facts because Flores’s cause of action for her second suit—Flores II—did not

accrue until after she filed the operative complaint in her first suit—Flores I. See

Howard, 871 F.3d at 1040. A brief summary of the relevant timeline is instructive.

Flores applied for short-term disability (“STD”) benefits in July 2018. LINA

denied Flores’s claim for STD benefits in October 2018. Flores filed Flores I in

3 May 2020, alleging breach of the STD policy and the implied covenant of good

faith and fair dealing. Even though Flores had not yet filed a claim with LINA for

long-term disability (“LTD”) benefits, she also sought to recover LTD benefits in

Flores I, arguing that filing an LTD claim with LINA would be futile. She

amended that complaint in January 2021 to include a claim under the Employee

Retirement Income Security Act (“ERISA”). The district court ultimately

determined that Flores was entitled to STD benefits, but denied her request for

LTD benefits “because she failed to comply with the LTD Policy’s Proof of Loss

provision,” which “is a condition precedent to payment of benefits.” In October

2021, after the district court entered final judgment in Flores I, Flores applied for

LTD benefits. LINA denied Flores’s claim for LTD benefits in April 2022. Flores

filed Flores II a few days later, alleging violations of California contract law and

ERISA.

We have held that “an ERISA cause of action accrues either at the time

benefits are actually denied or when the insured has reason to know that the claim

has been denied.” Gordon v. Deloitte & Touche, LLP Grp. Long Term Disability

Plan, 749 F.3d 746, 750 (9th Cir. 2014). Similarly, “California courts have long

held that an insured’s cause of action against an insurer accrues upon receipt of the

insurer’s unconditional denial of liability to the insured.” Harris v. Prudential Ins.

Co. of Am., 93 F. App’x 139, 140 (9th Cir. 2004); accord Cusano v. Klein, 264

4 F.3d 936, 947 (9th Cir. 2001) (“To determine when a cause of action accrues, we

look to state law.”); Neff v. N.Y. Life. Ins. Co., 30 Cal. 2d 165, 170 (1947) (holding

that “an unconditional denial of liability to the insured [gives] rise to an immediate

cause of action”). In short, under both rules, an insured’s claim against an insurer

accrues when the insurer denies benefits. See Gordon, 749 F.3d at 750; Neff, 30

Cal. 2d at 170. It follows that Flores’s cause of action in Flores II— her LTD

case—did not accrue until LINA denied Flores’s LTD claim in April 2022. See

Gordon, 749 F.3d at 750; Neff, 30 Cal. 2d at 170. Because the claims in Flores II

accrued in April 2022, they could not “have been brought” in January 2021, when

Flores filed her amended complaint in Flores I. Howard, 871 F.3d at 1040.

Because the common nucleus factor is the most important, “[w]e have

repeatedly found it to be outcome determinative,” and need not consider the other

criteria. Media Rts. Techs., 922 F.3d at 1028–29. We took the same approach in

Media Rights, concluding that claims that accrued after the plaintiff filed the

lawsuit were not barred by claim preclusion without analyzing the other factors.

Id. at 1024. At bottom, Flores I and Flores II could not have been tried together

because the latter suit involves Flores’s eligibility for benefits that she applied for

after a judgment had been rendered in the former suit. See Howard, 871 F.3d at

1040.

5 The dissent argues that the district court in Flores I “squarely held” that

Flores was not entitled to LTD benefits, which bars Flores II. But the dissent

overstates the nature of the district court’s LTD conclusion in Flores I and, by

extension, its preclusive effect. The district court in Flores I determined that

Flores was not entitled to LTD benefits at that time because she had not complied

with “a condition precedent to payment of [LTD] benefits,” namely she had not

submitted proof of loss and had “never made a claim under the LTD Policy.”

After receiving that determination, Flores did what any diligent plaintiff would

have done; she went back and complied with the precondition that the district court

stated she had missed. Flores filed a claim for LTD benefits with LINA, waited for

LINA to deny her benefits, and then filed Flores II having complied with the proof

of loss requirement. It follows that the district court’s determination that Flores

was not entitled to LTD benefits before she had complied with the terms of the

LTD policy does not bar her subsequent suit for LTD benefits after she complied

with the terms of the LTD policy. Segal v. Am. Tel. & Tel. Co., Inc., 606 F.2d 842,

845 (9th Cir. 1979) (per curiam) (“A valid and final personal judgment for the

defendant which rests on . . . the plaintiff’s failure to satisfy a precondition to suit,

does not bar another action by the plaintiff instituted after . . . the precondition has

6 been satisfied . . . .” (quoting Restatement (Second) of Judgments § 48.1(2)

(1973))); Restatement (Second) of Judgments § 20 (2023) (same).1

In sum, because Flores II accrued after Flores filed the operative complaint

in Flores I and the claims could not have been brought together, claim preclusion

does not apply. Howard, 871 F.3d at 1040. The district court erroneously

concluded otherwise.

REVERSED.

