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Click here for the full text of this decision FACTS:Since 1965, National Western Life Insurance Co. sold child riders on life insurance policies. Each rider provided life insurance in $1,000 increments up to $5,000 for children listed in the application and any others thereafter born to or adopted by the applicant. Post-application children were covered without proof of insurability and without any obligation on the insured parent to notify National Western of their existence. Generally, coverage ceased when a child reached age 25 or the parent died, or the policy was no longer in effect. National Western did not notify an insured parent when every child listed in the application was over 25. Most of the riders, but not all, contained a provision disclaiming liability for benefits when the insurer had accepted a premium after termination and stating that any premiums so accepted would be refunded. Eighty-one percent of the policies lapsed. The record contains no indication of the probable total amount of overpayments National Western received for child riders. In March 2000, Ella Mae Rowe sued National Western on behalf of all its similarly situated policyholders for breach of contract, fraud, negligent misrepresentation, violations of the Texas Deceptive Trade Practices-Consumer Protection Act, violations of Article 21.21 of the Texas Insurance Code, unjust enrichment, and a constructive trust. She alleged that National Western designed the child rider so that policyholders likely would not notice that they no longer had coverage and would continue to make premium payments anyway. Rowe claims actual damages equal to the overpayments, plus statutory and punitive damages. The trial court certified a nationwide, opt-out class of “[a]ll purchasers, who were residents of the United States at the time of purchase, of . . . NWL child riders [on specified forms] issued from June 15, 1965 to the date of this Order [June 22, 2001].” The court found that this group would include over 12,000 persons resident in 41 states. The court’s order excepts from the class “[o]wners of active child riders who have children under 25 years of age as of the date of this Order, as listed on the policy application forms.” In its findings, the court stated that class notice will instruct a recipient to fill out and return an attached form if he or she had post-application children or wanted to retain coverage. The form states that a failure to return it may result in a presumption that the recipient had no post-application children and, for active policyholders, in termination of their child rider coverage. The findings add: “On damages, it is expected that most of the damage calculation would be provided by expert testimony.” The findings do not explain how this calculation would be made without determining whether or at what point policyholders no longer wanted child rider coverage. National Western pleaded limitations as a defense, and Rowe pleaded the discovery rule and fraudulent concealment. The trial court found that the discovery rule issues could be tried by asking the jury to “decide when a reasonable policyholder had met the discovery rule test and the fraudulent concealment test.” The court did not explain whether or how individual issues related to limitations will be determined. The court did conclude, however, that persons with policies terminated prior to January 1, 1980 should be excluded from the class because of “the increasing difficulty of locating policyholders, the further back the Class definition is extended.” The findings do not explain the court’s choice of that date. The trial court concluded that Texas law should apply to all claims of all class members, essentially because National Western’s activities are centered in Texas. The court of appeals affirmed the class certification. HOLDING:Reversed and remanded. The trial court did not perform the rigorous analysis required by Southwestern Refining Co. v. Bernal, 22 S.W.3d 425 (Tex. 2000), to determine whether class action requirements have been met in this case, the court concludes. “The court did not explain why a policyholder’s failure to respond to class notice should give rise to a presumption that the policyholder has no child under 25 and no longer desires child rider coverage, given that a common response to class action notices is to ignore them. The court stated that policyholders with children under 25 or still desiring child rider coverage”will be allowed to exclude themselves from the Class’ at the end when proofs of claim must be submitted. But the trial court excepted such policyholders from the class definition, so it is not clear how the exclusion process is intended to work. The court gave no meaningful explanation for how it would try damages, actual and punitive; limitations issues, including discovery rule and fraudulent concealment issues; and reliance, in causes of action for which reliance is an element. The court did not explain why, given the number of individual issues, it determined that common issues predominate. The court did not explain why class members in another state should not have the benefit of that state’s law. Finally, the court did not analyze whether, given the difficulties of proceeding with a nationwide class, many of whose members’ claims predate the applicable limitations period by as much as 18 years, a class action is a superior means for resolving the dispute.” OPINION:Per curiam. Johnson, J., did not participate.

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