Page v. State Farm Life Ins. Co.
| Docket Number | SA-20-CV-00617-FB |
| Decision Date | 10 March 2022 |
| Parties | RONALD K. PAGE, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARY SITUATED, Plaintiff, v. STATE FARM LIFE INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Western District of Texas |
To Honorable Fred Biery, United States District Judge:
REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
ELIZABETH S. ("BETSY") CHESTNEY, UNITED STATES MAGISTRATE JUDGE.
This Report and Recommendation concerns Defendant State Farm Life Insurance Company's Motion for Summary Judgment [#105]. All dispositive pretrial matters in this case have been referred to the undersigned for disposition pursuant to Western District of Texas Local Rule CV-72 and Appendix C [#58]. The undersigned has authority to issue a recommendation on Plaintiff's class certification motion pursuant to 28 U.S.C. § 636(b)(1)(B). For the reasons set forth below, the undersigned will recommend that the District Court grant in part and deny in part Defendant's motion.
Plaintiff Anna Gonzalez filed this putative class action on May 22 2020, against State Farm Life Insurance Company (hereinafter “State Farm”), on behalf of herself and all other similarly situated holders of universal life insurance policies issued by State Farm and its predecessors in interest using Form 94030 in Texas. Gonzalez's case was subsequently consolidated with an almost identical suit filed by Plaintiff Ronald K. Page, SA-20- CV-945-FB. After consolidation, Plaintiffs filed a Consolidated Amended Class Action Complaint. (Consolidation Order [#42]; Consol. Am. Compl. [#64].) The Court thereafter granted Plaintiffs leave to file another amended pleading. The First Amended Consolidated Class Action Complaint (“First Amended Complaint”) filed on March 2, 2021, remains the live pleading in this case. (First Am. Compl. [#72].) After the consolidation and amendments, Gonzalez voluntarily dismissed her claims, leaving Page as the only named Plaintiff.
Page's First Amended Complaint alleges that State Farm charged and collected from Page and other similarly situated life-insurance policyholders amounts in excess of that authorized by the express terms of their life insurance policy (hereinafter “the Policy”). (First Am. Compl. [#72], at ¶ 1.) According to the First Amended Complaint, the Policy allows for a monthly deduction from each policyholder's interest-bearing account, which includes a cost of insurance charge (“COI charge”), a monthly expense charge in the amount of $5.00 (“expense charge”), and a charge for any riders. (Id. at ¶ 28.) The Policy also discloses a “premium expense charge” set at a fixed percentage of five percent of each premium payment made. (Id. at ¶ 38.)
Page alleges that the Policy identifies specific factors State Farm may use to determine the “COI rate” for purposes of making the monthly COI charge deduction and that these factors are limited to age of the insured on the Policy anniversary, sex, applicable rate class, and any projected changes in mortality. (Id. at ¶¶ 29-39.) Page claims that State Farm nonetheless relied on additional factors that were not disclosed in the Policy and that are unrelated to the insured's mortality risk in determining the COI rate, such as State Farm's profits and expenses, resulting in excessive deductions from the insured's interest-bearing account in violation of the Policy. (Id.)
Based on these allegations, Page asserts two claims of breach of contract (one based on the COI rate provision, and another based on the expense charge provision), as well as claims of conversion, breach of the duty of good faith and fair dealing, and violations of the Texas Deceptive Trade Practices-Consumer Protection Act and other provisions of the Texas Insurance Code. (Id. at ¶¶ 59-107.) Page seeks declaratory and injunctive relief, as well as compensatory and punitive damages, on behalf of the proposed class. (Id. at ¶¶ 108-13.)
Similar class action have been filed across the country on behalf of policyholders who were issued policies on Form 94030. See Vogt v. State Farm Ins. Co., No. 2:16-cv-4170-NKL (W.D. Mo.); Bally v. State Farm Life Ins. Co., 18-cv-4954-CRB (N.D. Cal.); Whitman v. State Farm Life Ins. Co., No. 19-cv-06025-BJR (W.D. Wash.); Jaunich v. State Farm Life Ins. Co., No. 20-cv-01567-PAM-JFD (D. Minn.). This is the only pending class action filed on behalf of Texas policyholders regarding Form 94030 and these allegedly excessive deductions.
