McHugh v. Protective Life Ins.

• Decision Date: 09 October 2019
• Docket Number: D072863
• Citation: 40 Cal.App.5th 1166,253 Cal.Rptr.3d 780
• Court: California Court of Appeals Court of Appeals
• Parties: Blakely MCHUGH et al., Plaintiffs and Appellants, v. PROTECTIVE LIFE INSURANCE, Defendant and Respondent.

40 Cal.App.5th 1166

253 Cal.Rptr.3d 780

Blakely MCHUGH et al., Plaintiffs and Appellants,

v.PROTECTIVE LIFE INSURANCE, Defendant and Respondent.

D072863

Court of Appeal, Fourth District, Division 1, California.

Filed October 9, 2019

Winters & Associates and Jack B. Winters, Jr., Georg M. Capielo, Sarah D. Ball, Sarah D. Ball ; Williams Iagmin and Jon R. Williams, San Diego, for Plaintiffs and Appellants.

Law Offices of Daniel D. Murphy and Daniel D. Murphy, San Francisco, for California Advocates for Nursing Home Reform, Inc., as Amicus Curiae on behalf of Plaintiffs and Appellants.

Grignon Law Firm and Margaret M. Grignon, Long Beach; Maynard Cooper & Gale and C. Andrew Kitchen, Alexandra V. Drury, San Francisco, John C. Neiman, Jr. ; Noonan Lance Boyer & Banach and David J. Noonan, San Diego, for Defendant and Respondent.

Alston & Bird and Thomas A. Evans, San Francisco, for American Council of Life Insurers, as Amicus Curiae on behalf of Defendant and Respondent.

O'ROURKE, J.

This appeal raises one fundamental issue: whether Insurance Code sections 10113.71 and 10113.72¹ ("the statutes"), which came into effect on January 1, 2013, apply to term life insurance policies issued before the statutes' effective date. In 2005, Protective Life Insurance Company (Protective Life) issued William Patrick McHugh a 60-year term life policy (the policy) that provided for a 31-day grace period before it could be terminated for failure to pay the premium.² McHugh failed to pay the premium due on January 9, 2013, and his policy lapsed 31 days later. McHugh passed away in June 2013.

Thereafter, McHugh's daughter, Blakely McHugh, the designated beneficiary under the policy, and Trysta M. Henselmeier (appellants)³ sued Protective Life for breach of contract and breach of the implied covenant of good faith and fair dealing, claiming Protective Life failed to comply with the statutes' requirement that it provide a 60-day grace period before it terminated the policy for nonpayment of premium.

The parties filed various trial court motions, and Protective Life, relying largely on interpretations of the Department of Insurance (the Department) argued that the statutes do not apply retroactively to McHugh's policy and the claim. The court rejected Protective Life's arguments and ruled that the statutes applied to the claim. The matter proceeded to jury trial and Protective Life prevailed. Appellants appeal from both a special verdict in favor of Protective Life and an order denying their motion for judgment notwithstanding the verdict (JNOV).

Pursuant to Code of Civil Procedure section 906, Protective Life requests that we affirm the verdict on the additional ground that the statutes do not apply to the policy and the trial court erred by ruling to the contrary when it denied Protective Life's motion for a directed verdict. Appellants oppose the request, claiming that Protective Life should have filed an appeal. We grant Protective Life's request. "It is a general rule a respondent who has not appealed from the judgment may not urge error on appeal. [Citation.] A limited exception to this rule is provided by Code of Civil Procedure section 906, which states in pertinent part: ‘The respondent ... may, without appealing from [the] judgment, request the reviewing court to and it may review any of the foregoing [described orders or rulings] for the purpose of determining whether or not the appellant was prejudiced by the error or errors upon which he relies for reversal or modification of the judgment from which the appeal is taken.’ ‘The purpose of the statutory exception is to allow a respondent to assert a legal theory which may result in affirmance of the judgment.’ " ( Hutchinson v. City of Sacramento (1993) 17 Cal.App.4th 791, 798, 21 Cal.Rptr.2d 779.)

We affirm the judgment on the additional ground that, as a matter of law, the court erred by denying Protective Life's motion for a directed verdict. As we discuss below, the statutes apply only to policies issued or delivered after January 1, 2013, and not to McHugh's policy. Accordingly, we need not address the other contentions appellants raise⁴ because they are all premised on the erroneous assumption that sections 10113.71 and 10113.72 apply retroactively to the policy and claim.

