:26:56] Speaker 00:
And I don't really see how somebody would, what if somebody doesn't want that?

[00:27:01] Speaker 01:
It's not you are bound to this, like, congratulations, you're married to this policy, you now owe X. It's instead, you have a reinstatable policy, call it what you want, and take this golden ticket, this Willy Wonka golden ticket, and if you want the policy, redeem it.

[00:27:17] Speaker 03:
Might not be so cool.

[00:27:18] Speaker 01:
Well, right.

[00:27:19] Speaker 01:
And to some people, though, it may be.

[00:27:20] Speaker 01:
And that's the point.

[00:27:21] Speaker 01:
And we shouldn't throw the baby out with the bath water, like I said.

[00:27:24] Speaker 00:
But if you define the class in that way, aren't you just kind of pushing back the individualized issues that are inevitable in all of this?

[00:27:31] Speaker 00:
What if somebody comes back to Allianz and says, oh, yes, I received this notice.

[00:27:35] Speaker 00:
And the first response is, well, wait a minute here.

[00:27:37] Speaker 00:
Back at the time, you told us you didn't want this.

[00:27:40] Speaker 00:
And now you're telling us that you do.

[00:27:42] Speaker 00:
How are we going to figure out who's right about that?

[00:27:45] Speaker 00:
Why should Allianz have to trust what somebody says five years later when at time one they decided that they didn't want the policy?

[00:27:51] Speaker 01:
If they actually have proof that someone just really didn't want this policy, then I think that they can marshal those facts.

[00:28:00] Speaker 01:
If they don't, and I suspect they don't, because again, we're not talking about the hard surrenders, we're talking about the soft surrenders.

[00:28:06] Speaker 01:
If they don't have that, then we're stuck in this world of opt in or opt out.

[00:28:10] Speaker 01:
Again, I submit to you, it's going to be under-inclusive.

[00:28:12] Speaker 01:
It's going to be a smaller pool than it would have been if they had done what they were supposed to do in real time.

[00:28:16] Speaker 01:
That's number one.

[00:28:17] Speaker 01:
And number two, why should we bear the burden of this?

[00:28:20] Speaker 01:
They're the ones who are the sophisticated entity in a heavily regulated industry, and it was a simple thing.

[00:28:26] Speaker 01:
They could just send this thing out.

[00:28:28] Speaker 01:
A lot of the stuff, they were already doing.

[00:28:30] Speaker 00:
The thing is, we don't have in front of us a claim like this.

[00:28:32] Speaker 00:
All we're talking about is, is this properly

[00:28:35] Speaker 00:
Put together as a class right and so some of the concerns I'm raising are you could be right that some individual could have a claim here and should should prevail depending on how you characterize the claim.

[00:28:46] Speaker 00:
At the same time, though, we're kind of also asking was this really suitable for class treatment and that's where some of this gets a little hairy to me.

[00:28:53] Speaker 01:
And I think it really is.

[00:28:54] Speaker 01:
I mean, we're on a case where you've got, I mean, how often do you get a class action where you can sort of identify everybody who's involved by a spreadsheet and the amount for at least the beneficiaries, the 2%, how much they're owed also by reference to an Excel spreadsheet.

[00:29:09] Speaker 01:
I mean, you know, where I come from, Excel spreadsheets generally equal class certification.

[00:29:13] Speaker 01:
That's just,

[00:29:14] Speaker 01:
you know, this is not trying to value cars and did you get, you know, was it black or was it some sort of special color and did you get enough, you know, in the total loss.

[00:29:24] Speaker 01:
This is pretty straightforward and it has the benefit of, again, of filtering out the very people that they're concerned about while delivering relief to the people who deserve it.

[00:29:33] Speaker 01:
I mean, to me, it's a perfect class case, actually.

[00:29:36] Speaker 01:
And then I see I'm past my time.

[00:29:39] Speaker 03:
Yeah, you are Unless there's other questions if you want to just if you have a closing

[00:29:45] Speaker 01:
I guess the closing sentence would be this.

[00:29:49] Speaker 01:
The court certified this class.

[00:29:50] Speaker 01:
This court applies an abuse of discretion standard and its exceptional abuse of discretion under the Woollen case in that context.

[00:29:56] Speaker 01:
If that means anything here in this context, then I think Your Honor should affirm.

[00:30:00] Speaker 00:
Can I ask you before you sit down, I don't know if you're a class counsel in some of these other, there are some other cases that are pending.

[00:30:06] Speaker 00:
Can you give us your understanding of the universe of this litigation involving these notice provisions?

[00:30:10] Speaker 01:
Yes, and I'm so glad you asked.

[00:30:12] Speaker 01:
I am class counsel, and I think I've lost count, but there's like five of these others that we have.

[00:30:17] Speaker 01:
Poe is another that we don't.

[00:30:19] Speaker 01:
The one thing I can say about the universe there is that there is a motion to certify the statutory question, the text piece, Your Honor, that you mentioned that I touched on.

[00:30:28] Speaker 01:
to the California Supreme Court.

[00:30:30] Speaker 01:
It's the Moriarty case.

[00:30:31] Speaker 01:
It is, yes.

