NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ANGEL MORENO AND CARMELITA 

MORENO,

 Plaintiffs - Appellants,

 v.

WELLS FARGO, N.A.; AMERICAN 

BANKERS LIFE ASSURANCE 

COMPANY OF FLORIDA, FORMERLY 

KNOWN AS UNION SECURITY LIFE 

INSURANCE COMPANY

 Defendants - Appellees.

No. 13-17615

D.C. No. 2:13-cv-00972-PHXSRB

MEMORANDUM*

Appeal from the United States District Court

for the District of Arizona

Susan R. Bolton, District Judge, Presiding

Argued and Submitted May 10, 2016

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, CLERK

U.S. COURT OF APPEALS
2

Plaintiffs Angel Moreno and Carmelita Moreno appeal from the dismissal of 

their amended complaint, which alleged claims under Arizona law against 

Defendants Wells Fargo, N.A. (Wells Fargo) and American Bankers Life Assurance 

Company of Florida (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 business of insurance. The 

Morenos also appeal from the district court’s judgment awarding attorneys’ fees to

defendants. We have jurisdiction under 28 U.S.C. § 1291. We 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.”). This

case arises from a home loan that the Morenos obtained through Wells Fargo. In 

conjunction with this loan, the Morenos elected to purchase disability insurance 

coverage from Union Security Life Insurance Company, now known as American 

Bankers. The 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’s 
3

August 20, 2012 letter notifying the Morenos that their insurance coverage had 

ended. Accordingly, the Morenos’ failure to make their payments caused them to 

lose their insurance coverage, not any act or omission by defendants.

To be sure, Wells Fargo’s Truth in Lending Disclosure for Optional Credit 

Insurance provided that the Morenos would be notified prior to termination. As 

such, the Morenos contend that had they been notified prior to termination, they 

would have corrected the deficiency. However, neither the disclosure nor the 

insurance policy provided a right to cure or to reinstatement, and the statutory right 

to cure under Arizona law does not apply to insurance agreements. See Ariz. Rev.

Stat. § 33-813 (requiring lenders to permit reinstatement 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 disabled in December 

2012. Nor do the parties dispute that the Morenos seek coverage under the policy in 

question beginning at that time. The Morenos’ disability insurance coverage, 

however, terminated several months before Mr. Moreno’s disabling event and, 

therefore, before any coverage rights under their policy would have accrued. As a 

result, any failure by defendants to provide prompt notice of termination in April 
4

2012 when the Morenos first failed to make full mortgage and insurance premium 

payments did not cause the Morenos’ loss.

Because the Morenos cannot overcome their causation problem, any 

amendment of the complaint would have been futile. The 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 the district court abuse its discretion in awarding 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); SER 2-5 (district court’s evaluation of factors). The Morenos’ contention

that the district court did not give sufficient consideration to their financial condition 

is unavailing. The district court acknowledged and discussed the Morenos’ 

financial condition (see SER 3) and dramatically lowered the attorneys’ fees award 

sought by each defendant as a result.

AFFIRMED.
Moreno v. Wells Fargo Bank, N.A., et al., No. 13-17615

WATFORD, Circuit Judge, dissenting:

When the Morenos took out a mortgage with Wells Fargo in 2006, they also

bought an insurance policy to ensure that they could pay the mortgage in the event

that either of them became disabled. Wells Fargo sold the Morenos the policy on

behalf of defendant American Bankers Life Assurance Company of Florida

(ABLAC). The policy stated that if the Morenos failed to pay either the monthly

mortgage payment or the insurance premium in full when due, their insurance

coverage would “stop.” But at the time the Morenos bought the policy, Wells

Fargo, acting as ABLAC’s agent, told them in writing, “You will be notified prior

to termination.” Under Arizona’s “reasonable expectations” doctrine, that

assurance became part of the policy, even if other provisions of the policy

contradicted it. See Gordinier v. Aetna Casualty & Surety Co., 742 P.2d 277,

283–84 (Ariz. 1987); Darner Motor Sales, Inc. v. Universal Underwriters

Insurance Co., 682 P.2d 388, 396–97 (Ariz. 1984).

