NOT FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT ANGEL MORENO AND CARMELITA MORENO , Plaintiff s - Appellants , v. WELLS FARGO, N.A.; AMERICAN BANKERS LIFE ASSURANCE COMPANY OF FLORIDA , FORMERLY KNOWN AS UNION SECURITY LIFE INSURANCE COMPANY

Defendant s - Appell ees . No. 13

- 17615 D.C. No. 2:13

- cv - 00972

- PHX
SRB
MEMORANDUM *

Appeal from the United States District Court for the District of Arizona Susan R. Bolton , District Judge, Presiding Argued and Submitted May 1 0 , 201 6 San Francisco, California Before: IKUTA and WATFORD , Circuit Judges, and WATSON, District Judge. **

* This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36

- 3.

** The Honorable Derrick Kahala Watson, District Judge for the U.S. District Court for the District of Hawaii, sitting by designation. 

# FILED
JUN 2 2016 MOLLY C. DWYER, CLER K U.S. COURT OF APPEAL S2

Plaintiffs Angel Moreno and Carmelita Moreno appeal from the dismissal of their amended complaint , which alleg ed claims under Arizona law against Defendants Wells Fargo, N.A. (Wells Fargo) and American Bankers Life Assurance Company of Flori da (American Bankers) . The Morenos’ claims included those for breach of the duty of good faith and fair dealing, breach of contract, consumer fraud, and unfair and deceptive acts and practices in the bus iness of insurance. T he Morenos also appeal from th e district court’s judgment awarding attorneys’ fees to defendants
. We have jurisdiction under 28 U.S.C. § 1291. W e affirm. 1
. The district court did not err in dismissing the Morenos’ claims for lack of proximately caused damages
. See Knievel v. ESPN , 393 F.3d 1068, 1072 (9th Cir. 2005) (“We review the district court’s grant of a motion to dismiss de novo
. ”). T h is case arises from a home l oan that the Morenos obtained through Wells Fargo . I n conjunction with this loan, the Morenos elected to purchas e disability insurance coverage from Union Security Life Insurance Company, now know n as American Bankers. T he insurance policy at issue provided that coverage would terminate if and when : “You are considered in default under the terms of your debt agreement with the Creditor, or in default with your monthly insurance premium.” It is undisputed that the Morenos failed to timely make full mortgage and insurance premium payments beginning in April 2012, several months prior to Wells Fargo ’s3

August 20, 2012 letter notifying the Morenos t hat their insurance coverage had ended
. Accordingly, the Morenos’ failure to make their payment s caused them to lose their insurance coverage , not any act or omission by defendants
. To be sure, Wells Fargo’s Truth in L ending Disclosure for Optional Credit Insurance provided that the Morenos would be notified prior to termination
. As such, t he Morenos contend that had they been notified prior to termination , they would have corrected the deficiency . However , neither the disclosure nor the insurance policy provide d a right to cure or to reinstatement , and t he statutory right to cure under Arizona law does not appl y to i nsurance agreements. See Ariz. R ev . S tat . § 33

- 813 (requiring lenders to permit reinstate me nt of a deed of trust following default under certain circumstances )
. Accordingly, it would not have been reasonable for the Morenos to expect that a right to cure existed. The parties do not dispute that Mr. Moreno became disabl ed in Dec ember 2012 . No r do th e parties dispute that the Morenos seek coverage under the policy in question beginning at that time. The Morenos ’ disability insurance coverage , however, terminated s everal months b efore Mr. Moreno’s disabling event and, therefore, before any coverage rights under th eir policy would have accrued. A s a result, any failure by defendants to provide prompt notice of termination in April4

2012 when the Morenos first failed to make full mortgage and insurance premium payments did not cause the Moreno s’ loss. Because the Morenos cannot overcome their causation problem, any amendment of the complaint would have been futile
. T he district court did not abuse its discretion by denying leave to amend. See Johnson v. Buckley , 356 F.3d 1067, 1077

- 78 (9th Cir. 2004)
. 2. Nor did t he district court abuse its discretion in a ward ing attorneys’ fees. See Rodriguez v. Disner , 688 F.3d 645 , 659 (9th Cir. 2012). The district court considered the appropriate factors and made the necessary findings. See Am

. Const. Corp. v. Philadelphia Indem. Ins. Co. , 667 F. Supp. 2d 1100, 1106

- 07 (D. Ariz. 2009) (listing relevant factors for court to consider in awarding attorneys’ fees) ; S ER 2

