Steele v. Security Ben. Life Ins. Co., 49976
Decision Date | 01 December 1979 |
Docket Number | No. 49976,49976 |
Parties | Vernon L. STEELE, For Himself and For All Others Similarly Situated, Appellant, v. SECURITY BENEFIT LIFE INSURANCE COMPANY, Appellee. |
Court | Kansas Supreme Court |
Syllabus by the Court
1. Where the sole named plaintiff's claim becomes moot prior to certification of a class the action must be dismissed unless the district court failed to rule on the plaintiff's motion for class certification as soon as practicable after commencement of the class action.
2. In an appeal from the district court's denial of plaintiff's motion for class action certification pursuant to K.S.A. 60-223(B )(2) and dismissal of the action in its entirety, the record is examined and it is Held : Under the circumstances herein, the district court did not err in denying the class action certification or in dismissing the action in its entirety.
Fred W. Phelps, Jr. of Fred W. Phelps, Chartered, Topeka, argued the cause and was on brief, for appellant.
Wesley A. Weathers of Crane, Martin, Claussen, Hamilton & Barry, Topeka, argued the cause, and Randall J. Forbes, Topeka, was with him on brief, for appellee.
Plaintiff-appellant Vernon L. Steele contends the district court erred in denying his motion for class action certification and in dismissing the case in its entirety. We do not agree.
In 1958, Steele purchased a $3,000 endowment insurance policy from defendant Security Benefit Life Insurance Company (hereinafter SBL). A like policy in the amount of $1,000 was purchased by Steele from SBL in 1966.
Each policy provided that upon default the policy owner had 60 days (90 days by company practice) to select one of three nonforfeiture provisions:
(A) Policy could be surrendered for net cash value.
(B) Policy could be continued as nonparticipating, paid-up, reduced ordinary life.
(C) Policy could be continued for a certain length of time as nonparticipating, paid-up term insurance in an amount equal to the face value of the policy.
If the policyholder did not elect one of these options, the automatic option was (C).
Until 1972, premiums on this type of policy were collected by SBL by sales agents visiting the homes of policyholders. The sales agents carried with them loan forms which enabled policyholders to borrow against their policies to pay the premiums. This, for all practical purposes, was a fourth "option" not specified in the policy. If this fourth option were elected, the policy as written remained in full force. Under the three options specified in the policy the insurance was either surrendered or converted to a different type of insurance with concomitant reduction in benefits. In 1972, SBL determined the whole procedure of personal collection of premiums was no longer economically feasible and issued passbooks to holders of such policies.
In 1973, the premium paying procedure was again changed and passbooks were eliminated. Under the procedure from 1973 to date a periodic premium notice is sent and the policyholder then remits payment. Collection of premiums is no longer accomplished by personal contact and the fourth "option," a loan against the policy to pay the premium, is no longer readily available. To compensate for this loss SBL instituted a new procedure whereby, upon a default where a policy holder did not specify one of the three policy options, an automatic premium loan (APL) was made, thereby keeping the policy as written in full force and effect. Upon making an APL the policyholder was sent a notice of the action. It was and is the policy of SBL to reverse the APL process upon request of the affected policyholder and institute whichever one of the three listed options the policyholder designates.
In 1974, Steele defaulted on a premium on each policy, the APL procedure was followed, and Steele was notified of the action. Steele did not express dissatisfaction with the procedure or request a listed policy option. On May 5, 1975, Steele's attorney contacted SBL and asked for information as to how the premium payments had been handled. SBL explained the procedure and, in accordance with its operating procedure SBL offered to reverse the APL process and institute whichever listed policy option Steele desired. Steele's attorney stated he would discuss the matter with his client. Four days later (May 9, 1975) Steele instituted this class action, seeking $2,000,000 actual damages and $10,000,000 punitive damages against SBL on the ground the APL procedure was wrongful.
In August, 1975, and November, 1975, while this action was pending, the premiums on both policies again became due and were not paid. Counsel for SBL sent Steele's counsel a notice of default and a request for instruction. The August 21, 1975, letter is reproduced herein:
No response was received to the letter and the policies reverted to option (C) of the policies extended term insurance as of August, 1974, the date of the first APL.
In April, 1976, Steele filed a motion for certification of the case as a class action pursuant to K.S.A. 60-223. Apparently, this motion was never heard. Steele's attorney proceeded with discovery. In response to a letter from the court to counsel, inquiring as to the status of the case, Steele's counsel filed an amended motion to certify the action as a K.S.A. 60-223(B )(2) class action, which stated, Inter alia :
Stripping away Steele's diatribe against SBL, we see even plaintiff admitting his alleged individual problem with SBL has been rectified, but the class awaits "rectification."
The district court held:
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