Opinion ID: 808364
Heading Depth: 3
Heading Rank: 3

Heading: California Public Policy

Text: Stephan’s alternative position is that in 2007, the inclusion of discretionary provisions in insurance polices violated California law and that any such provisions in the Plan are therefore void. This argument is also unavailing. [5] Under California law, “insurance policies are governed by the statutory and decisional law in force at the time the policy is issued. Such provisions are read into each policy thereunder, and become a part of the contract with full binding effect upon each party.” Interins. Exch. of the Auto. Club of S. Cal. v. Ohio Cas. Ins. Co., 58 Cal. 2d 142, 148 (1962) (internal quotation marks omitted). This principle governs not only new policies but also renewals: Each renewal incorporates any changes in the law that occurred prior to the 11094 STEPHAN v. UNUM LIFE INSURANCE renewal. See Modglin v. State Farm Mut. Auto. Ins. Co., 273 Cal. App. 2d 693, 700 (1969); Steven Plitt, Daniel Maldonado & Joshua D. Rogers, Couch on Insurance § 29:43 (3d ed. 2010). So, even though the 2007 policy under which Stephan was insured was a renewal, it was nevertheless subject to any relevant California law in place at the time it was issued. The law in effect at the time of renewal of a policy governs the policy even if that law is subsequently changed or repealed. See Interins. Exch. of the Auto. Club, 58 Cal. 2d at 148-49. [6] In 2007, there was no California statute explicitly prohibiting discretionary provisions. Stephan relies on Cal. Ins. Code § 10291.5(b) which provided then (and provides now) that [t]he commissioner shall not approve any disability policy for insurance or delivery in this state . . . [i]f the commissioner finds that it contains any provision, or has any label, description of its contents, title, heading, backing, or other indication of its provisions which is unintelligible, uncertain, ambiguous, or abstruse, or likely to mislead a person to whom the policy is offered, delivered or issued. This reliance is misplaced. As we explained above, the Commissioner’s notice that he would withdraw approval from policies containing discretionary clauses, the administrative hearing officer’s proposed decision approving such notice, and the Commissioner’s order adopting that decision (together, “the Commissioner’s decision” or “the decision”) held that discretionary clauses create “uncertainty” about how a policy will be enforced and therefore what entitlements it ultimately guarantees. For that reason, the Commissioner decided such clauses render insurance policies “misleading and ambiguous” in violation of Cal. Ins. Code § 10291.5(b)(1). STEPHAN v. UNUM LIFE INSURANCE 11095 This decision did not, as Stephan contends, render void all discretionary provisions contained in policies issued or renewed after it was made. Section 10291.5(b) does not directly void any policy or policy provision, even those that fail to conform with its strictures. Rather, § 10291.5(b) provides the Commissioner grounds for refusing to approve or withdrawing approval from any non-conforming policy. See id. § 10291.5(b); id. § 10291.5(f). Specifically, the statute provides that any policies that are approved by the Commissioner and are “in accordance with the conditions, if any, contained in the approval . . . shall . . . be conclusively presumed to comply with, and conform to” § 10291.5. Id. § 10291.5(k) (emphasis added). Thus, “[r]egardless of whether the Insurance Commissioner should have approved the policy, an otherwise valid policy is a binding contract and governs the obligations of the parties until the Commissioner revokes his approval.” Peterson v. Am. Life & Health Ins. Co., 48 F.3d 404, 410 (9th Cir. 1995). The policy form upon which the Plan was written was approved by the Department of Insurance in 1991.5 After Unum and the California Department of Insurance reached a settlement agreement, the policy form was re-approved, subject to the terms of the CSA. As discussed above, because it was a renewal, the Plan could contain a discretionary author- 5 Stephan argues that the policy was never approved by the Department of Insurance. For this proposition, Stephan relies on a letter from the Department stating that it had no record of approving the form issued to TWP, although it did have a record “of approving a similar form number.” Unum submitted to the district court an affidavit from Bonita Williams, the Unum employee responsible for overseeing the filing and approval of insurance forms with state departments of insurance. Williams stated that the relevant form had indeed been approved, and that the Department could not locate the approval because the policy number had been inadvertently changed. The district court found that the policy form was approved. This factual finding is not clearly erroneous; we therefore affirm it. See Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 962 (9th Cir. 2006) (en banc). 11096 STEPHAN v. UNUM LIFE INSURANCE ity provision and remain in compliance with the CSA. Because the Plan was approved by the Commissioner, under § 10291.5(k), it must be “conclusively presumed to comply with” California law. [7] In sum, the Plan’s discretionary authority provision did not violate the terms of the CSA, nor is the provision void under California law. We therefore review Unum’s decision for abuse of discretion. See Glenn, 554 U.S. at 111.