Banks v. New York Life Ins. Co.
| Decision Date | 02 July 1999 |
| Docket Number | No. 98-C-0551.,98-C-0551. |
| Citation | 737 So.2d 1275 |
| Parties | Major BANKS, Christopher Edwards, et al. v. NEW YORK LIFE INSURANCE CO., et al. |
| Court | Louisiana Supreme Court |
C. Jerome D'Aquila, Charles Sterling Lambert, Jules Burton LeBlanc, III, Randy J. Ungar, LeBlanc, Maples & Waddell, New Orleans; Robert M. Johnston, Debra B. Hayes, Adams & Johnston, New Orleans; Christopher A. Kesler, Houston, TX, Counsel for Applicant.
Eugene R. Preaus, Maura Zivalich New Orleans, Pelleteri, Preaus, Roddy & Krebs; Phillip A. Wittman, Stephen Henry Kupperman, New Orleans, Patrick W. Pendley, Stone, Pigman, Walther, Wittman, Hutchinson, Plaquemine, Counsel for Respondent.
Clare Frances Jupiter, New Olreans, Stephen J. Goodman, Phillip E. Stano, Counsel for Amicus Curiae American Counsel of Life Insurance.
ON REHEARING
In January, 1996, Major Banks and Charles Edwards, individually and on behalf of all other persons similarly situated, filed suit in the Eighteenth Judicial District Court for the Parish of Pointe Coupee, Louisiana, against New York Life Insurance Company (New York Life) and two Louisiana insurance agents for New York Life.2 Plaintiffs alleged that New York Life used unfair and deceptive practices in the issuance and sale of its insurance policies.3 Plaintiffs sought damages and a judgment certifying a class composed of all persons who purchased whole or universal life policies from New York Life between January 1, 1982 through December 31, 1994, who are residents of Louisiana and who opted out of the class action settlement styled Willson et al. v. New York Life Insurance Company et al. filed in the Supreme Court of New York.4 After removal of the case to federal court and remand to the state district court, the plaintiffs moved for class certification. Following an evidentiary hearing, the trial judge rendered judgment certifying the class. New York Life appealed. The court of appeal reversed the judgment of the trial court finding that the claims of the plaintiffs lacked common character, making class certification an abuse of the trial judge's discretion.5 Upon application of plaintiffs we granted certiorari.6 On original hearing, we reversed the judgment of the court of appeal and reinstated the judgment of the trial court certifying the class. We concluded that common questions of law and fact predominated over individual issues because each class member stood in the same position with respect to the alleged misrepresentations by the company concerning its life insurance policies and marketing materials.7
New York Life applied for rehearing contending that the majority focused exclusively on the purported conduct of New York Life in reaching the conclusion that common issues of law and fact predominated over individual concerns and failed to consider relevant evidence of each class representative's conduct and experience in its inquiry. New York Life further argued that if misrepresentations were made as plaintiffs claim, they were the result of individual agents making misrepresentations to individual persons in violation of New York Life's policies and procedures. Such individualized matters preclude a finding of common character so as to make class certification a superior vehicle in this case. We granted New York Life's application for rehearing to address these concerns.8
Plaintiffs' claims arise from their purchase of various life insurance policies from 1982 through 1994. During this period, the marketing and sale of New York Life policies were conducted by approximately a thousand agents. These agents sold about 101,109 policies to Louisiana residents, of which approximately 1,850 are encompassed within the class. Plaintiffs purchased whole life and/or universal life policies. Beginning in the early 1980's New York Life began to base the method of projecting interest and dividend rates of their life insurance policies on a higher rate of return based upon the market of the past few years rather than a rate previously used. It also began to offer new methods of paying premiums. Some of the purchasers of whole life policies selected the Premium Offset Proposal ("POP") whereby premiums would be paid by automatically deducting them from dividends earned under the policies. Because the POP procedure depends upon the accumulation of dividends that can vary from year to year and are not guaranteed, the utilization of this feature could reduce the number of years that out-of-pocket premium payments must be made but not necessarily void the obligation to pay premiums which remain payable for the life of the policyholders. The New York Life home office developed the dividend scales and interest rates and investment return projections on the policies. Based on these assumptions, premium costs and cash value projections were calculated.
New York Life agents were trained by the home office and marketing materials came from the home office. During the class period, illustrations such as charts and explanatory brochures were available to assist agents in the sales presentations. New York Life alleges that explanatory materials stated that dividends were not guaranteed, and by 1987, software automatically placed on every page of an illustration a notice stating that dividends and cash values were not guaranteed. Sales presentations were individualized. Each agent developed a different relationship with each policyholder. Some policies were sold after numerous conversations and lengthy meetings while others were sold after group presentations at work sites and with very little interaction with premiums being paid through voluntary payroll deductions. Each agent had his or her own method of marketing and selling insurance policies. The record further reveals a diverse group of representative plaintiffs, with varying levels of sophistication and experience who purchased life insurance policies in different years from different New York Life agents in different sales situations.
Major Banks purchased four whole life policies for himself and family members for the purpose of accumulating cash values that could later be borrowed against to pay college expenses. He met his agent at work after a group presentation. The agent provided Banks with illustrations showing the premiums and potential cash value of the policies. Major Banks stated that he read the language on the illustrations stating that values shown are based on current dividends which are not guaranteed. He complains that the illustrations he saw at the presentation differed from those attached to his policies and further alleges that he was told by his agent that his policies would accumulate cash value after the third year. He has retained each policy and they have accumulated some cash value and he has also purchased another policy.
Rosetta Nelson, who owned insurance from several different companies, purchased employee whole life policies on the lives of her children in 1992 for the purpose of obtaining death benefits from two New York Life agents who visited the work site. She conversed with only one agent and was not given any illustrations prior to her purchase. She complains that she was not informed of the additional benefits of her life insurance policies when she bought them.
Marilyn Ferrara bought her policy from an agent she had known for years. She has owned other New York Life policies. She met with the agent only once and saw no illustrations. She chose to pay her premium over a five year period for a total of $23,640 but ceased paying and surrendered her policy after paying $21,000. Upon surrender she received $336 over the $21,000 she had paid in premiums.
Lloyd Price knew his agent, met with him several times and complained that based on the illustrations he received, he thought the accumulated dividends and cash values on his whole life insurance policy were guaranteed to "POP" after eight years. He complains that his agent did not emphasize the writing on the illustrations that dividends were not guaranteed and out-of-pocket payment of premiums may be required. As of the date of the certification hearing, the eight year period had not expired and his policy was still in force.
Linda Joseph purchased the policies at issue after a divorce. She had owned other New York Life policies. Her agent advised her to surrender two existing policies and use the cash value as the initial payment on a new universal life policy to get a greater death benefit at a lower premium. She complains that she thought her policy would have greater cash value although she admitted she took a loan out against the policy and she did receive a net gain in cash value after paying costs and expenses.
Lorraine LeBlanc, a bank executive, thought when she purchased her policy she would pay only one initial premium, but found out in 1993 that dividends were not sufficient to pay premiums under her "POP" plan. She was given illustrations by her agent that she did not read. Her policy is still in effect and she has only paid her initial premium with the others satisfied by deductions from the policy amount.
Last, Opal Michel, a real estate broker, has owned life insurance for many years, knew her agent for many years and met with him several times. The agent provided illustrations. She complains that the actual cash values of the policies are not the same as the amounts reflected on the illustrations. She has not paid any out-ofpocket premiums except for the initial payment.
La Code Civ. P. arts. 591 through 597 establish the basic requirements for a class action in Louisiana:9
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