1 The dissent makes hay out of the district court’s invocation of California’s notice-prejudice rule in Flores I. But the district court’s finding of prejudice in Flores I is not nearly as broad as the dissent suggests that it is. Contrary to the dissent’s suggestion, the district court found prejudice in Flores I “[b]ecause [Flores] never made a claim under the LTD Policy” such that “LINA did not have an opportunity to conduct a vocational review, secure updated medical records, evaluate potential offsets, or determine whether [Flores] is receiving income from another source, which may be indicative of an ability to work.” That finding— which was predicated on Flores’s failure to provide proof of loss under her LTD policy—has no bearing on Flores II, a suit that Flores filed after she submitted proof of loss under her LTD policy.

7

FILED

Kayle Flores v. Life Ins. Co. of N. Am., No. 22-55779 JAN 22 2024

MOLLY C. DWYER, CLERK

COLLINS, Circuit Judge, dissenting: U.S. COURT OF APPEALS

In her prior lawsuit (Flores I), Plaintiff Kayle Flores sought the same long-

term disability (“LTD”) benefits, under the same policy, for the same alleged

disability, for the same period, that she now seeks again in this lawsuit (Flores II).

In the prior suit, the district court squarely held that “Plaintiff is not entitled to

benefits under the LTD policy,” and Flores did not appeal that adverse judgment.

Unsurprisingly, the district court held that the LTD benefits claim in Flores II was

precluded by the final judgment on the merits in Flores I. The majority

nonetheless concludes that Flores can now obtain a do-over based on the premise

that the very LTD claim that she actually filed, litigated, and lost in the prior case

somehow had not sufficiently accrued to even allow it to be litigated in Flores I.

Because neither law nor logic support this remarkable result, I respectfully dissent.

Because the judgment in Flores I was rendered by a federal court exercising

federal question jurisdiction over Flores’s ERISA-based claims, the preclusive

effect of that judgment is determined under federal common law standards. See

Taylor v. Sturgell, 553 U.S. 880, 891 (2008). Under the doctrine of “claim

preclusion,” the LTD claim in Flores II is barred if Flores I “(1) involved the same

‘claim’ or cause of action as [Flores II], (2) reached a final judgment on the merits,

and (3) involved identical parties or privies.” Media Rts. Techs., Inc. v. Microsoft Corp., 922 F.3d 1014, 1020–21 (9th Cir. 2019). The third element is obviously

satisfied here, because the sole plaintiff and the sole defendant in the two suits are

exactly the same. The other two requirements are also satisfied as well.

Contrary to what the majority suggests, see Memo. Dispo. at 6–7, the

judgment rejecting Flores’s LTD benefits claim in Flores I was clearly on the

merits. The district court in Flores I applied California’s “notice-prejudice rule”

and held that Flores’s failure to timely present her LTD benefits claim, as required

under the policy, had resulted in actual prejudice to Defendant and thereby

established a defense to liability for Flores’s claim of LTD benefits. See UNUM

Life Ins. Co. of Am. v. Ward, 526 U.S. 358, 364 (1999) (holding that ERISA does

not preempt California’s notice-prejudice rule). In particular, the district court

concluded that Flores’s failure to timely present proof of loss meant that Defendant

lost “entirely” its right to conduct a contemporaneous medical examination of

Flores. In short, Flores I held that it was too late to make a formal demand for

benefits that should have been presented earlier.

The majority, however, ignores that important holding and instead

inaccurately suggests that all of the prejudice found by the district court in Flores I

was of a type that could readily be remedied by submitting a late proof of loss. See

Memo. Dispo. at 7 n.1. In effect, the majority wrongly recharacterizes the district

court’s notice-prejudice ruling as if it had held that Flores had not exhausted her

2 remedies by filing a claim for LTD benefits with LINA. See also Memo. Dispo. at

4. Notably, Defendant’s papers in Flores I had separately invoked both defenses—

the notice-prejudice rule and failure to exhaust administrative remedies—but the

district court’s decision in Flores I specifically relied on the “notice-prejudice rule”

and held that its requirements had been satisfied. And when the demanding

requirements of California’s notice-prejudice rule are met, that rule—unlike a mere

failure to exhaust remedies—provides a defense on the merits, because it

“generally excuse[s] the insurer from its contractual obligations under the

insurance policy.” Pitzer College v. Indian Harbor Ins. Co., 447 P.3d 669, 706–07

(Cal. 2019); see also Shell Oil Co. v. Winterthur Swiss Ins. Co., 15 Cal. Rptr. 2d

815, 845 (Cal. Ct. App. 1993).

Moreover, Flores subsequently moved for clarification and reconsideration

of the district court’s ruling in Flores I, arguing that “if the Court meant that there

is no availability to LTD benefits at all, then that ruling should be reconsidered”

(emphasis added). In response, the district court “confirm[ed] that Plaintiff is not

entitled to benefits under the LTD policy,” and it otherwise denied Flores’s

motion. This further establishes that the district court had rejected the LTD

benefits claim on the merits, and had not merely denied it without prejudice to later

renewing the claim after a subsequent exhaustion of remedies.

