District Court Finds Choice of Law Provision in AD&D Policy Trumps California Law Banning Discretionary Authority in Life Insurance Policies

In White v. Guardian Life Insurance Company, et al., No. 22-CV-1788-L-KSC, 2023 WL 5519315 (S.D. Cal. Aug. 25, 2023), California Southern District Judge M. James Lorenz denied Plaintiff’s motion to establish de novo as the applicable standard of review in an action for AD&D benefits brought under the Employee Retirement Income Security Act (ERISA).

In a brief opinion, the Court held that an abuse of discretion standard of review applied to the action because the AD&D policy contained a Florida choice of law provision and there was no statute banning discretionary clauses in Florida. Notwithstanding that California law prohibits insurance policies from assigning discretion to the insurer or administrator, pursuant to Cal. Ins. Code § 10110.6, the Court found that the application of Florida law to the policy at issue was neither unreasonable nor fundamentally unfair. It noted that the Plaintiff’s employer was headquartered in Florida, and a majority of its employees (although not Plaintiff) were located in Florida. And, at the time the policy was issued in 2009, section 10110.6 of the California Insurance Code had not yet gone into effect, eliminating the possibility that Defendant chose Florida law to avoid a statute banning discretionary clauses.

This opinion contradicts that of the decision by Northern District Judge James Donato in Hirschkron v. Principal Life Ins. Co., 141 F. Supp. 3d 1028 (N.D. Cal. 2015), foreshadowing a likely finale before the Ninth Circuit in the future. In Hirschkron, the Court applied the de novo standard of review finding that the discretionary provisions contained in the group long-term disability policy were void pursuant to Cal. Ins. Code § 10110.6. The Court found that the parties’ arguments about the enforceability of a Maryland choice of law provision and whether or not the discretionary provisions would be valid under Maryland law, were irrelevant to the question at hand. Following the reasoning as outlined in the cases of Rapolla v. Waste Management Employee Benefits Plan, Case No. 13–cv–02860–JST, 2014 WL 2918863, at *5 (N.D.Cal. June 25, 2014), and Snyder v. Unum Life Ins. Co. of America, Case No. CV–13–07522–BRO (RZx), 2014 WL 7734715, at *10–11 (C.D.Cal. Oct. 28, 2014), although “choice of law provisions in ERISA contracts should be followed so long as they are ‘not unreasonable or fundamentally unfair,’” allowing a choice of law provision to trump Cal. Ins. Code § 10110.6 on the narrow issue of the applicable standard of review for a denial of benefits would subvert the right to a “fair review of claims denials” that was granted by the California legislature to all California residents. 2014 WL 7734715, at *11.

If Guardian or another disability insurer has denied your disability insurance claim, contact us for assistance.