The California Court of Appeal recently affirmed a denial of class certification in Fairbanks v. Farmers New World Life Insurance Company.  The plaintiffs alleged that Farmers violated the California Unfair Competition Law in connection with its marketing and sales of universal life and flexible universal life policies.  The central claim was that Farmers designed and sold the policies in such a manner that insureds would not pay enough premiums to keep the policies in force to maturity (age 95 or 100), so the policies would lapse.  Plaintiffs claimed essentially that Farmers was selling what amounted to expensive term insurance but calling it “permanent” insurance when it typically would not perform that function.  The trial court denied certification because individual issues concerning what each putative class member was told by their agent and what they cared about in purchasing their policy would predominate over common issues.  The appellate court affirmed.  The result here is not surprising.  Most courts have denied certification in similar cases involving life insurance sales practices, including vanishing premium cases.  There are a few things in this decision, however, that are notable: 

  • The court made what some might consider a “merits” determination:  There was conflicting evidence on whether Farmers had a common marketing strategy.  The trial court found Farmers’ evidence that it did not have such a strategy more persuasive on this point, and the court of appeal affirmed because there was substantial evidence supporting the trial court’s factual finding.  Some might call this a “merits” ruling, although I think it’s more appropriately labeled as a factual issue where class certification requirements (commonality and predominance) overlapped with the merits of the plaintiffs’ theory.  This is a good case to cite for the proposition that state appellate courts, in addition to federal courts, allow these kinds of “merits” determinations at class certification, even in states like California, which are not unfriendly to class actions.
  • A survey of putative class members was important to the outcome:  The plaintiffs actually had this survey done, but the results supported Farmers’ position, and Farmers was able to use the results effectively.  The key question asked was whether the policyholders would have bought the policies if they knew that the premiums were not guaranteed to keep the policies in force to maturity.  The answer was that about half of the people would have bought it and half would not.  Using this type of survey can be an effective strategy in insurance class actions.  You can’t really predict the outcome before doing the survey, but it’s unlikely that you will not see a significant amount of disagreement among policyholders on an issue like this.  People buy life insurance with different considerations in mind and use it for different purposes.  It is a bit surprising that the plaintiffs would have commissioned this survey.
  • Depositions of sales agents also were important:  Farmers deposed a sample of agents regarding how they would sell these policies, and was able to illustrate how they used different approaches — some would tell policyholders that the premiums may not be sufficient to keep the policy in force to maturity, and others would recommend switching to a level death benefit in later years.  Defendants often don’t take much offensive discovery in class actions.  This is one example of where they should.
  • Plaintiffs improperly tried to change their theory of certification on appeal:  The court of appeal rejected some of the plaintiffs’ arguments because, although there was ample evidence in the record, the theory being proffered was not the theory argued below.  This is not an uncommon tactic by the plaintiffs’ bar — introduce a massive record in the trial court and then keep shifting your theory around trying to find something that works.  Here, for example, the plaintiffs argued on appeal that the language of the policies was a common misrepresentation on which a class should be certified.  The court of appeal found that was not properly raised below because, although there was reference to the policy language in the trial court briefing, the plaintiffs never argued for certification on that basis alone, but rather argued that the policy language was part of a common marketing scheme. 
Tags: California, Farmers
Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Wystan Ackerman Wystan Ackerman

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you…

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you have something to say.  For those looking for my detailed law firm bio, click here.  If you want a more light-hearted and hopefully more interesting summary, read on:

People often ask about my unusual first name, Wystan.  It’s pronounced WISS-ten.  It’s not Winston.  There is no “n” in the middle.  It comes from my father’s favorite poet, W.H. (Wystan Hugh) Auden.  I’ve grown to like the fact that because my name is unusual people tend to remember it better, even if they don’t pronounce it right (and there is no need for anyone to use my last name because I’m always the only Wystan).

I grew up in Deep River, Connecticut, a small town on the west side of the Connecticut River in the south central part of the state.  I’ve always had strong interests in history, politics and baseball.  My heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox).  I think it was my early fascination with Lincoln that drove me to practice law.  I went to high school at The Williams School in New London, Connecticut, where I edited the school newspaper, played baseball, and was primarily responsible for the installation of a flag pole near the school entrance (it seemed like every other school had one but until my class raised the money and bought one at my urging, Williams had no flag pole).  As a high school senior, my interest in history and politics led me to score high enough on a test of those subjects to be chosen as one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified my interest in law and government.  One of my mentors at Williams was of the view that there were far too many lawyers and I should find something more useful to do, but if I really had to be a lawyer there was always room for one more.  I eventually decided to be that “one more.”  I went on to Bowdoin College, where I wrote for the Bowdoin Orient and majored in government, but took a lot of math classes because I found college math interesting and challenging.  I then went to Columbia Law School, where I was lucky enough to be selected as one of the minions who spent their time fastidiously cite-checking and Blue booking hundred-plus-page articles in the Columbia Law Review.  I also interned in the chambers of then-Judge Sonia Sotomayor when she was a relatively new judge on the Second Circuit, my only connection to someone who now has one-ninth of the last word on what constitutes the law of our land.  I graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole, one of the largest Connecticut-based law firms.  At the end of 2008, I was elected a partner at Robinson+Cole.

I’ve worked on class actions since the start of my career at Skadden.  Being in the insurance capital of Hartford, we have a national insurance litigation practice and I was fortunate to have the opportunity to work on some prominent class actions arising from the 2004 hurricanes in Florida and later Hurricane Katrina, including cases involving the applicability of the flood exclusion, statutes known as valued policy laws, and various other issues.  My interest and experience in class actions gradually led me to focus on that area.

In Connecticut courts I’ve defended various kinds of class actions that go beyond insurance, including cases involving products liability, securities, financial services and consumer contracts.

My insurance class action practice usually takes me outside of Connecticut.  I’ve had the pleasure of working on cases in various federal and state courts and collaborating with great lawyers across the country.  While class actions are an increasingly large part of my practice, I don’t do exclusively class action work.  The rest of my practice involves litigating insurance coverage cases, often at the appellate level.  That also frequently takes me outside of Connecticut.  A highlight of my career thus far was working on Standard Fire Ins. Co. v. Knowles, the U.S. Supreme Court’s first Class Action Fairness Act case.  I was Counsel of Record for Standard Fire on the cert petition, and had the pleasure of working with Ted Boutrous on the merits briefing and oral argument.

I started this blog because writing is one of my favorite things to do and I enjoy following developments in class action law, writing about them and engaging in discussion with others who have an in interest in this area.  It’s a welcome break from day-to-day practice, keeps me current, broadens my network and results in some new business.

When I’m not at my desk or flying around the country trying to save insurance companies from the plaintiffs’ bar, or attending a conference on class actions or insurance litigation (for more on those, see the Seminars/Programs page of this blog), I often can be found playing or reading with my young daughter, helping my wife with her real estate and mortgage businesses, reading a book about history or politics, or watching the Boston Red Sox (I managed to find bleacher seats for Game 2 of the 2004 World Series when Curt Schilling pitched with the bloody sock).  When the weather is good I also love to take the ferry to Block Island, Rhode Island and ride a bike or walk the trails there. If you go, I highly recommend the Clay Head Trail.

Read more about Wystan Ackerman
Show more Show less
Related Posts
Are Defendants Required To Create Datasets to Respond to Discovery Requests in Class Actions?
January 29, 2018
Insights From FDCC Program On December 2015 Amendments To Federal Rules of Civil Procedure
March 10, 2016
2015 Amendments to Federal Rules – Impact on Class Actions
November 20, 2015