BACKGROUND

I. Factual Background.

Bennett purchased a universal life insurance policy from ReliaStar’s

predecessor, Northern Life Insurance Company, in 1992. The policy provided

coverage for Bennett’s life, with a maturity date following his 95th birthday. It did

not contain any renewal provision. Unlike other insurance policies that require

mandatory premium payments, Bennett’s policy allowed him to choose when to

pay premiums and how much. Initially, Bennett opted to make quarterly payments

of $124.

When Bennett made a premium payment, it was added to his policy’s

“accumulation value.” The accumulation value was determined by Bennett’s

premium payments, a monthly interest credit, any policy loans or withdrawals

made by Bennett, and a recurring “monthly deduction” to cover the cost of

insurance and other fees. The monthly deduction was a charge against the

accumulation value. So long as the policy’s cash surrender value was equal to or

greater than the monthly deduction, premium payments were optional. The policy

would remain in force as long as the cash surrender value was sufficient to cover

the policy’s monthly deductions.

2 If the cash surrender value fell below the amount of the monthly deductions,

Bennett’s policy would enter a 61-day grace period. The grace period provision

states, “[d]uring the grace period, we will send you notice of the premium required

to keep the policy in force.” Failure to pay the premium stated in the grace period

notice would cause Bennett’s insurance coverage to terminate at the end of the

grace period. The grace period provision further states, “[w]e will send you and

any assignee of record notice of the required premium at least 30 days before we

lapse this policy.” Lastly, the policy provided that it could be reinstated at any

time within five years after lapse, provided that certain conditions are met.

Bennett contends that he made the “required minimum premium payments

through automatic deduction from his bank account” for nearly two decades,

including at the time his policy lapsed. However, in May 2019, Bennett received

notice that his policy terminated “for insufficient cash value to cover the cost of

insurance and expenses.” Bennett alleges that he did not receive a lapse notice

prior to the termination notice, nor did he receive notice of a right to designate a

third party to receive notice of the pending lapse.

The notice of termination also notified Bennett that he could apply for

reinstatement of the policy. This right to seek reinstatement lasted for 5 years,

until May 2024. Bennett claims that the termination notice stated that applying for

3 reinstatement “would require evidence of insurability, underwriting approval[,] and

payment of all past due premiums.” Bennett declined to reinstate his policy.

Instead, he elected to file this action.

II. Procedural History.

Bennett commenced this diversity action on his own behalf and on behalf of

a putative class. He asserted claims for declaratory relief, breach of contract, and

unfair competition under California law. All of Bennett’s claims are based on his

contention that ReliaStar was required, but failed, to comply with Sections

10113.71 and 10113.72 of the California Insurance Code (the “statutes”), which

were enacted in 2013, before ReliaStar terminated his policy.

ReliaStar moved to dismiss Bennett’s claims for lack of subject matter

jurisdiction and lack of standing, and because the statutes do not apply

retroactively to Bennett’s policy. The district court rejected ReliaStar’s argument

that Bennett lacked standing, ruling that “the termination of the policy is sufficient

to constitute injury in fact for standing purposes.” Concluding, however, that the

statues do not apply retroactively, the district court agreed with ReliaStar that the

statutes do not govern Bennett’s policy, which was issued in 1992. Because that

issue was dispositive of all of Bennett’s claims, the district court dismissed the

4 complaint with prejudice. On appeal, Bennett argues that the district court erred in

concluding that the statutes do not apply retroactively.

After briefing was completed, the California Supreme Court’s decided

McHugh v. Protective Life Insurance Co., 494 P.3d 24 (Cal. 2021). In McHugh,

the state high court held that the procedural protections upon which Bennett’s

claims rest “apply to all policies in effect as of the sections’ effective date.” Id. at

45.

DISCUSSION

I. Bennett has standing to sue based on ReliaStar’s termination of his life

insurance policy.

ReliaStar argues that the district court lacks subject matter jurisdiction over

Bennett’s claim because he did not suffer an Article III injury. Since Bennett has

the right to apply for reinstatement of his policy until May 2024, ReliaStar argues

that Bennett cannot show that “he has suffered an ‘actual or imminent injury’”

(citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992)); Torres v. Unum Life

Ins. Co. of Am., 2009 WL 69358 (N.D. Cal. Jan. 9, 2009)). The district court

rejected ReliaStar’s argument, finding that “the termination of the policy is

sufficient to constitute injury in fact for standing purposes.”

District courts in this circuit have addressed this question. For example, in

Siino v. Foresters Life Insurance & Annuity Co., 2020 WL 8410449, *4 (N.D. Cal.

5 2020), the court concluded that the wrongful termination of the plaintiff’s life

insurance policy constituted “an injury in fact sufficient to establish standing[,]”

even where the plaintiff could have sought reinstatement of the policy. The court

reasoned that the ability to seek reinstatement of a life insurance policy upon

termination “is irrelevant.” Id. (citing Bennett v. Am. Gen. Life Ins. Co., 2015 WL

12661909, at *6 (C.D. Cal. 2015)). Similarly, here, Bennett would suffer injury

because he alleges that he would have to pay past due premiums for a period

during which he had no coverage. We therefore affirm the district court’s

conclusion that Bennett has standing.

II. Remand is appropriate in light of the California Supreme Court’s

decision in McHugh.

The California Supreme Court’s opinion in McHugh squarely resolves the

parties’ remaining arguments on appeal. In concluding that the statutes do not

apply retroactively to life insurance policies issued before the enactment of the

statues, such as Bennett’s, the district court relied on the California Court of

Appeal’s decision, McHugh v. Protective Life Insurance Co., 253 Cal. Rptr. 3d 780

(Ct. App. 2019), which concluded that the statutes do not apply retroactively. See

id. at 788. As noted above, however, after briefing in this appeal was complete and

while this case was stayed, the California Supreme Court reversed the California

Court of Appeal. The California Supreme Court held “that sections 10113.71 and

6 10113.72 apply to all life insurance policies in force when these two sections went

into effect, regardless of when the policies were originally issued.” McHugh, 494

P.3d 27. “The grace period and notice protections apply to all policies in effect as

of the sections’ effective date[.]” Id. at 45.

CONCLUSION

Although McHugh definitively addresses and decides the state-law issue on

which the district court’s order is based, the district court did not rule on the other

issues raised by ReliaStar’s motion to dismiss. In light of McHugh, the parties

agree that the proper resolution of this appeal is to vacate and remand for the

district court to address the remaining issues on the motion to dismiss. In

accordance with the parties’ agreement, we REVERSE the district court’s decision

and REMAND the case for further proceedings. Bennett is awarded his costs on

appeal.

REVERSED and REMANDED.

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