A reasonable consumer, not trained in the technicalities of the law, would

understand the statement “You will be notified prior to termination” to mean: If

I’m short on a payment, or late in making a payment, my policy won’t be

terminated automatically. Instead, I will be given notice prior to termination so

that I can make up the shortfall (or send the payment in by a specified date) before

FILED

JUN 02 2016

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS
Page 2 of 4

my policy will be cancelled outright. No reasonable consumer would understand

the assurance to mean that I will get notice before termination occurs but there

won’t be anything I can do to stop it from happening.

In April 2012, the Morenos ran into some temporary financial difficulties. 

They paid Wells Fargo $1,000 that month, not enough to cover the roughly $1,400

they owed on the mortgage and the approximately $40 they owed for the insurance

premium. Wells Fargo unilaterally allocated all $1,000 to the mortgage, meaning

the Morenos were about $400 short on the mortgage payment and failed to pay the

insurance premium altogether. (Obviously, if the Morenos had had any say in it,

they would have allocated the first $40 of their April payment to the insurance

premium since they were going to be short on the mortgage payment either way.) 

The Morenos were similarly short on their May and June payments, and Wells

Fargo again allocated 100% of those payments to the mortgage and none to the

insurance premium owed.

No one ever gave the Morenos prior notice that their insurance policy was

about to be terminated, as they had been assured would occur. In August 2012,

Wells Fargo simply sent them a notice saying that their policy had been

cancelled—not because the policy terminated automatically upon their failure to

pay the insurance premium back in April, but because they had failed to pay the
Page 3 of 4

premiums for 90 days. This was the first the Morenos heard about their policy

being terminated, and the notice told them it was too late to do anything about

it—the policy had already been terminated. That obviously doesn’t qualify as

receiving notice “prior to termination.”

That the Morenos’ policy did not authorize automatic termination upon their

failure to make the April payment is confirmed by the actions of Wells Fargo,

acting as ABLAC’s agent. Wells Fargo certainly didn’t think that the Morenos’

failure to make the April payment resulted in automatic termination of the policy. 

When the Morenos were short that month, Wells Fargo didn’t tell them, “Don’t

bother paying any further insurance premiums—your policy has been cancelled.”

Wells Fargo continued to bill the Morenos for their monthly premiums in May,

June, and July, even though the Morenos were short on their May and June

payments as well. So Wells Fargo didn’t interpret the policy as providing for

automatic termination upon failure to make a single payment. It understood the

policy to contain a grace period of 90 days during which the insured could become

current before the policy would be cancelled outright.

The district court dismissed the Morenos’ case because it concluded that the

defendants’ conduct could not have caused the Morenos’ injuries. The court

reached that conclusion by two faulty lines of reasoning. First, the court simply
Page 4 of 4

ignored the reasonable expectations doctrine and assumed that the policy

terminated automatically when the Morenos missed that first payment in April,

contrary to Wells Fargo’s own interpretation of the policy. That line of reasoning

is wrong because, under the reasonable expectations doctrine, the assurance “You

will be notified prior to termination” became part of the policy, even if other

provisions of the policy contradicted that assurance. Second, the district court

reasoned that, even if the Morenos had received prior notice as promised, it

wouldn’t have made any difference—they still wouldn’t have been able to pay the

mortgage and insurance premiums in April, May, and June, and thus the policy

would have been cancelled anyway. That line of reasoning is wrong because the

Morenos specifically alleged, in a proposed amendment to their complaint, that if

someone had given them prior notice they could have made up the shortfall

immediately by tapping into their 401(k) plan and an IRA they owned. They

understandably didn’t want to do that if they didn’t have to, as they would have

incurred tax penalties. But they could have and would have done so in order to

save the policy. (Not long after the events just described, Mr. Moreno became

disabled, so the Morenos can’t buy a new policy now.)

Neither of the district court’s rationales for dismissing this case can be

sustained. I would reverse the judgment and remand for further proceedings.