Insurer Avoids Court Review of Whether California’s Lapse Statutes Apply to Out-of-State Policies

September 5, 2025

Do California’s lapse statutes apply to policies originally issued in another state but later renewed in California? We won’t find out anytime soon.

This important question was raised by Susan Pitt v. Metropolitan Tower Life Insurance Co., Case No. S289376. The California Supreme Court was set to decide the issue, having accepted a request to do so from the federal Ninth Circuit Court of Appeals. Unfortunately, before the California Supreme Court could hear the case, the parties reached a settlement. Because the case was not a class action, the insurer could avoid having the California Supreme Court decide the issue by settling with the individual plaintiff in the case. Lawyers call this tactic “picking off” the plaintiff to avoid review.

Consumers would benefit from a clear ruling by the California Supreme Court on this issue. LICAC therefore submitted an amicus letter urging the Curt to accept the request from the Ninth Circuit. After the settlement between the insurer and the plaintiff, LICAC submitted another letter requesting that the Court decide the issue notwithstanding the settlement between the parties. The Court has declined to take this step and has now dismissed the case.

Why Are Lapse Statutes Important?

Lapse Statutes include a series of important requirements to protect policyholders. Insurers must:

  • provide a 60-day grace period for premium payments
  • give a life insurance policyholder and a designated additional person at least 30 days’ written notice of a potential lapse for nonpayment of premium
  • provide an annual notice to life insurance policyholders of their right to designate an additional person to receive notice of a potential policy lapse

The law was intended to help people (often seniors) avoid policy lapses if they miss their premium payments due to forgetfulness, hospitalization, lost mail, glitches with auto-pay arrangements, or other problems.

As LICAC pointed out to the Court, the number of consumers affected by this issue is quite large – nearly 200,000 people with existing life insurance policies move to California every year.

Unfortunately, consumers will have to wait until another case gets up to the Court in order to have the issue decided.

Read the full text of the latest letter here: https://www.lifeinsuranceconsumeradvocacycenter.org/wp-content/uploads/2025/08/July-28-2025-LICAC-As-Filed-Letter-to-California-Supreme-Court-re-Pitt-v-Metropolitan-Tower.pdf.

LICAC’s former letter can be found here: https://www.lifeinsuranceconsumeradvocacycenter.org/california-supreme-court-to-decide-whether-californias-lapse-statutes-apply-to-policies-originally-issued-in-another-state-but-later-renewed-in-california/.