- 5 ( district court’s e valuation of factors)
. The Morenos’ contention that the district court did not give sufficient consideration to the ir financial condition is unavailing . T he district court acknowledged and discussed the Morenos ’ financial condition ( see S ER 3) and dramatically lowered the attorneys’ fee s award sought by each defendant as a result
. AFFIRMED
.More n o v . W e l ls Fargo Bank

, N .A., e t al. , No. 13-17615 W ATFOR D , C irc uit Judge , disse nting: W he n the M ore nos took out a m ortga ge with W e lls Fa rgo in 2006, the y

a lso bought a n insura nc e polic y

to e nsure tha

t the y c ould pa y the m ortga ge in the e ve nt tha t e ithe r of the m

be c a m e disa ble d. W e l ls Fa

rgo sold the M ore nos the polic y on be ha lf of de fe nda

nt Am e ric a n B a nke rs Life Assura nc e C o m pa ny of Florida (AB LAC ). The polic y

sta te d tha t if the M ore n o s fa ile d to pa y e ithe r the m o nthly

m ortga ge pa

y m e nt or the insura

nc e pre m ium

in full whe n due , the ir insura nc e
c ove ra ge would “ stop.” B ut a t the tim e the M o re nos bought the polic y , W e lls Fa rgo, a c ting a s AB LAC ’ s a ge nt, told the m in writing, “ You will be notifie d prior to te rm ina tion.” Unde r Ariz ona ’ s “ re a sona ble e xpe c ta t ions” doc trine , tha t
a ssura nc e be c a m e pa

rt of the polic y , e ve n if othe r provisions of the polic y
c ontra dic te d it. S

e e Gordinie r

v . Ae tna C

asualty & Sure ty C o. , 742 P.2d 277, 283–84 (Ariz . 1987); Darne r Motor Sale s, Inc . v . Univ e rsal Unde rw rite rs Insuranc e C

o. , 682 P.2d 388, 396–97 (Ariz . 1984). A re a sona ble c onsum e r, not tra i ne d in the te c hnic a litie s of the la w, would unde rsta nd the sta te m e n t “ You will be notifie d prior to te rm i na tion” to m e a n: If I’ m short on a pa

y m e nt, or la

t e in m a king a

pa y m e nt, m y polic y won’ t be te rm ina te d a

utom a tic a l ly . Inste a d, I will be give n notic e prior to te rm ina tion so tha t I c a n m a ke up the shortfa ll (or se nd the pa y m e nt in by a

spe c i fie d da te ) be fore 

# FIL ED
JUN 02 2016 M OLLY C. DW Y ER, CLERK U

. S. CO URT O F APPEALSPa ge 2 of 4

m y polic y will be c a nc e lle d outright. No re a sona ble c onsum e r would unde rsta nd the a ssura nc e to m e a n tha

t I will ge t notic e be fore te rm ina tion oc c urs but the re won’ t be a ny t

hing I c a n do to stop it from ha ppe ning. In April 2012, the

M ore nos ra

n into som e te m

pora ry fina nc ia l diffic ultie s. The y pa id W e lls Fa

rgo $1,000 tha

t m onth, not e nough to c ove r the roughly $1,400 the y owe d on the m ortga ge a nd the a pproxim a te ly

$40 the y owe d for the insura

nc e pre m ium . W e lls Fa

rgo unila t e ra lly a lloc a te d a ll $1,000 to the m ortga ge , m e a ning the M ore nos we re a

bout $400 short on the

m ortga ge pa

y m e nt a nd fa ile d to pa

y the insura nc e pre m ium

a ltoge the r. (Obviously , if the M ore n os ha d ha d a ny sa y in it, the y would ha ve a lloc a te d the first $40 of the ir April pa y m e nt to the insura

nc e pre m ium sinc e the y

we re going to be

short on the m ortga ge pa y m e nt e ithe r wa y .) The M ore nos we re sim ila rly short on the ir M a

y a n d June pa

y m e nts, a nd W e lls Fa rgo a ga in a lloc a te d 100% of those pa y m e nts to the m ortga ge a nd none to the insura nc e pre m ium

owe d. No one e ve r ga ve the M ore nos prior notic e tha t the ir insura

nc e polic y

wa s
a bout to be te rm ina te d , a s the y ha d be e n a ssure d would oc c ur. In August 2012, W e lls Fa rgo sim ply se nt the m

