9th Circuit Gives Woman Another Shot at Insurer

LOS ANGELES (CN) — The Ninth Circuit reversed and remanded dismissal of a class action from a woman who said it took Prudential Insurance 32 years to pay death benefits for her late son, and underpaid her when it did.

In her November 2013 class action, Beverly Burton said she was a beneficiary on a Prudential policy her husband took out in 1958, and made a claim after she lost her son Roderick to cancer.

Though Roderick died in 1981, Burton said it took Prudential 32 years to confirm death benefits — until May 2013.

Two months later, Prudential sent her a check for just over $5,000 and informed her that the money was for a $1,000 death benefit, based on a 2.5 percent interest rate.

Burton accused Prudential of taking advantage of low interest rates at the time and altering the language and meaning of California Insurance Code section 10172.5 to avoid paying higher interest rates from 1981.

In an Oct. 17 ruling, not for publication, a Ninth Circuit panel found that U.S. District Judge Beverly Reid O'Connell had correctly ruled that the insurance code "consistently disincentivizes insurers from delaying payment of past due benefits."

The panel added: "Either fixed rate interpretation advanced by the parties - whether fixed at the time of the insured's death, or at the time of payment - could incentivize insurers to delay payment under certain circumstances, undermining the purpose of the statute."

The panel said Judge O'Connell should not have ruled for Prudential on Burton's claim that the insurer underpaid her because the Prudential never made clear whether it had properly calculated interest rates on benefits from 1981 to 2013.

"Under these circumstances, Burton has sufficiently pled that Prudential did not pay the required interest rate under section 10172.5(a) for each time interest accrued," the panel wrote.

Judges Stephen Reinhardt, John Owens and Michelle Friedland also revived Burton's claim of breach of faith and fair dealing based on her claim that she suffered an economic loss.

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