McHugh v. Protective Life Ins. Co.

IN THE SUPREME COURT OF CALIFORNIA

BLAKELY MCHUGH et al., Plaintiffs and Appellants, v. PROTECTIVE LIFE INSURANCE COMPANY, Defendant and Respondent.

S259215

Fourth Appellate District, Division One D072863

San Diego County Superior Court 37-2014-00019212-CU-IC-CTL

August 30, 2021

Justice Cuéllar authored the opinion of the Court, in which Chief Justice Cantil-Sakauye and Justices Liu, Kruger, and Groban concurred.

Justice Jenkins filed a concurring opinion, in which Justice Corrigan concurred.

MCHUGH v. PROTECTIVE LIFE INSURANCE COMPANY S259215

Opinion of the Court by Cuéllar, J.

Millions of California consumers manage financial risks for their families by purchasing life insurance. Through these policies, Californians ensure that their families and other designated beneficiaries are protected by a financial safety net — and are able to plan for contingencies — in the event of the policy owners’ untimely death. But there’s a cost: In exchange for continuing coverage, consumers pay regular premiums to their insurers. If consumers fail to do so, insurers have the right to end the policies. In 2012, the Legislature created certain protections to shield consumers from losing life insurance coverage because of a missed premium payment. Codified in sections 10113.71 and 10113.72 of the Insurance Code,1 these protections went into effect on January 1, 2013. Soon thereafter, the defendant terminated one of the life insurance policies at issue in this case because the policy owner had failed to make a payment. Plaintiffs claim that the defendant had no right to terminate these policies without complying with the newly codified statutory protections against termination. The Court of Appeal reasoned that sections 10113.71 and 10113.72 did not apply because they appeared to affect only policies issued or delivered after the sections’ January 1, 2013 effective date, and the policy

1 All unspecified section references are to the Insurance Code.

1

MCHUGH v. PROTECTIVE LIFE INSURANCE COMPANY Opinion of the Court by Cuéllar, J.

at issue here predated the sections. In reaching this construction of the statutes, the court cited — among other considerations — its deference to Department of Insurance (DOI) staff correspondence and electronic instructions for policy forms. We conclude that sections 10113.71 and 10113.72 apply to all life insurance policies in force when these two sections went into effect, regardless of when the policies were originally issued. This interpretation fits the provisions’ language, legislative history, and uniform notice scheme, and it protects policy owners — including elderly, hospitalized, or incapacitated ones who may be particularly vulnerable to missing a premium payment — from losing coverage, consistent with the provisions’ purpose. This interpretation does not depend on extending deference to DOI staff correspondence or electronic instructions, neither of which represent the agency’s official interpretation of sections 10113.71 and 10113.72 nor otherwise reflect the agency’s carefully considered, long- standing, and consistent interpretive viewpoint on the sections. Accordingly, we reverse the judgment of the Court of Appeal and remand for proceedings consistent with this opinion. I. In March 2005, Chase Life Insurance Company, the predecessor in interest to defendant Protective Life Insurance Company (Protective Life), issued a $1 million term life insurance policy to William McHugh. The policy named McHugh’s daughter, Blakely McHugh, as the designated beneficiary and Trysta Henselmeier, Blakely’s mother and McHugh’s successor in interest, as a contingent beneficiary.