On August 9, 2022, Milbank LLP obtained denials of class certification on behalf of Lincoln National Life Insurance Company and Lincoln National Corporation in two cost of insurance (“COI”) litigations in the US District Court for the Eastern District of Pennsylvania (Pappert, J.).
In the cases, In re Lincoln National COI Rate Litigation (“Lincoln COI”) and In re Lincoln National 2017 COI Rate Litigation (“2017 Lincoln COI”), universal life insurance policyholders alleged that Lincoln breached its contracts with them when it adjusted COI rates on their policies. Plaintiffs moved to certify classes of approximately 50,000 current and former policyholders alleging damages and seeking injunctive relief.
The universal life insurance policies in question were issued by Lincoln’s predecessor Jefferson-Pilot between 1999 and 2007 (Lincoln COI) and between 1983 and 2008 (2017 Lincoln COI). The policies feature non-guaranteed elements, including COI rates, which can be adjusted at Lincoln’s discretion according to the policies’ terms. Most of the policies at issue provide that COI rates are based on Lincoln’s future expectations of mortality, expenses, interest, and lapses. Policyholders are assessed COI charges monthly.
In 2016 and 2017, Lincoln undertook cost of insurance rate redetermination exercises for the products at issue with the help of actuarial consultants Willis Towers Watson and Milliman, Inc. Shortly after Lincoln announced changes in COI rates, policyholders sued, bringing claims for breach of contract, claims under various consumer protection statutes, and other state law claims.
Plaintiffs sought to certify nationwide classes asserting breach of contract claims, nationwide classes based on extraterritorial application of a North Carolina consumer protection statute, and various state law classes. After Lincoln filed its submissions opposing class certification, Plaintiffs abandoned pursuit of their motions to certify nationwide classes asserting the North Carolina claim. After day-long oral argument on their motions for class certification, Plaintiffs withdrew their motions for certification of their state law classes, pursuing only certification of nationwide breach of contract classes. In his decisions denying certification of nationwide contract classes, Judge Pappert found that Plaintiffs had not established that common issues predominate over individual ones.
Motions for class certification in COI rate adjustment litigations are rarely denied. Milbank is aware of only two such denials among the many COI rate adjustment class actions filed in the past 20 years.
In support of their motions for class certification, Plaintiffs also sought to introduce the testimony of two actuarial experts—one in each litigation. Lincoln moved to exclude the opinions proffered by these experts on the grounds that they were unreliable and would not assist the Court in resolving Plaintiffs’ motions.
The Court agreed with Lincoln and excluded the testimony of both actuarial experts. Judge Pappert characterized the opinion of one of the experts as “ungrounded assertions rather than the product of any discernable methodology.”
“Our litigators will continue to advocate aggressively for our clients to defeat cost of insurance litigation. We’re also prepared to take on the full scope of insurance-related individual and class actions, drawing on our deep knowledge and experience in this space,” said Litigation & Arbitration partner Stacey J. Rappaport.
In both cases, Plaintiffs declined to file a Rule 23(f) petition to appeal Judge Pappert’s ruling.
The Milbank team representing the Lincoln entities was led by Ms. Rappaport and included consulting partner Michael Hirschfeld, partner Aaron Renenger, and associates John Estep, Erin Culbertson and Andrew Porter.