[00:30:33] Speaker 01:
And we picked that because it was last, number one, and number two, because it didn't have any of this class action noise.

[00:30:38] Speaker 01:
It just squarely presented.

[00:30:39] Speaker 01:
It's an individual case that squarely presented that substantive issue, so we think it's the perfect vehicle for it.

[00:30:45] Speaker 01:
We did file a jointer.

[00:30:46] Speaker 01:
I know that's technically not proper, and my friends on the other side, you know.

[00:30:49] Speaker 01:
But the whole point was just to wave our hands to you, and really to give them a vehicle to respond to that, because they're not parties in Moriarty, so we were actually trying to do them a solid.

[00:30:57] Speaker 01:
If you have any doubt at all about .71, .72, the insurance statutes, I would implore this court to certify the question to the California Supreme Court so we can get some answers because there's some pretty strong language in McHugh.

[00:31:11] Speaker 01:
that supports us.

[00:31:12] Speaker 01:
Thomas, I know it's unpublished as well.

[00:31:15] Speaker 01:
We think that's a pretty straight answer for us.

[00:31:17] Speaker 01:
I understand that the class action dynamics may differ, but getting an answer there really does do a lot of heavy lifting on all the class certification requirements.

[00:31:26] Speaker 05:
We do have about a half a dozen cases pending in front of different panels of this court.

[00:31:33] Speaker 05:
And that's just in the Ninth Circuit alone.

[00:31:36] Speaker 05:
I've got a notebook full of district court cases that are at various stages of percolation here.

[00:31:43] Speaker 02:
Yeah.

[00:31:44] Speaker 05:
So as I say, I think somebody needs some adult supervision.

[00:31:49] Speaker 01:
I agree, Your Honor, and I think that can come from A, the California Supreme Court on the substance, and B, the bright lines that I think I'm advocating for, which is, did you get the statutory rights or did you not?

[00:32:01] Speaker 01:
And if the answer is no, congratulations, you have an opportunity to either reinstate your policy or if the policy, if the insured died while the policy should have been enforced but was last by them, you can get a check.

[00:32:14] Speaker 01:
Thank you.

[00:32:20] Speaker 04:
Your Honors, there's no right to any remedy, whether damages or injunctive, unless there's a cause of action.

[00:32:27] Speaker 04:
And my friend stood up and repeatedly agreed with you, Your Honors.

[00:32:30] Speaker 04:
What about a declaratory judgment action?

[00:32:32] Speaker 03:
They've sought that as well, right?

[00:32:34] Speaker 04:
They sought a declaratory judgment, Your Honor, but in B2, it's only appropriate if it's final declaratory relief.

[00:32:41] Speaker 04:
And the relief they're seeking, the thing that you could declare, the statute's applyable.

[00:32:45] Speaker 04:
We already know that from the queue.

[00:32:47] Speaker 04:
Or if a notice wasn't sent,

[00:32:49] Speaker 04:
then there would be a declaration that the notice wasn't sent when it was violated.

[00:32:53] Speaker 04:
But there wouldn't be a cause of action, because you still have to go through the elements of injury and causation there, as we pointed out.

[00:33:00] Speaker 04:
And my friend on the other side repeatedly said, the people who are entitled to relief are people who didn't know.

[00:33:06] Speaker 04:
I didn't know.

[00:33:07] Speaker 04:
Man, I didn't know I was lapsing.

[00:33:09] Speaker 04:
I wanted it then.

[00:33:10] Speaker 04:
We agree with that.

[00:33:12] Speaker 04:
He said, we're entitled to marshal our proof of the people who knew and knowingly canceled.

[00:33:17] Speaker 04:
We agree.

[00:33:19] Speaker 04:
But that proof isn't limited to our own files.

[00:33:21] Speaker 03:
So let me ask you about smalls.

[00:33:23] Speaker 03:
Because the district court went further and decided summary judgment in favor of small, correct?

[00:33:33] Speaker 03:
I mean, I suppose if we decertify or we say there's a problem with certification, does that automatically address the summary judgment?

[00:33:42] Speaker 04:
You won't get there, but what the district court will have to do on remand is reconsider summary judgment in light of whatever principles your honor set out.

[00:33:49] Speaker 03:
The only thing in front of your honor is- I mean, theoretically, the only principles we set out are whether this is certification worthy.

[00:33:58] Speaker 03:
They could all have these claims, and I'll be honest, when I was reading it, I thought small, I mean, I didn't delve into it a lot, but it seemed like she had a decent claim.

[00:34:09] Speaker 04:
Yet Small, Your Honor, is one of the people who can claim, and a fact finder will have to decide, that she didn't know and it was accidental.

[00:34:17] Speaker 04:
And we agree, Your Honor, that if people can prove there is a violation of the statute and as a result they didn't know and it was accidental, they have a claim.

[00:34:25] Speaker 03:
Yours is just a mechanism by which to get there.

[00:34:27] Speaker 04:
That's exactly right.

[00:34:29] Speaker 04:
Because, again, to go back, there is a legal difference between people who knowingly and intentionally terminated.