The last question is whether the two suits involve the same claim or cause of

3 action. “We employ four criteria to evaluate whether claims are identical:

(1) whether rights or interests established in the prior judgment would be destroyed

or impaired by prosecution of the second action; (2) whether substantially the same

evidence is presented in the two actions; (3) whether the two suits involve

infringement of the same right; and (4) whether the two suits arise out of the same

transactional nucleus of facts.” Howard v. City of Coos Bay, 871 F.3d 1032, 1039

(9th Cir. 2017) (citation and paragraph breaks omitted). “These criteria are not

applied “mechanistically,’” and the “fourth criterion is the most important.” Id.

(citations omitted); see also United States ex rel. Barajas v. Northrop Corp., 147

F.3d 905, 910 (9th Cir. 1998) (“We have applied the doctrine of res judicata ‘on

the ground that the two claims arose out of the same transaction,’ without reaching

other factors” (citation omitted)). Here, it is clear that the two actions arise from

the “same transactional nucleus of facts,” because Flores seeks the same LTD

benefits, based on the same underlying condition, under the same policy. In her

operative complaint in Flores II, Flores states that “[p]ursuant to the terms and

conditions of the LTD Policy, [Plaintiff] is entitled to LTD benefits” because

Flores is disabled due to suffering from Cushing’s disease. This is the same claim

for LTD benefits in the same language and supported by largely the same facts

from the operative complaint in Flores I. Accordingly, the last three of the four

Howard criteria are all met. And the first criterion is met as well, because the

4 judgment on the merits in Defendant’s favor would be “impaired” by the do-over

that Flores is attempting in Flores II.

In reaching a contrary conclusion, the majority misapplies the “bright-line”

rule from Howard “that res judicata does not apply to events post-dating the filing

of the initial complaint.” 871 F.3d at 1039 (citation omitted); see Memo. Dispo. at

3. Howard’s “bright-line” rule rests on the premise that a claim that is based on

“events post-dating the filing of the initial complaint” does not involve “the same

transactional nucleus of facts.” Id. at 1039 (emphasis added) (citations omitted);

see also Media Rts. Techs., 922 F.3d at 1024 (holding that, under the “separate-

accrual rule” applicable under the Copyright Act, “any sales of allegedly infringing

Microsoft products after April 25, 2013 [the date of filing of the prior suit], gave

rise to a cause of action (the ‘post-filing copyright infringement claims’) as of the

date of the sale—i.e., at some point after April 25, 2013.” (emphasis added)).

Here, however, the relevant facts and events have not changed: the LTD claim

asserted in Flores II seeks the same LTD benefits under the same policy based on

the same asserted disability as in Flores I. Howard’s bright-line rule for applying

the fourth criterion therefore does not apply here.

In nonetheless claiming that Flores II rests on new facts that give rise to a

second opportunity to litigate Flores’s eligibility for LTD benefits, the majority

points only to the fact that, after the judgment in Flores I, Flores submitted a

5 formal claim for LTD benefits, which Defendant denied. See Memo. Dispo. at 4.

According to the majority, that is when Flores’s LTD benefits claim first came into

existence, and, as a result, it is a different claim from the one rejected in Flores I.

All of this is wrong. The majority mistakenly relies on the rule for establishing

when a claim accrues for statute of limitations purposes. See Gordon v. Deloitte &

Touch, LLP Grp. Long Term Disability Plan, 749 F.3d 746, 750 (9th Cir. 2014)

(discussing accrual of an ERISA cause of action in the context of whether the

action was barred by the statute of limitations). But whether the statute of

limitations had technically begun to run when Flores asserted her LTD benefits

claim in Flores I cannot alter the fact that she actually did assert her LTD benefits

claim in Flores I and it was rejected on the merits. As we have recognized in other

contexts, a cause of action may exist, and be capable of being asserted in a suit,

even if the lenient rules governing the running of the statute of limitations would

defer “accrual” for limitations purposes. See, e.g., Cusano v. Klein, 264 F.3d 936,

947 (9th Cir. 2001) (noting that a cause of action may sufficiently exist under state

law to qualify as property of a bankruptcy estate even if accrual for statute of

limitations purposes is deferred). Having litigated and lost her LTD claim on the

merits in Flores I, Flores cannot create a new “claim” simply by filing a formal

LTD claim with Defendant. The majority’s allowance of such an evasion of the

Flores I judgment is all the more inappropriate given that the Flores I court found

6 that Defendant was prejudiced by Flores’s failure to provide timely proof of loss.

It may well be that the judgment in Flores I was wrong. But Flores did not

appeal from it, and preclusion doctrines “prevent[] relitigation of wrong decisions

just as much as right ones.” B&B Hardware, Inc. v. Hargis Indus., Inc., 575 U.S.

138, 157 (2015) (citations omitted). Flores I clearly bars this suit, and the majority

errs in holding otherwise. I respectfully dissent.

7