Life insurance lapse disputes have become increasingly common in recent years, especially after the California Legislature enacted Insurance Code sections 10113.71 and 10113.72 (Statutes) to prevent policyholders from inadvertently losing coverage. The Statutes impose specific requirements on insurers before terminating a life insurance policy for nonpayment, including mandatory grace periods and advance notice obligations. The Statutes set forth a “single, unified pretermination notice scheme” consisting of “three components” designed to minimize the chance that policy holders would inadvertently default. McHugh v. Protective Life Ins. Co., 12 Cal. 5th 213, 240 (2021). First, the Statutes require insurers to give policy owners a 60-day grace period to pay a missed premium payment (the Grace Period Requirement). Cal. Ins. Code § 10113.71(a). Second, they require insurers to notify policy owners of their right to designate a third party to receive notices regarding overdue premiums or impending terminations of their policy (the Designee Notice Requirement). Id. § 10113.72(a), (b). Third, and finally, the Statutes require insurers to provide notices regarding any unpaid premium, within 30 days of the missed payment, and notices regarding impending termination for nonpayment, at least 30 days before termination (the Pretermination Notice Requirement). Id. §§ 10113.71(b), 10113.72(c).

In Siino v. Foresters Life Insurance and Annuity Co., __ F.4th___ (9th Cir. 2025), the Ninth Circuit Court of Appeals recently issued a published decision clarifying how these statutes operate and what a policyholder must prove to sustain a challenge to a policy lapse. The result was a split decision that both affirmed protections under the law and emphasized the continued importance of showing causation in breach of contract claims.

The facts in Siino are a cautionary tale about the risks of missed notices. In 2010, Pamela Siino purchased a $100,000 term life policy from Foresters Life Insurance and Annuity Company (FLIAC). In 2014, she moved and attempted to update her address with the insurer, but the change was rejected for lack of a signature. As a result, notices sent by FLIAC regarding upcoming premiums and potential lapse were sent to her old address. After failing to pay the premium due in January 2018, her policy was deemed lapsed. Although FLIAC sent a notice on February 26, 2018, advising her that her policy had lapsed and that she could reinstate the policy within 30 days, Siino never received it. She discovered the lapse only in 2019 after her husband contacted their insurance agent. Rather than reinstating her policy, she eventually purchased new coverage and filed suit under California’s lapse statutes. She filed a putative class action suit against FLIAC asserting claims for declaratory relief under state and federal law, breach of contract, and violations of California’s Unfair Competition Law.

Siino’s claim centered on two critical violations of California law. First, she alleged that FLIAC failed to provide a pretermination notice at least 30 days before terminating her policy, as required by Insurance Code § 10113.71(b). Second, she claimed that FLIAC never informed her of her right to designate another person to receive lapse or termination notices, a violation of Section 10113.72. The district court ruled in her favor, granting declaratory relief and concluding that her policy remained in force so long as she paid back the missed premiums. Siino complied, tendering the overdue amounts with interest. FLIAC appealed.

The Ninth Circuit affirmed in part and reversed in part. In a detailed opinion by Judge Milan D. Smith, the court held that the district court correctly found that FLIAC violated both the Pretermination Notice Requirement and the Designee Notice Requirement. The court noted that FLIAC’s letter to Siino in February 2018 came after the policy was already considered lapsed and thus failed the statutory requirement of providing notice before termination. As the court explained: “FLIAC’s notice failed to provide Siino with the pretermination warning she was owed under the Statutes” because it offered reinstatement rather than warning of an impending lapse.

Likewise, FLIAC failed to produce any evidence that it ever advised Siino of her right to designate someone to receive notices. Siino declared she never received such a notice, and the insurer’s representative could neither confirm nor deny that it had been sent. This, the court held, constituted a clear violation of Section 10113.72. She could properly prove this in part because she was getting her mail at the old address until 2015 and the requirement became effective under California law in 2013. “Because Siino affirmatively declared that FLIAC never sent her notice of the right to designate, and FLIAC failed to bring forward opposing evidence… there is no genuine dispute of fact,” the court wrote.

But the court stopped short of awarding Siino full relief. It reversed the portion of the district court’s order declaring that her policy remained valid and enforceable. Citing its recent decision in Small v. Allianz Life Insurance Co. of North America, 122 F.4th 1182 (9th Cir. 2024), the Ninth Circuit emphasized that declaratory relief premised on breach of contract requires a showing of causation under Small. That is, a plaintiff must show the statutory violations caused the lapse. The court concluded that Siino failed to meet that burden. “Because the record makes clear that Siino moved in 2014 and failed to successfully update her address on file,” the court explained, “any additional notices sent by FLIAC would have been directed to an old address where Siino would not have received them.” Thus, FLIAC’s violations were not the legal cause of her injury.

In conclusion, Siino underscores both the power and the limits of California’s lapse statutes. The Ninth Circuit affirmed the importance of strict compliance by insurers, particularly with respect to pretermination and designee notices. At the same time, the ruling serves as a reminder that plaintiffs still bear the burden of proving causation when seeking contract-based remedies. As life insurers face increasing scrutiny under these statutes, Siino clarifies that while procedural violations matter, they do not guarantee reinstatement absent a clear connection to the loss of coverage. For policyholders and insurers alike, diligence in notice and communication remains paramount.