Medina v. Conseco Annuity Assur. Co., 04CA0164.

• Citation: 121 P.3d 345
• Case Date: August 25, 2005
• Court: Supreme Court of Colorado

121 P.3d 345

Jose MEDINA, Plaintiff-Appellant, v. CONSECO ANNUITY ASSURANCE COMPANY, Conseco Life Insurance Company, Bankers National Insurance Company, and Bankers Life and Casualty Company, Defendants-Appellees.

No. 04CA0164.

Colorado Court of Appeals, Division III.

August 25, 2005.

Bloom, Murr & Accomazzo, P.C., James E. Gigax, Denver, Colorado, for Plaintiff-Appellant.

Holland & Hart, LLP, Todd W. Miller, Parker W. Dragovich, Greenwood Village, Colorado; Dewey Ballantine, LLP, Adam J. Kaiser, New York, New York, for Defendants-Appellees.

TAUBMAN, J.

In this class action involving claims for breach of contract and declaratory judgment against defendants, Conseco Annuity Assurance Company, Conseco Life Insurance Company, Bankers National Insurance Company, and Bankers Life and Casualty Company, (Conseco), plaintiff, Jose Medina, appeals the trial court's order denying class certification. We affirm.

I. Background

In 1979, Medina purchased a disability insurance policy from Vulcan Life Insurance Company (now defendant, Conseco Annuity). At the time the policy was issued, the premium, if paid annually, was $233. However, Medina chose to pay his premium monthly, and therefore, Conseco required that he pay $237.72 for the first year.

The monthly premium was set forth in the policy as follows: "Premium $19.81 payable as of the effective date of policy and thereafter monthly." The policy also listed the "total annual premium" as $233.

Medina has maintained his policy with Conseco. Although the amount of the premium has changed, it continues to be less expensive to pay the premium on an annual basis rather than monthly.

In his complaint, Medina asserted claims for breach of contract and declaratory judgment. Medina alleged that Conseco had breached the terms of the policy by collecting monthly premiums in excess of the stated annual premium.

In Medina's motion for certification of a nationwide class, he described the class as follows:

All individuals or other persons who purchased individual disability policies, and/or traditional life insurance policies, and Medicare supplement policies, while residing in the United States, from Conseco Annuity Assurance Company, Conseco Life Insurance Company, Bankers Life and Casualty Insurance Company, and Bankers National Life Insurance Company, or any predecessor of any of those companies, who paid the premiums on said policies in installments rather than annually, within the applicable limitations period.

After an evidentiary class certification hearing, the trial court determined that the case dealt with "a myriad of different insurance policies and provisions regarding premium payments" and that there were "three-thousand policy forms stem[ming] from seven different types of insurance contracts." The court found that because of the large number of policies, it was likely that there would be a similar number of insurance agents, and a similar number of premium increase modifications. Ultimately, the court determined that certification was not warranted under C.R.C.P. 23(a) and (b)(3), finding that even though "there may be common legal issues within the proposed class members, highly individualized factual questions predominate." The court concluded that certifying the class would necessitate a case-by-case inquiry into each class member's contract to determine whether a claim was warranted.

II. Class Certification

Medina contends that the trial court erred in denying his motion for class certification because the court based its decision on Conseco's assertion that there were 3,000 different policies and there was no evidence presented to support that assertion. We conclude there was no reversible error.

Medina appealed the trial court's denial of class certification. See Toothman v. Freeborn & Peters, 80 P.3d 804 (Colo.App.2002). See also Levine v. Empire Sav. & Loan Ass'n, 192 Colo. 188, 557 P.2d 386 (1976); Levine v. Empire Sav. & Loan Ass'n, 189 Colo. 64, 536 P.2d 1134 (1975); cf. § 13-20-901, C.R.S.2004, and C.R.C.P. 23(f).

Whether to certify a class action lies within the discretion of the trial court and its decision will not be disturbed absent an abuse of that discretion. An abuse of discretion occurs where the trial court's decision is manifestly arbitrary, unreasonable, or unfair, or when the trial court applies incorrect legal standards. Clark v. Farmers Ins. Exch., 117 P.3d 26 (Colo.App.2004). The trial court acts arbitrarily when it relies on factual assertions that are not supported by the record. Phillips Petroleum Co. v. Bowden, 108 S.W.3d 385 (Tex.Ct.App.2003).