Page moved to certify this case as a Rule 23 class action. In support of the motion, Page provided the Court with the Declaration and Report of Scott J. Witt, one of Page's retained experts. (Sealed Decl. [#84-1].) State Farm moved to exclude the testimony of Witt under Rule 702 of the Federal Rules of Evidence and Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579, 589 (1993). State Farm also filed an early motion for summary judgment, which argues that State Farm is entitled to summary judgment on all of Plaintiff's claims as a matter of law under the relevant contractual provisions in the Policy.
The undersigned held hearings on all three motions and subsequently issued an order and report and recommendation to the District Court [#137], denying State Farm's motion to exclude Witt and recommending the Court grant Page's motion for class certification. The report and recommendation remains pending before the District Court. The motion for summary judgment is now ripe for review.
Summary judgment is appropriate under Rule 56 of the Federal Rules of Civil Procedure only “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see also Fed. R. Civ. P. 56(c). A dispute is genuine only if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
The party moving for summary judgment bears the initial burden of “informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact.” Catrett, 477 U.S. at 323. Once the movant carries its burden, the burden shifts to the nonmoving party to establish the existence of a genuine issue for trial. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Wise v. E.I. Dupont de Nemours & Co., 58 F.3d 193, 195 (5th Cir. 1995). The non-movant must respond to the motion by setting forth particular facts indicating that there is a genuine issue for trial. Miss. River Basin Alliance v. Westphal, 230 F.3d 170, 174 (5th Cir. 2000). The parties may satisfy their respective burdens by tendering depositions, affidavits, and other competent evidence. Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir. 1992). The Court will view the summary judgment evidence in the light most favorable to the non-movant. Rosado v. Deters, 5 F.3d 119, 123 (5th Cir. 1993).
“After the non-movant has been given the opportunity to raise a genuine factual issue, if no reasonable juror could find for the non-movant, summary judgment will be granted.” Westphal, 230 F.3d at 174. However, if the party moving for summary judgment fails to satisfy its initial burden of demonstrating the absence of a genuine issue of material fact, the motion must be denied, regardless of the nonmovant's response. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc).
The Policy at issue in this case is a universal life insurance policy issued by State Farm between 1994 and 2004 that pays a death benefit to beneficiaries on the death of the insured. (Mason Decl. [#104-1], at 2.) The Policy includes an individual account value that accrues interest at a guaranteed rate of no less than 4%. (Policy [#72], at 34.) The account value at a given time is comprised of 95% of any premium payments by the policyholder, any dividend paid and added to the account value, and accrued interest, reduced by certain contractually specified deductions. (Id. at 33.)
The relevant provisions of the Policy requiring construction to resolve State Farm's motion for summary judgment address State Farm's calculation of each policyholder's account value and its calculation of monthly deductions and COI rates. Per the Policy, these specified deductions are comprised of a COI charge, a rider charge, and an expense charge:
Monthly Deduction. This deduction is made each month, whether or not premiums are paid, as long as the cash surrender value is enough to cover that monthly deduction. Each deduction includes:
(Id. at 33.) The “COI” is “calculated each month” by an equation set forth in the Policy that multiplies the monthly COI rate by the Policy's net amount of risk (the amount by which the death benefit amount exceeds the account value, i.e., the amount of its own funds State Farm must pay if the insured dies). (Id. at 34; Witt Decl. [#84-1], at ¶¶ 23-24.)
The Policy includes a table of maximum monthly COI rates based on the policyholder's age. (Policy [#72], at 28.) Additionally, there is a provision describing how State Farm calculates the COI rates charged each month as follows:
Monthly COI Rates. These rates for each policy year are based on the Insured's age on the policy anniversary, sex, and applicable rate class. A rate class will be determined for the...
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