Kansas City, MO – In a landmark ruling, the Western District Court of Appeals has confirmed that prejudgment interest should be tacked onto a $28 million jury verdict in a class action lawsuit against Kansas City Life Insurance Company (KCL). The decision, issued on September 24, overturns an earlier denial of the prejudgment interest and underscores a breach of contract concerning the insurer’s method of calculating policy cash values.
The litigation initiated by David B. Karr, representing over 8,000 policyholders, stems from allegations that KCL improperly deducted from the accounts’ monthly cash value under the guise of inflated “cost of insurance” and monthly expense charges. Karr’s legal argument highlighted that KCL’s practices sidestepped the stipulations specified in the policy agreements which should primarily reflect mortality risk factors, not company expenses or profit motives.
Central to the dispute was the interpretation of the cost of insurance (COI) provision within the policies, which, according to Karr, mandated calculations strictly based on mortality risks without incorporating profit generation or expense recovery. Karr contended that KCL failed not only in this regard but also did not adjust the COI rates per improved future mortality expectations, directly contradicting the policy’s terms.
In a resolute conclusion, the appeals court affirmed the trial court’s award after a trial on damages where the jury settled on the substantial $28 million sum for breaches on multiple contractual fronts. Originally, the trial court had also supported the plaintiff’s motion for class certification and summary judgment on liability, aligning with Karr’s breach of contract claims.
However, the initial trial court had struck down the request for prejudgment interest – a decision Karr challenged through a cross-appeal. Supporting Karr’s position, Judge Cynthia L. Martin of the appellate court rejected KCL’s multiple appeals that sought to nullify the judgment and class certification. Judge Martin’s opinion highlighted that the insurance policies in question clearly delineated the factors that could be considered in calculating insurance costs, dismissing the insurer’s broader interpretative claims.
Moreover, in refuting KCL’s attempt to invoke the primary jurisdiction doctrine, which would have deferred the matter to the Department of Insurance, the court clarified that Missouri statutes do not designate the Department as a tribunal for resolving contractual disputes over insurance policies.
The appellate court also handled KCL’s objections to the class certification and the adequacy of the damages evidenced at trial – concerns that it ultimately found unpersuasive. Following the overall dismissal of KCL’s appeals, the court addressed the previously denied prejudgment interest. It directed the trial court to compute and include an appropriate amount reflecting the period from policy termination or surrender up to the present for those still active.
Patrick J. Stueve of Stueve Siegel Hanson, who represented the class, expressed satisfaction with the appellate court’s decision, citing its alignment with multiple previous court findings supporting the policyholders’ interpretation. Conversely, a KCL spokesperson indicated the company’s disagreement with the appellate judgment, hinting at further appeals.
This ruling not only emphasizes the judicial system’s role in upholding contractual fidelity but also sets a significant precedent in how insurance claims related to policy interpretations are to be judged. As policymakers and insurance firms digest the implications of this decision, both policyholders and insurers will likely pay keen attention to the precision of policy language and its practical enactment.