Certification of a class action is governed by C.R.C.P. 23, and the plaintiff has the burden of proving compliance with that rule. Ammons v. Am. Family Mut. Ins. Co., 897 P.2d 860 (Colo.App.1995).

C.R.C.P. 23(a) provides:

One or more members of a class may sue or be sued as representative parties on behalf of all only if: (1) The class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.

If the requirements of C.R.C.P. 23(a) are satisfied, the class action may be maintained only if it also meets one of the subsections of C.R.C.P. 23(b). Here, the relevant subsection is C.R.C.P. 23(b)(3), which requires that, "The court find[] that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy."

We affirm the trial court's decision denying class certification based upon its conclusion that common issues of law and fact did not predominate and that a class action was not the superior method of litigation.

Because we conclude that Medina did not satisfy the requirements of C.R.C.P. 23(b), we need not address the requirements of C.R.C.P. 23(a). See Chin v. Chrysler Corp., 182 F.R.D. 448, 453 (D.N.J.1998) ("Because the Court concludes that class certification is not appropriate under Rule 23(b)(3), the Court need not address and does not reach the question whether Plaintiffs have satisfied the threshold Rule 23(a).").

Initially, we note that federal cases under F.R.C.P. 23 are persuasive because C.R.C.P. 23 is virtually identical to the federal rule. Goebel v. Colo. Dep't of Insts., 764 P.2d 785 (Colo.1988).

The focus for the trial court is whether the proof at trial will be predominantly common to the class or primarily individualized. In re Polypropylene Carpet Antitrust Litig., 996 F.Supp. 18, 22 (N.D.Ga.1997)(to satisfy the requirements of predominance, the "[p]laintiffs must show they plan to use common evidence . . . without resorting to lengthy individualized examination").

In considering the issue of predominance or superiority, whether a case should be certified is a fact-driven, pragmatic inquiry guided by the objective of judicial efficiency and the need to provide a forum for the vindication of dispersed losses. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997).

A court must not delve into the merits of the case when determining whether to grant or deny class certification. The court's obligation is to determine whether the requirements of C.R.C.P. 23 have been met. However, in making this determination, it is often necessary to consider the substantive claims and defenses of the parties and the essential elements of those claims and defenses. See Klay v. Humana, Inc., 382 F.3d 1241 (11th Cir.2004); Joseph v. Gen. Motors Corp., 109 F.R.D. 635 (D.Colo.1986). Many courts consider whether a common nucleus of operative fact exists. See, e.g., Joseph v. Gen. Motors Corp., supra, 109 F.R.D. at 640.

Further, determining whether to certify a class often requires more than a review of the pleadings. Therefore, it is better practice to hold an evidentiary hearing upon the issue of certification when there are factual disputes relating to class certification. Levine v. Empire Sav. & Loan Ass'n, 197 Colo. 293, 592 P.2d 410 (1979).

Initially, we agree with Medina's contention that the trial court abused its discretion in concluding that there were 3,000 policy forms, an assertion by defense counsel that is not supported by the record. Nevertheless, we conclude that because of the existence of seven policy types with different language, individual issues predominate over common issues of law and fact, and that a class action is not the superior method for resolving plaintiff's claim.

At the class certification hearing, the court considered examples of seven different types of policies and two different forms of policy increases that were issued by Conseco. The language in the different policy types included in part:

• The Type I Policy stated "initial annual premium" and "premiums at issue" and then listed the amount of the premiums if paid quarterly, semi-annually, or annually.

• The Type II Policy stated "annual premium," "total insured annual premium," and "total premium (as of date of issue)," and then listed the amount of the premiums if paid quarterly, semi-annually, or annually.

• The Type III Policy listed the "modal factors" for the premium and the amount of each premium if it was paid annually, semi-annually, quarterly, or monthly. The policy also stated that "[p]remiums paid other than annually are determined by multiplying the total annual premium by the factors shown above."

• The Type IV Policy only stated the "total monthly premium" because that was the method of payment which the insured had chosen. The policy also stated that "[i]f the premiums are not paid by monthly payroll deduction, the premium for the appropriate Face Amount should be multiplied by one if...