Monday, June 3, 2019

No. 315: Long-Term Care Insurance —A Lawsuit Relating to the Calculation of Inflation Benefits

On May 17, 2018, Gerald Issokson (Gerald), executor of the estate of his mother, Pearl Issokson (Pearl), filed a class action lawsuit against Connecticut General Corporation and three other firms. Pearl owned long-term care (LTC) insurance coverage under a group LTC policy. The policy included home health care benefits up to a lifetime maximum benefit of $10,000, and an inflation provision. Pearl's coverage was provided through a certificate effective November 1, 1988. (See Issokson v. Connecticut General, U.S. District Court, District of Massachusetts, Case No. 3:18-cv-30070.)

The Complaint
Pearl died April 20, 2015. At the time of her death she was aged 92 and had been receiving home health care since 1990 due to physical and cognitive impairments. She was eligible for home health care benefits from 1990 through 2013, but neither she nor her family collected those benefits. Gerald asked the company to look into the matter.

The company sent Gerald a check for $16,130 representing the sum of the $10,000 lifetime maximum benefit and $6,130 for the impact of the inflation provision. Gerald alleges in the complaint that the company calculated the impact of the inflation provision using simple interest, although the insurance certificate seems to require that the impact of the inflation provision should be calculated using compound interest.

The Inflation Provision
The inflation provision in Pearl's insurance certificate consists of one sentence. It reads:
The benefits will automatically be increased by the lesser of the percent of increase in the Consumer Price Index during the prior calendar year or 5 percent.
When Gerald requested an explanation of the inflation calculation, a company spokesperson responded in a letter dated February 4, 2016. The letter shows the yearly percentage increases in the Consumer Price Index (CPI) for the years 1990 through 2013. The simple total of the yearly percentage increases in the CPI is indeed 61.3 percent. According to my calculation, however, the total of the yearly percentage increases in the CPI, compounded annually,  is 82.98 percent. Thus the check should have included $8,298 rather than $6,130 for the impact of the inflation provision. The reason why the discrepancy was only $2,168 was that the yearly percentage increases in the CPI were small during the time period in this case. Gerald's complaint and the spokesperson's letter are in the complimentary package offered at the end of this post.

The Classes
Gerald seeks to represent four classes. They are: (1) a "damages class" consisting of all current and future policyholders, nationwide, of any of the defendants whose certificates of insurance contain the language quoted above, or similar language, (2) an "injunctive class" consisting of all current policyholders, nationwide, of any of the defendants whose certificates of insurance contain the language quoted above, or similar language, (3) a "Massachusetts damages class," and (4) a "Massachusetts injunctive class."

The Counts
The complaint consists of five counts. They are: (1) breach of contract, (2) violations of the Connecticut Unfair Insurance Practices Act, (3) declaratory relief, (4) bad faith breach of duty of good faith and fair dealing, and (5) violations of certain Massachusetts laws.

Progress of the Case
The defendants have not filed an answer to the complaint. However, on July 16, 2018, the plaintiff and the defendants filed a joint stipulation containing three items:
  1. This Court lacks personal jurisdiction over the claims of non-Massachusetts putative class members and all claims against Connecticut General Corporation.
  2. Plaintiff lacks standing to assert class action claims under the Connecticut Unfair Insurance Practices Act against Connecticut General Corporation.
  3. Plaintiff lacks Article III standing to seek declaratory relief.
On July 20, 2018, the judge commented on the joint stipulation. He said in part:
The court adopts the parties' proposal set forth in the Stipulation. Therefore, the court will treat the Stipulation as a fully briefed and opposed partial motion to dismiss, incorporating the identical arguments made in the briefing and oral argument regarding the partial motion to dismiss in Rain v. Connecticut General Corp., 17-cv-30115....
It is important to note that the subject of the Rain case is not related to the subject of the Issokson case. The judge has not yet ruled on the partial motion to dismiss in either the Rain case or the Issokson case.

General Observations
The underlying issue in the Issokson case is whether the impact of the inflation provision in Pearl's certificate should be calculated on a simple basis or on a compound basis. The defendants have not yet said a word about that underlying issue.

Based on my reading of the wording of the inflation provision in Pearl's certificate, I think the company should have used the compound calculation rather than the simple calculation. Even if one believes the opposite, the language in the certificate is certainly ambiguous on the subject, and an ambiguous provision is supposed to be interpreted against the party that drafted the provision.

Available Material
I am offering a complimentary 29-page PDF consisting of the Issokson complaint (22 pages), the company spokesperson's letter (2 pages), and the joint stipulation (5 pages). Send an email to jmbelth@gmail.com and ask for the June 2019 package about the Issokson LTC insurance case.

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