Lscc LLC v. Wilco Life Insurance Company

• Court: Court of Appeals for the Ninth Circuit
• Decided: November 13, 2020
• Docket: 19-56075
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS NOV 13 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

LSCC LLC, an Arkansas limited liability No. 19-56075 corporation, individually and on behalf of itself and all others similarly situated, D.C. No. 2:19-cv-01854-PSG-MRW Plaintiff-Appellant,

v. MEMORANDUM*

WILCO LIFE INSURANCE COMPANY, FKA Conseco Life Insurance Company,

Defendant-Appellee.

Appeal from the United States District Court for the Central District of California Philip S. Gutierrez, Chief District Judge, Presiding

Argued and Submitted August 13, 2020 Pasadena, California

Before: WARDLAW and VANDYKE, Circuit Judges, and CHOE-GROVES,** Judge.

The district court dismissed this case on the basis that LSCC LLC (“LSCC”)

failed to state a plausible breach of contract claim. The court concluded that the

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Jennifer Choe-Groves, Judge for the United States Court of International Trade, sitting by designation. plain language of the settlement agreement and the original policies authorized

Wilco Life Insurance Company (“Wilco”) to deduct grace period premiums from

policy proceeds. LSCC appealed, and we reverse.

“We review de novo the district court’s decision to grant Defendant[’s]

motion to dismiss under Rule 12(b)(6).” Zadrozny v. Bank of N.Y. Mellon, 720 F.3d

1163, 1167 (9th Cir. 2013) (citation & quotation marks omitted). We also review

the “interpretation of an insurance policy” and “the district court’s interpretation of

[California] law” de novo. Stanford Ranch, Inc. v. Md. Cas. Co., 89 F.3d 618, 624

(9th Cir. 1996) (citations omitted).

LSCC purchased four life insurance policies from Wilco to insure the life of

Stephen W. Creekmore. Later, LSCC became a member of a class action lawsuit

against Wilco that ultimately settled. Under the terms of the settlement, Wilco

agreed to provide the class members (including LSCC) extended life insurance

coverage beyond the date that the initial policy would have terminated after a 61-

day grace period. Wilco agreed to provide this extra coverage, referred to as a

“Death Benefit Extension Period,” at no additional cost and without altering the

underlying policies prior to the start of the extended coverage period.

At some point after the settlement, LSCC stopped paying the policy

premiums, the policies entered their respective grace periods, and once the grace

periods expired, the Death Benefit Extension Period started. Several years after the

2 policies entered the Death Benefit Extension Period Creekmore died. Wilco paid

the proceeds owed under the policies—but deducted premium costs for the policies’

61-day grace periods. LSCC sued Wilco for breaching the settlement agreement by

deducting grace period premium costs from the proceeds.

Under the original policies, there were only three instances where a policy

holder could pay a premium for the grace period. First, during the grace period, the

policy holder could affirmatively opt to restore normal coverage by paying all past

due premium amounts, thereby removing the policy from the grace period,

reactivating the policy, and avoiding the termination of coverage. Or, after the

policy terminated at the expiration of the grace period, the policy holder could

reinstate the policy by meeting four requirements: (1) providing satisfactory

evidence of insurability; (2) paying a premium sufficient to cover all past due

monthly deductions that were outstanding at the end of the grace period; (3) paying

a minimum premium that would keep the policy in force for two months at the time

of reinstatement; and (4) paying any remaining debt that existed at the end of the

grace period. Lastly, if the policy holder died during the grace period, past due

premiums would be automatically deducted from the policy proceeds, and the

remainder of the funds would be remitted to the beneficiary.

Nothing in the original policies required payment for the grace period outside

of these three circumstances, none of which happened here. Wilco essentially

3 acknowledges as much, stating that “at the time the policies were drafted, this

contingency was an impossibility because the Death Benefit Extension Period did

not exist.” The grace period premium charge that Wilco imposed can therefore only

be attributed to the Death Benefit Extension Period resulting from the settlement.

But the settlement terms are clear that the extended coverage period is to be provided

at no cost. As LSCC correctly points out, “[t]here is no provision anywhere in the

Policy Contract, let alone in the governing Settlement Agreement, that provides for

the payment of an ‘accrued’ grace period premium. … [T]he word ‘accrued’ appears

nowhere …, nor do[es] … any equivalent or comparable terminology.” Because

neither the underlying policies nor the settlement agreement authorized these

deductions, the district court erred in dismissing LSCC’s complaint challenging

Wilco’s deduction of a grace period premium from the policies’ proceeds.

REVERSED and REMANDED.