a notic e sa y ing tha t the ir polic y ha d be e n
c a nc e lle d—

not be c a use the polic y te rm ina te d a utom a tic a lly

upon the ir fa ilure to pa y the insura

nc e pre m ium

ba c k in April, but be c a

use the y ha d fa ile d to pa

y thePa ge 3 of 4

pre m ium s for 90 da

y s. This wa s the first the M ore nos he a rd a bout the ir polic y be ing te rm ina te d, a

nd the notic e told the m

it wa s too la

te to do a ny thing a b out it— the polic y ha d alre ady

be e n te rm ina te d. Tha

t obviously

doe sn’ t qua lify

a s
re c e iving notic e “ prior to te rm ina tion.” Tha t the M o re nos’ polic y did not a uthoriz e a utom a tic te rm ina t ion upon the ir fa ilure to m a ke the April pa y m e nt is c o nfirm e d by

the a c tions of W e lls Fa

rgo,
a c ting a s AB LAC ’ s a ge nt. W e lls Fa rgo c e rta inly didn’ t

think tha t the M ore nos’ fa ilure to m a ke the April pa y m e nt re sulte d

in a utom a tic te rm i na tion of the polic y . W he n the M o re nos we re short tha t m onth, W e lls Fa

rgo didn’ t te ll the m , “ Don’ t bothe r pa y ing a ny furthe r insura

nc e pre m ium s—

y our polic y

ha s be e n c a nc e lle d.” W e lls Fa rgo c ontinue d to bill the

M ore n os for the ir m o nthly pre m ium s in M a y , June , a nd July , e ve n though the

M ore nos we re short on the ir M a y a nd June pa y m e nts a s we ll. So W e lls Fa rgo didn’ t inte rpre t the polic y a s providing for
a utom a t ic te rm ina tion upon fa ilure to m a ke a single pa y m e nt. It unde rstood the polic y to c onta in a

gra c e pe riod of 90 da

y s during whic h the insure d c ould be c om e
c urre nt be fore the polic y would be c a nc e lle d outright. The distric t c ourt dism isse d the M ore n os’ c a se be c a use it c onc lude d tha

t the de fe nda n ts’ c onduc t c ould not ha ve c a use d the M o re nos’ injurie s. The c ourt
re a c he d tha

t c onc lusion by

two fa ulty line s of re a s oning. First, the c ourt sim plyPa ge 4 of 4

ignore d the re a sona

ble e xpe c ta t ions doc trine a nd a ssum e d tha t the polic y te rm ina te d a

utom a tic a l ly

whe n the M o re nos m isse d tha t first pa y m e nt in April,
c ontra ry to W e lls Fa

rgo’ s own inte rpre ta tion of the polic y . Tha t line of re a soning is wrong be c a

use , unde r the re a sona

ble e xpe c ta tions doc trine , the a s sura n c e “ You will be notifie d prior to te rm ina tion” be c a m e pa rt of the polic y , e ve n if othe r provisions of the

polic y c ontra d ic te d tha

t a ssura nc e . Se c o n d, the distric t c ourt
re a s one d tha

t, e ve n if the M ore nos ha d re c e i ve d prior notic e a s prom i se d, it wouldn’ t ha

ve m a de a ny

diffe re nc e

—

the y still wouldn’ t ha

ve be e n a ble to pa y the

m ortga ge a nd insura

nc e pre m ium s in April, M a y , a nd June , a nd thus the polic y would ha ve be e n c a n c e lle d a

ny wa y . Tha t line of re a soning is wrong be c a use the M ore n os spe c ific a lly

a lle ge d , in a

propose d a m e ndm e nt to the ir c om pla int, tha t if
som e one ha d give n the m

prior notic e the y

c ould ha v e m a de up the shortfa ll im m e dia te ly by ta pping into the ir 401(k) pla n a n d a n IR A the y owne d. The y unde rsta nda b ly didn’ t wa

nt to do tha

t if the y didn’ t ha ve to, a s the y

would ha ve inc u rre d ta x pe na ltie s. B ut the y c ould ha ve a nd would ha

ve done so in orde r to
sa ve the polic y . (Not long a fte r the e v e nts just de sc ribe d, M r. M ore no be c a m e disa ble d, so the M ore nos c a n’ t buy a ne w polic y

now.) Ne ithe r of the distric t c ourt’ s ra tiona l e s for dism issing this c a se c a n be susta ine d . I would re ve rse the judgm e nt a nd re m a nd for furthe r proc e e dings.