Security Ben. Life Ins. Co. v. Graham, 90-248

• Decision Date: 10 June 1991
• Docket Number: No. 90-248,90-248
• Citation: 810 S.W.2d 943,306 Ark. 39
• Parties: SECURITY BENEFIT LIFE INSURANCE COMPANY, Appellant, v. James H. GRAHAM, Joseph E. Barsocchi, Margaret D. Barsocchi, and Harry H. Kerr, III, Appellees.
• Court: Arkansas Supreme Court

Page 943

810 S.W.2d 943

306 Ark. 39

SECURITY BENEFIT LIFE INSURANCE COMPANY, Appellant, v. James H. GRAHAM, Joseph E. Barsocchi, Margaret D. Barsocchi and Harry H. Kerr, III, Appellees.

No. 90-248.

Supreme Court of Arkansas.

June 10, 1991.

Byron Freeland, Little Rock, Leon Holmes, Robert Knuti, R.R. McMahan and Damon N. Vocke, Chicago, Ill., Stuart P. Miller and Abraham W. Bogoslavsky, Little Rock, for appellant.

Joseph L. Buffalo, Jr., John K. Shamburger, Donald Henry, Little Rock, for appellees.

BROWN, Justice.

The four appellees, James H. Graham, Joseph E. Barsocchi, Margaret D. Barsocchi, and Harry H. Kerr, III, filed a second amended complaint against appellant Security Benefit Life Insurance Company, alleging that they were owners of a single premium deferred annuity (SPDA) and held their certificates of insurance under a Group SPDA Master Policy originally issued by The First Pyramid Life Insurance Company of America. Their complaint, which was filed on February 6, 1990, alleged breach of contract and sought terminal payments owed them under the policy. The appellees further prayed for class certification and a determination of the liability of Security Benefit to all class members.

A motion for class certification was then filed by the appellees followed by a hearing on that motion. Subsequent to that hearing but before the trial court's decision, fifteen to seventeen additional SPDA certificate holders filed affidavits for participation in the class. The trial court issued findings supporting class certification and followed the findings with an order on June 22, 1990, certifying the case as a class action. The trial court's order defined the class as all present owners of individual certificates issued by First Pyramid under the Group SPDA Master Policy. The order estimated the number of certificate holders as 600 with residences in thirty-nine states.

Security Benefit lodged this interlocutory appeal, contesting the trial court's decision under Ark.R.Civ.P. 23 on grounds that the proposed class was not sufficiently numerous, that common questions of law or fact did not predominate, and that other methods existed for a fair and efficient adjudication of this dispute.

We affirm the trial court's decision and hold that the case was properly certified as a class action.

The Group SPDA Master Policy, which covers the appellees as certificate holders, was originally issued by First Pyramid, an Arkansas-based insurer, on June 1, 1982. As of June 1, 1986, that contract was assumed by Security Benefit, which is based in Kansas, under a reinsurance assumption agreement. The agreement was approved by the Arkansas Insurance Commission. The annuitants were sent an assumption certificate, which included notice of the assumption by Security Benefit.

Less than a year later, on March 31, 1987, the Group SPDA Master Policy and all associated liability was assumed by Life Assurance Company of Pennsylvania (LACOP). Notice of this transfer and the release of Security Benefit was not sent to the annuitants, according to the appellees. The appellees further contend that no regulatory approval for this transfer was obtained and that Security Benefit continued to service the contracts of certificate holders after March 31, 1987.

On June 14, 1988, still another assumption of the Master Policy and annuity contracts was made--this time, by Diamond Benefits Life Insurance Company. Diamond Benefits, at that point, was a domestic carrier in Arizona. The annuitants were notified of the transfer by letter and assumption certificate which included the fact that LACOP had previously assumed the contracts and would no longer be obligated under them. The appellees contend, however, that the annuitants were never specifically advised that Security Benefit would no longer be obligated to perform under the contracts. Since this assumption by Diamond Benefits, the Arizona insurance commissioner has determined that Diamond Benefits is insolvent, and on December 19, 1988, he put the company into receivership.

While our cases interpreting Ark.R.Civ.P. 23 were somewhat inconsistent prior to 1988, we took pains to clarify our interpretation in a case handed down that year. See International Union of Elec., Radio & Mach. Workers v. Hudson, 295 Ark. 107, 747 S.W.2d 81 (1988). In Hudson we observed that though our Rule 23 differed from Federal Rule 23 in text, the spirit of the federal rule existed in our Rule 23. We, therefore, rejected our traditional circumspection toward class actions in Hudson.

We also affirmed in Hudson, as well as in later cases, the broad discretion given to the trial court in matters relating to class actions. See Lemarco, Inc. v. Wood, 305 Ark. 1, 804 S.W.2d 724 (1991); First Nat'l Bank of Fort Smith v. Mercantile Bank of Jonesboro, 304 Ark. 196, 801 S.W.2d 38 (1990). Our Reporter's Note 2 to Rule 23 recognizes the broad discretion in the trial court to protect the rights of class members, and we expanded the scope of that authority in Hudson to embrace also the court's decision of whether a class should be certified.

Thus, in deciding the case before us, we must view it in terms of these twin precepts: our policy change in that we no longer espouse our former circumspection toward class actions, and the broad discretion we have conferred upon the trial court in deciding the class certification issue.

Here, the trial court found that a class existed and that a class action was superior to other available methods for a fair and efficient adjudication of the controversy. At the time of the court's decision the pertinent part of Rule 23 read:

(a) Where the question is one of a common or general interest of many persons, or where the parties are numerous, and it is impracticable to bring all before the court within a reasonable time, one or more may sue or defend for the benefit of all.

(b) An action may be...