The Beaumont Court of Appeals has held that a Jefferson County district court abused its discretion when it certified a class of equitable claims involving life insurance policies.

In American General Life Insurance Company v. Anna Dickson, Individually and On Behalf of All Others Similarly Situated (No. 09-21-000290CV), Plaintiff asserted claims for money had and received and unjust enrichment against the insurer who issued a life insurance policy to her father in 1985. The father named as beneficiary of the policy a local bank, presumably as collateral for a loan). He died in 1996, but no claim on the policy was ever made. In 2011, under an agreement with the Texas Department of Insurance, the insurer conducted a comparison of the Social Security Master Death File against life insurance policies issued in Texas for which no claims had been made. The analysis turned up Plaintiff’s father’s policy. Consequently, in 2012 the insurer sent a letter notifying Plaintiff of the policy. Plaintiff responded by offering proof of loss, informing the insurer that the beneficiary, the bank, had ceased to exist, and stating that she had been unable to locate any loan documents for which the policy served as collateral. Plaintiff also represented that she and her sister were sole beneficiaries under their mother’s will, which bequeathed them the entire estate. The insurer processed the claim, obtained a release from the bank’s successor, and cut checks to Plaintiff and her sister, each for half of the face amount of the policy plus interest accruing from the date Plaintiff presented proof of loss.

In 2014 Plaintiff sued the insurer for money damages and equitable relief, claiming that the insurer converted the interest on the face value of the policy from the date her father’s death was entered into the SSA’s file to the date of proof of loss, a period of 16 years. She also sought class certification and appointment as class representative of similarly situated Texas policyholders. The trial court certified the class under Rule 42, TRCP, on the basis that the class claims of similar situated beneficiaries or heirs predominated over individual claims and that a class action was the fairest and most efficient way to adjudicate the claims. The insurer filed an interlocutory appeal.

In a memorandum opinion by Justice Horton, the court of appeals found that the trial court abused its discretion when it granted class certification. The court’s analysis focused on the predominance element of the certification test in Rule 42. Noting at the outset that Texas law does not favor class certification for equitable claims (because they involve highly individualized fact situations), the court accepted the insurer’s argument that “in a trial of equitable claims it would be entitled to inquire into each class member’s knowledge and understanding surrounding the circumstances that caused any delays in submitting a claim after a policyowner died to allow a factfinder to weigh whether that person, in equity and good conscience, was entitled to an equitable remedy or recovery given the particular circumstances surrounding that individual’s claim.” In Plaintiff’s case, for example, the insurer alleged that laches barred her claims and that she had unclean hands (she did not disclose, for example, that her mother’s will gave 20% of the estate, which included the life insurance policy, to her cousin). In a class action, therefore, the insurer would be entitled to go into each individual’s circumstances to discover why he or she had delayed filing a claim and was in fact entitled to relief “in equity and good conscience.” The court of appeals concluded that Plaintiff failed to establish the predominance of class claims and that a class action would not be the fairest and most efficient way to try the policyowners’ claims.

In this case the trial court’s certification order listed four plaintiff’s firms seeking to cash in on what they undoubtedly hoped would be a massive settlement. The gamble did not pay off but only because the court of appeals put a stop it. This is another prime example of why strong appellate courts are so vitally important. Without them, defendants in the insurer’s position in this case might have opted to settle once the certification order came down from the trial court. But by virtue of changes in the interlocutory appeals statute to allow immediate appeal of a class certification order and the election of qualified, independent justices to this court, justice was served. That’s why we focus both on the Legislature and courts in equal measure—one doesn’t work without the other.

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