Thursday, August 14, 2014

No. 64: Coventry First—A Setback in the Griswold Case

In No. 27 posted February 3, 2014, I discussed a class action lawsuit filed against Coventry First LLC (Fort Washington, PA), an intermediary in the secondary market for life insurance. The plaintiff is Lincoln Griswold, a Pennsylvania resident.

The Underlying Lawsuit
In 2006, Griswold purchased an $8.4 million policy from United of Omaha Life Insurance Company. In 2008, he sold the policy to Coventry. Later he learned that an agent involved in the transaction received a much larger commission than what Griswold had been led to believe. In October 2010, Griswold filed a class action lawsuit against Coventry in state court. Coventry removed the case to federal court.

In December 2010, Coventry filed a motion to dismiss the complaint or compel arbitration. In June 2011, the district court judge conducted a hearing on the motion. In February 2013, the district court judge denied the motion. (Griswold v. Coventry, U.S. District Court, Eastern District of Pennsylvania, Case No. 2:10-cv-5964.)

The Appellate Ruling
Coventry appealed the decision. In January 2014, after extensive briefing, a three-judge appellate panel heard oral arguments.

On August 11, 2014, the appellate panel handed down a unanimous ruling. The panel said it lacked appellate jurisdiction to review the district court's denial of Coventry's motion to dismiss Griswold's complaint. The panel also said it affirmed the district court's denial of Coventry's motion to compel arbitration. (Griswold v. Coventry, U.S. Court of Appeals, Third Circuit, Case No. 13-1879.)

General Observations
As I said in No. 27, I think the Griswold case is important. It is reminiscent of the serious charges filed against Coventry in October 2006 by then New York Attorney General Eliot Spitzer, and the settlement of the charges in September 2009 by then New York Attorney General Andrew Cuomo. The Florida Office of Insurance Regulation also issued an order to show cause and later resolved the matter by issuing a consent order. (See the January/February 2007, December 2007, and December 2009 issues of The Insurance Forum.)

It remains to be seen whether Coventry will ask the panel to reconsider its ruling and/or ask the full Third Circuit to review the ruling, whether Griswold will seek class certification in the district court, whether discovery—including the taking of depositions—will occur, and whether a trial date will be set in the district court. Should a class be certified in this case, one can only imagine its huge potential impact on Coventry. Also, lurking in the background is the possibility that Coventry will try to settle the case and persuade Griswold to agree to keep the terms of the settlement confidential.

I am offering a complimentary PDF containing the Third Circuit panel's 22-page ruling. Send an e-mail to and ask for the Griswold/Coventry appellate ruling.