Key Decisions

June 2013 – An Insured Lacked Standing To Sue

(filed under: Key Decisions Archive | June 21, 2013)

An Insured Lacked Standing To Sue

Schwartz v. Provident Life And Accident Insurance Company
(Cal. Ct. of App., 1st Dist.), filed May 21, 2013

Provident Life and Accident Insurance Company and related companies sell disability insurance that provides monetary benefits to individuals who, due to injury or illness, are unable to work in their chosen occupations.

Rick Schwartz was insured under a policy he purchased in 1988. Schwartz, a certified public accountant, chose the policy because he believed it was a good idea to “lock in a good premium” at a young age with a “non-cancelable, guaranteed renewable” policy. Schwartz pays a fixed monthly premium of $371.44 in exchange for the insurer’s promise to pay a monthly benefit of $11,220 in the event of disability. Schwartz understood that his insurer would pay him the full benefits due under the policy if he became disabled, but would pay him no benefits and would retain the full amount of premiums paid if he did not become disabled. Schwartz has never become disabled and never filed a claim for benefits.

In October 2005, the Commissioner of the California Department of Insurance entered into a settlement agreement with Provident Life resolving allegations that it and related companies had wrongly denied benefits to some insureds that had filed claims for benefits.

Later that month, Schwartz sued Provident Life on behalf of insureds that had not been denied benefits and therefore received no direct benefits from the settlement agreement. Schwartz alleged that the insurers operated a “systematic scheme” from 1994 to 2005 to deny and terminate legitimate disability claims by policyholders. Schwartz, and the purported class he represents, claimed injury from the alleged deceptive scheme despite no claim for and no denial of benefits.

Schwartz also sought a writ of mandate to compel the commissioner to reopen his investigation and to accord relief to policyholders who, like Schwartz, had not been denied benefits. Schwartz stated several causes of action against the insurers, including a claim that their alleged deceptive claims handling practices violated the Unfair Competition Laws.

The trial court granted summary judgment against Schwartz. It found that because he and the class he represented had never made a claim nor been denied benefits, he lacked standing to bring an Unfair Competition claim.

The Court of Appeal affirmed. It noted: “Schwartz has failed to raise a material triable issue of fact that he suffered economic injury of any kind. Schwartz paid a fixed premium for a promise of disability coverage that was never denied. He did not lose money or property by the alleged wrongful denial of benefits to other policy holders using unfair claim practices that are now enjoined by the commissioner.”