Long-Term Care Insurance Lawsuits

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While an insurer may not intentionally make fraudulent statements on an application, this does not mean it is above the law. Insurance companies routinely engage in secretive investigations, and they often threaten incompetent insureds and their families. These claims can be subjected to abusive claim procedures since incompetent insureds often cannot defend themselves. Moreover, contemporaneous medical records may be unavailable or may need to be interpreted. In some cases, the treating physician during the time of application has since retired or died. Ultimately, a carrier must prove that the information contained in the application was not accurate.

Transamerica Life Insurance Company

A putative class action filed against Transamerica Life Insurance Company was successfully dismissed, with the court ruling that the company issued long-term care insurance policies with flawed actuarial assumptions and shifted the problem to policyholders through multiple premium increases. The complaint alleged fraud, breach of contract, and unjust enrichment, but was dismissed based on the filed rate doctrine, which generally holds that the premium charged by a company is “reasonable.”

A Long-term care insurance lawsuit against Transamerica Life Insurance Company has been filed by people who were denied benefits or have had premiums not paid. Transamerica has several long-term care insurance policies and has paid almost $2.5 billion in claims. The company was founded in 1904 as a small bank and expanded into a financial services company, becoming Bank of America. Approximately 20 years ago, Transamerica ventured into the insurance industry. The company’s headquarters no longer sit in San Francisco, but its iconic pyramid remains the company’s logo.

Life Investors Insurance Company of America

The insurer Life Investors Insurance Company of America was recently the latest company to be sued over denying policy benefits to cancer policyholders. The case, filed in Federal Court in Oxford, Miss., is the latest example of how consumers can file a long-term care insurance lawsuit against a company. Middletown Cycle and GE Money Bank were accused of defrauding consumers and were named in a separate lawsuit in the Warren County Court in Lebanon, Ohio.

The insurer has filed several legal challenges against policyholders. In a putative class action lawsuit, filed in Kansas in October 2013, plaintiffs claimed the company issued long-term care insurance policies based on flawed actuarial assumptions and transferred the underlying actuarial defect to policyholders through multiple premium increases. The complaint alleged fraud, breach of contract, and unjust enrichment, among other claims. While the complaint cited several arguments against the insurer, the court dismissed the complaint. The filed rate doctrine is a common legal theory under which a company is presumed to be reasonable under the circumstances.

Senior Health Insurance Co. of Pennsylvania

The Senior Health Insurance Company of Pennsylvania owes its financial troubles to poor investments and underpricing of policies. Senior Health’s financial situation has gotten so bad that it has been forced into rehabilitation. The Pennsylvania insurance commissioner and the state’s department of insurance are now fighting the company in court. Among the lawsuits against the company are actions taken by the Pennsylvania Department of Insurance and the state of Louisiana.

Senior Health is a long-term care insurance company that operates off of the closed block of long-term care policies. Its corporate office is in Indiana, while its administrative office is in St. Paul, Minnesota. The Pennsylvania Insurance Department, the company’s main regulator, has taken no formal action against Senior Health. The company has 39,000 LTC insurance policies. The company faces up to $3 billion in claims over the next five years, and it collects about $230 million a year in premiums.

Genworth Life Insurance Company

In February, Genworth reported a $327 million fourth-quarter pre-tax charge. Its reserves have climbed by billions of dollars over the last decade, and the company is now trying to convince state insurance regulators to permit annual small premium increases similar to those in health insurance. In contrast, long-term care policies have large premium increases that are not uncommon. If Genworth’s decision is upheld, it will have to reconsider its sales model.

The Genworth lawsuit centers on several policies. It claims that it sold California CADE and Reprice policies without adequately explaining their terms and conditions to policyholders. Moreover, it allegedly failed to disclose its expectations for future rate increases. This settlement agreement also requires Genworth to offer two alternatives for policyholders who do not want to terminate their policies. These alternatives are a reduced paid-up policy or a fully paid-up policy with lower benefits.

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