Reported / Citable
Background
New York Life issued a life policy to Mr. Linhart in 2007, with Barbara Linhart as beneficiary. California later enacted Insurance Code sections 10113.71 and 10113.72, adding grace-period and notice protections and allowing a policy owner to designate another person to receive lapse or termination notices.
The insurer sent annual notices about the designation right but never sent Mr. Linhart a standalone designation form. His policy lapsed for insufficient value on August 3, 2021, and he died four days later. The insurer declined payment. His widow brought a proposed class action contending section 10113.72 required designation forms for policies issued before the statute’s January 2013 effective date.
The Court’s Holding
The Ninth Circuit affirmed summary judgment for the insurer. The California Supreme Court’s McHugh decision establishes that subdivision (a), which requires an insurer to provide each applicant a designation form before issuing a policy, unmistakably applies only to new policies. Mr. Linhart’s 2007 policy was not new when the provision took effect.
Although other lapse safeguards can apply to existing policies, the court declined to convert the application-stage form requirement into a continuing duty to send a new form to every pre-2013 policyholder. Because subdivision (a) did not apply, the insurer’s failure to send the form could not support Linhart’s claim.
Key Takeaways
- The section 10113.72(a) designation-form requirement applies to policies issued on or after January 1, 2013.
- California’s life-insurance lapse protections do not all have identical temporal reach.
- Policyholders with older coverage should affirmatively update third-party notice designations rather than assume a new form will arrive.
- Class claims based on pre-2013 issuance must distinguish application-stage duties from annual notice obligations.
Why It Matters
The published decision narrows one potential theory for recovering benefits after an older life policy lapses shortly before death. It gives insurers a clear rule for the initial designation-form duty while leaving other statutory notice and grace-period obligations intact.
California insurance practitioners should analyze each subsection separately. The broad remedial purpose of lapse protections does not override text tying a particular duty to an applicant and the time before policy issuance.
The court focused on the Legislature’s different wording within the same statutory scheme. Subdivision (a) speaks to an insurer’s duty to give a form to an applicant before issuance, while subdivision (b) requires annual notice to a policy owner of the right to change or add a designee. Treating the initial-form command as retroactive would collapse that distinction. McHugh’s statement that subdivision (a) applies only to new policies controlled the federal court’s interpretation of California law.
That narrow holding does not establish that the lapse itself was valid under every potentially applicable protection, and it does not minimize the practical danger of a policy expiring shortly before death. Lawyers reviewing a denied claim should obtain the complete policy history, premium and account-value records, grace notices, mailing evidence, and annual designation communications. Insurers should likewise keep those duties operationally separate so compliance with the annual notice requirement is not mistaken for compliance with every other lapse safeguard.