DISCUSSION

The Insurance Code states the Insurance Commissioner "shall perform all duties imposed upon him or her by the provisions of this code and other laws regulating the business of insurance in [California], and shall enforce the execution of those provisions and laws." (§ 12921.1, subd. (a).) Furthermore, insurance companies must submit "[a]ll policies, certificates of insurance, notices of proposed insurance, applications for insurance, endorsements and riders delivered or issued for delivery in [California] and the schedules of premium rates pertaining thereto ... [to] the commissioner." (§ 779.8.) In short, insurance is a regulated industry. The Department is charged with ensuring that all policies issued in the State of California contain every provision required by law.

In discharging its statutory duties, the Department concluded sections 10113.71 and 10113.72 apply only to insurance policies issued after January 1, 2013. The Department published its determination in a document titled, "SERFF Instructions for Complying with [Assembly Bill No.] 1747," which states, "All life insurance policies issued or delivered in California on or after [January 1, 2013] must contain a grace period of at least 60 days." SERFF (System for Electronic Rate and Form Filing) is an internet-based system that enables insurance companies such as Protective Life to submit rate and form filings to the Department for approval of insurance products and changes to existing products. The Department mandates the use of SERFF and provides regulatory guidance to insurers through SERFF, including guidance for compliance with the statutes. The court in Bentley v. United of Omaha Life Insurance Co. (C.D. Cal. Sept. 14, 2016, No. 15-cv-07870) 2016 WL 7443190⁵ explained that the SERFF instructions are "available on the SERFF website where the [Department], a governmental agency, places instructions for any insurance company seeking [Department] approval."

Senior Department personnel consistently communicated the Department's position in response to inquiries from representatives of the insurance industry seeking advice about the statutes' applicability. For example, in a March 2013 letter, the Department's Assistant Chief Counsel of the Policy Approval Bureau, Leslie Tick, stated: "In general, new laws take effect on a going forward basis so that everyone knows what the law is when they enter into an agreement, such as an insurance policy. If the statutes had retroactive effect they would effect [sic ] actions which have already occurred, and which were lawful at the time, making them retroactively unlawful. Parties to a contract would have no certainty as to the terms of their agreement if the Legislature could change those terms retroactively. [¶] Generally a policy is ‘issued or delivered’ just once—when it is new. A statutes [sic ] would have to say ‘and renewed’ in order to apply to renewals, because presumably those renewed policies were issued or delivered before the Jan[uary] 1, 2013 effective date. [¶] For these reasons the statutory changes brought by [Assembly Bill No. 1747], apply on a going forward basis—that is, the changes apply to policies issued or delivered on or after [January 1, 2013]. [Assembly Bill No. 1747] does not require insurers to extend the grace period for policies that are already in force and does not require insurers to extend the grace period when policies that were issued prior to [January 1, 2013], are renewed."

In a December 2012 e-mail to an insurance company's representative, Department attorney Nancy Hom stated, "The requirements of [Assembly Bill No. 1747] are not retroactive. The bill applies to policies issued or delivered on or after January 1, 2013, not before." Also, in a July 2016 e-mail, attorney Tick informed an inquiring attorney that the Department had issued a SERFF instruction on this issue when the legislation was newly enacted, and added that Assembly Bill No. 1747 "applies to new policies issued on or after [January 1, 2013, but] not to policies renewed on or after [January 1, 2013]."

The California Supreme Court recently reminded us of the weight to accord to an agency's interpretation of law: " ‘Deference to administrative interpretations always is "situational" and depends on "a complex of factors" [citation], but where the agency has special expertise and its decision is carefully considered by senior agency officials, that decision is entitled to correspondingly greater weight.’ " ( Christensen v. Lightbourne (2019) 7 Cal.5th 761, 771, 249 Cal.Rptr.3d 281, 444 P.3d 85.) Courts "accord[ ] great weight and respect to the administrative construction" of a statute by the agency entrusted with enforcing it. ( Yamaha Corp. v. State Bd. of Equalization (1998) 19 Cal.4th 1, 12, 78 Cal.Rptr.2d 1, 960 P.2d 1031.) That is particularly so when the statute addresses "technical" matters within the agency's "expertise." ( Ibid. )

We are required to give deference to the Department's interpretation, as long as it is reasonable and consistent with the language of the statutes. ( Southern California Edison Co. v. Peevey (2003) 31 Cal. 4th 781, 796, 3 Cal.Rptr.3d 703, 74 P.3d 795.) " ‘ "Our fundamental task ..." ’ ... ‘ "is to ascertain the intent of the lawmakers so as to effectuate the purpose of the statute." ’ " ( People v. Pennington (2017) 3 Cal.5th 786, 795, 221 Cal.Rptr.3d 448, 400 P.3d 14.) We focus first on " ‘the statute's actual words, the "most reliable indicator" of legislative intent, "assigning them their usual and ordinary meanings." ’ " ( Ibid. ) We view the statutory language in context, and do not determine its meaning " ‘from a single word or sentence.’ " ( Ibid. ) "[A]...