Life insurance class actions I have been following include the multi-district litigation (MDL) against Prudential Life Insurance Company of America pending in federal district court in Massachusetts. This case involves the payment of life insurance benefits under servicemembers’ and veterans’ group life insurance programs that are operated by Prudential and subsidized by the federal government. The plaintiffs contend that it is improper for Prudential to pay policy proceeds by opening an “Alliance Account” and providing the beneficiary with a checkbook from which the entire proceeds can be withdrawn immediately or left in the account to earn interest at a rate determined by Prudential. The plaintiffs contend that the policy and applicable law mandate payment of the benefits in one lump sum check or 36 monthly checks if the beneficiary chooses that option. For more background on this case and the district court’s denial of Prudential’s motion to dismiss, see my May 12, 2011 blog post and April 14, 2011 blog post.
Judge Ponsor, who is presiding over this MDL, was recently faced with deciding class certification. One of his colleagues on the Massachusetts federal bench, Judge Stearns, has granted class certification in a case against CIGNA also involving the use of “checkbook” accounts to pay policy proceeds. However, these two cases potentially involve some different issues and different policy language. The Prudential policies are governed in part by a federal statute establishing the servicemembers’ and veterans’ programs, and the case against CIGNA involves an ERISA employee benefit plan.
Judge Ponsor’s recent decision, In re Prudential Insurance Company of America SGLI/VGLI Contract Litigation, 2012 U.S. Dist. LEXIS 116896 (D. Mass. Aug. 20, 2012), ultimately did not decide the merits of class certification. Instead, he took Prudential up on its offer to file a summary judgment motion on the issue of whether the named plaintiffs suffered any cognizable injury and consider that motion before ruling on class certification. Judge Ponsor found that this issue would be significant in assessing predominance of common issues of law and fact, which was the main issue in dispute. He explained that:
Plaintiffs’ theory of injury appears to be that the proposed class members were injured by the very fact that they received an Alliance Account instead of a lump sum payment, because providing a lump sum payment by cash is not the same as providing an account book. See Mogel v. UNUM Life Ins. Co. of Am., 547 F.3d 23, 26 (1st Cir. 2008) (“[D]elivery of the checkbook did not constitute a `lump sum payment’ called for by the policies. . . . `[T]he difference between delivery of a check and a checkbook . . . is the difference between [Defendant] retaining or [Defendant] divesting possession of Plaintiffs’ funds.'”).
However, Defendant argues and the court agrees, the fact that an Alliance Account is not the same as a lump sum payment does not necessarily mean that a beneficiary was injured by receiving an Alliance Account. According to Defendant, determining whether each member of the proposed class suffered an injury will require substantial individualized inquiry, including taking depositions of the class members to determine, for example, whether they knew that they could withdraw money from the Alliance Accounts at any time, whether and when they did withdraw money, and whether they actually benefitted from leaving their money in the Alliance Accounts. Defendant further argues that individualized evidence that has already been uncovered during discovery through the depositions of the named Plaintiffs shows that the named Plaintiffs suffered no injury and, in fact, some preferred to leave their money in the Alliance Accounts and knowingly chose to do so. Plaintiffs dispute the need for such individualized inquiry. They argue that, because they are seeking only disgorgement and interest remedies, how class members used their Alliance Account checkbooks or whether they may have preferred Alliance Accounts is irrelevant to the question of damages.
. . .
This threshold question of whether Plaintiffs suffered any cognizable injury is central to the case. A finding that the named Plaintiffs suffered no injury, while not binding on any prospective class members, may terminate the existing lawsuits. Even if Plaintiffs did suffer injury, the necessity of an individualized inquiry regarding injury for each proposed class member may render class certification inappropriate for some or all of the causes of action.
In light of these circumstances, it is clear that briefing and argument regarding this issue on motions for summary judgment will materially advance the litigation and aid the court’s decision regarding class certification. Cf. Santana v. Deluxe Corp., 12 F. Supp. 2d 162, 179 (D. Mass. 1998) (“A district court may rule on the merits of a summary judgment motion before deciding the class certification issue under Rule 23. . . .”).
Id. at *10-13.
It will be interesting to see how this turns out. If the court reaches the question of whether a need for an individualized inquiry with respect to injury defeats class certification, it seems possible that the anticipated decision by the Supreme Court next Term in Comcast Corp. v. Behrend (see my June 26, 2012 blog post) may have something to say on that subject. It’s always hard to predict exactly what the Court will address in its opinion, but the question on which certiorari was granted in Comcast appears to implicate the extent to which the need for individual adjudication of damages makes class certification inappropriate. In Prudential, however, it appears that the question is not merely about damages but also about whether there was any cognizable injury (two closely-related, but distinct questions).