[00:34:35] Speaker 04:
And my friend on the other side said that if there was a violation of the notice, then that means it was unknowing and intentional.

[00:34:43] Speaker 04:
No, it doesn't.

[00:34:44] Speaker 04:
The notice is just for a backup notice recipient.

[00:34:46] Speaker 04:
And we've got plenty of examples here in the facts where people knew.

[00:34:49] Speaker 04:
They got the notice themselves, and they said, I don't want the policy.

[00:34:53] Speaker 04:
And unless the court is willing to interpret this statute to abrogate the common law and say that when both contractual parties want to terminate the contract, it has to stay in force anyway,

[00:35:05] Speaker 04:
That's what you would have to hold to make this uniform.

[00:35:08] Speaker 04:
I want to speak briefly on B2 class.

[00:35:11] Speaker 04:
Ms.

[00:35:11] Speaker 04:
Small is a member of the small beneficiary class with a deceased insured.

[00:35:16] Speaker 04:
She is not a member of the class with a living insured.

[00:35:20] Speaker 05:
Even if she's covered under the family policy, that's the first I've heard of that.

[00:35:25] Speaker 04:
No, it's in our briefs.

[00:35:26] Speaker 04:
We address it at page 41.

[00:35:28] Speaker 04:
And my friend on the other side is not quite accurate here.

[00:35:32] Speaker 04:
She is not an owner.

[00:35:34] Speaker 04:
She is a beneficiary on that, and she was an additional insured, which means as long as her husband was living, there was coverage for her too.

[00:35:43] Speaker 04:
But as soon as he died, there's no more coverage for her, which is why her claims for injunctive relief were dismissed long ago, and that's not appealed.

[00:35:52] Speaker 04:
She's trying to say she can still have declaratory relief, even though there's no more current interest by her there.

[00:36:00] Speaker 04:
So that's your typicality argument, is that she's only representing a small- Yeah, when she was seeking one class, we pointed out that she wasn't typical of the living people.

[00:36:10] Speaker 04:
When the district court, Sue Espante, said two classes, that makes it the really strong form where she's not adequate to represent a class that she's not part of.

[00:36:19] Speaker 04:
That would be a narrower way to reverse the B2 class here, but if your honors agree,

[00:36:24] Speaker 04:
that it's legally relevant whether the policyholder knew full well and knowingly and intentionally determined.

[00:36:31] Speaker 04:
If you agree that's legally relevant here, then that cuts across all forms of the cases B2, B3.

[00:36:38] Speaker 04:
And to your honest point, there is no indivisible injunction here.

[00:36:43] Speaker 04:
What they're asking for is one-off.

[00:36:45] Speaker 04:
Give them a choice to reinstate this policy, this policy.

[00:36:48] Speaker 04:
that's not a b two mandatory class that's an individual form of what does this what would this case do if we decided for the other five is this preclusive of the other five or d or maybe you don't know if you're not in the other five case i've watched it your honors that there are eight cases in the ninth circuit now that raise variations on the statutory jumped up absolutely no six there's two more so seven

[00:37:13] Speaker 05:
Yeah, no, there are some.

[00:37:15] Speaker 04:
Some are class certification variations, some are merits, and then there are 24 in the district courts.

[00:37:21] Speaker 04:
But, Your Honor, this would be, you would be the lead panel on this, and so it'd be start as well.

[00:37:27] Speaker 03:
I understand that, but that's my question is, are they, to the extent you know, are all the other claims the same, or would those cases still have to go forward?

[00:37:36] Speaker 04:
There are all variations in the same claims.

[00:37:39] Speaker 04:
You know, there are five different provisions, notice provisions here.

[00:37:42] Speaker 04:
Ms.

[00:37:42] Speaker 04:
Small only has one.

[00:37:43] Speaker 04:
She has the minor reminder.

[00:37:45] Speaker 04:
Some other plaintiffs have other alleged violations of different subparts of this.

[00:37:49] Speaker 04:
And so I'm not going to say that what Your Honor, depending on what grounds Your Honors ruled on, it would have broader or narrower effect here.

[00:37:58] Speaker 04:
But if you get to the point of agreeing that evidence of whether somebody knew full well and wanted to cancel, if you agree that's legally immaterial, that is going to provide adult supervision to the entire set of cases.

[00:38:12] Speaker 05:
I'm not sure there's a parallel for the panel on multi-district litigation, but would those 24 cases benefit from consolidation before a single district judge?

[00:38:26] Speaker 04:
That's a question I haven't thought of, and I'm sure the other insurers that I don't represent would not want me to speak for them, Your Honor.

[00:38:35] Speaker 04:
I actually think stare decisis and lead panel is sufficient to resolve most legal questions.

[00:38:44] Speaker 04:
You don't need to do anything more formal or official to actually get these in order.

[00:38:50] Speaker 05:
I'm not sure there's even a way to do it, but I like to think outside of the box occasionally Okay, thank you your honor.

[00:38:59] Speaker 03:
Thank you.

[00:39:00] Speaker 03:
Thank you both counsel for your arguments Yeah, very interesting case.

[00:39:04] Speaker 03:
The case is now submitted and we'll move on to our final argument