A recent decision on class certification in a case involving ratemaking for universal life insurance policies illustrates where the rubber is meeting the road in insurance class actions post-Wal-Mart.  It also reminds class action lawyers of the importance of considering carefully whether the putative class members would actually want the relief being sought by the putative class representative.

In Thao v Midland National Life Insurance Company.pdf, Case No. 09-C-1158, 2012 U.S. Dist. LEXIS 72277 (E.D. Wisc. May 24, 2012), the plaintiff contended that Midland did not calculate cost-of-insurance rates in accordance with a provision of its universal life policies stating that “Cost of Insurance rates are based on the Issue Age, completed Policy Years, Sex, Specified Amount, and Premium Class of the Insured.”  Midland’s premium calculations used, as a starting point, a base scale that was an approximation of Midland’s pricing mortality rates (which were based on the factors described in the policy provision).  The base scale was then adjusted to meet company objectives, so that rates for particular classes of policyholders would not be too low or too high.  An “Add-On” was then used to adjust the calculation so that premiums would be higher in earlier policy years and lower in later policy years, because many policyholders prefer that type of structure for tax reasons or other reasons (e.g., because available cash flow is smaller once policyholders are in retirement).  The plaintiff contended that the use of the “Add-On” in calculating the premiums was contrary to the policy provision quoted above, and sought a remedy whereby the use of the “Add-On” would be prohibited in the future, and prior “overpayments” resulting from the “Add-On” would be refunded to putative class members.

The plaintiff sought certification of a 33-state class of purchasers of policies on certain specific policy forms.  (The opinion does not explain whether the 33 states were all of the states where Midland sells this type of coverage, or were chosen by plaintiff’s counsel due to purported similarity of state law in the selected states.)  The court concluded that, because the policy language involved was essentially identical for the entire putative class, there was a common question of law on which a common answer would apply to the entire class.  The court found that “differences in state law and extrinsic evidence will likely not result in different meanings for different class members.”  Id. at *9.  However, the court further explained that, under Wal-Mart, “before the class proposed by Thao may be certified, Thao must prove – not merely assert – that if Midland had set its cost-of-insurance rates using only the five factors listed in the policy, then all of the numerical values in all of Midland’s tables would be either lower than they are now or unchanged.”  Id. at *12.  The court found that the plaintiff did not meet this burden of proof for two reasons.  First, if the “Add-On” were removed from the premium calculation as plaintiff sought, the resulting rates would not be based exclusively on the five factors set forth in the policy provision.  This is because the base scale was only loosely based on mortality expectations, modified by actuaries during the pricing process so that rates for particular classes of policyholders would not be too low or too high.  Secondly, the court found that, if the rates were adjusted so that they were based exclusively on mortality rates, many policyholders would not want that result because they prefer to pay higher rates in earlier years in exchange for paying lower rates later in life.  Because class members would have different preferences in this regard, there was no “common grievance” appropriate for certification.

This case is a good illustration of how plaintiffs’ attorneys are structuring and developing their insurance class action cases to try to satisfy Wal-Mart, and how district courts are handling motions for class certification post-Wal-Mart.  A common strategy for plaintiffs post-Wal-Mart is to focus on a narrow, simple issue of policy interpretation that does not require application of the policy terms to particular factual circumstances.  This policy interpretation issue might not ultimately be meritorious, but it could be a close enough call that an insurer may not want to litigate its merits pre-certification (the plaintiff’s strategy is to try to encourage settlement if the insurer does not want to risk losing the policy interpretation issue on a classwide basis).  This opinion also demonstrates how, in adjudicating class certification post-Wal-Mart, district courts are delving deeply into the facts and requiring the plaintiff to demonstrate a viable theory, in detail, on the merits.  Here, the court explored deeply the details of how Midland calculated its cost-of-insurance rates (with charts and a graph in the opinion to illustrate the analysis), the impact that the plaintiff’s proposed remedy would have, and the impact that using strictly mortality-based rates would have.  Ultimately the outcome appeared to turn on the fact that the result the plaintiff was advocating was not one that many policyholders would want, something that is always worth thinking about in developing a strategy to defend a class action.

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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.