Developments Reported in No. 334
On January 18, 2019, three individuals filed a class action lawsuit against Genworth and Genworth Life Insurance Company (GLIC). The plaintiffs are Pennsylvania residents Jerome and Susan Skochin, and Maryland resident Larry Huber. They purchased their policies in 2003 and 2004 from General Electric Capital Assurance Company, a predecessor of Genworth and GLIC. The original complaint included four claims for relief: Count 1 for breach of the implied covenant of good faith and fair dealing, Count 2 for fraudulent inducement, Count 3 for fraudulent omission, and Count 4 for violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (CPL).
The lawsuit is one of many involving premium increases on LTC insurance policies. Unlike other cases, however, the plaintiffs do not challenge the increases. Rather, they allege the defendants failed to disclose material information to assist policyholders in making decisions about their policies. Thus Skochin may be thought of as a disclosure (or nondisclosure) case.
On March 12, 2019, the defendants filed a motion to dismiss the complaint. The judge denied the motion. On April 29, the plaintiffs filed an amended complaint that included four claims for relief: Count 1 for breach of contract, Count 2 for fraudulent inducement, Count 3 for fraudulent omission, and Count 4 for violation of the CPL.
On May 13, the defendants filed a motion to dismiss the amended complaint. On June 28, the judge ordered the defendants to complete production of documents by July 19. On July 3, the plaintiffs filed a stipulation of dismissal of Genworth, leaving GLIC as the only defendant.
On August 7, the judge set November 14 for a class certification hearing, and March 3, 2020 for the jury trial to begin. On August 29, the judge granted GLIC's motion to dismiss Count 1 (breach of contract) in the amended complaint, and denied GLIC's motion to dismiss the other three counts. He ordered the plaintiffs to file a second amended complaint by September 20, and GLIC to file its answer by October 4. On September 20, the plaintiffs filed a second amended complaint that included two claims for relief: Count 1 for fraudulent inducement by omission, and Count 2 for violation of the CPL.
Developments Subsequent to No. 334
On October 30, the plaintiffs filed a notice of settlement. On November 1, the judge ordered the plaintiffs to file a third amended complaint, and stayed the defendant's answer pending approval of the settlement. He also ordered the plaintiffs to file a motion to notify the class and a proposed settlement agreement. On November 22, the plaintiffs filed a third amended complaint. On December 20, the plaintiffs filed a motion to notify the class and a proposed settlement agreement.
On January 15, 2020, the judge held a hearing, granted preliminary approval of the proposed settlement, directed that the class notice be mailed to class members, and set the final approval hearing for July 10. On March 31, in response to requests by Genworth, the judge granted an amendment to the preliminary approval, and directed that the notice be mailed to class members. The class notice is in the complimentary package offered at the end of this post.
The Proposed Settlement
According to the proposed settlement and the class notice, policyholders will be offered certain options. Some policyholders will be offered options that include cash benefits. However, I found no estimate of the aggregate cash benefits to policyholders, other than a wide range of figures in the ambiguous paragraph (b) of the following description of the compensation of the plaintiffs' attorneys:
As part of the request for Final Approval of the Settlement Agreement, Class Counsel will file a request seeking to be paid the following:
(a) $2,000,000 relating to the injunctive relief that is in the form of the Disclosures.
(b) An additional contingent payment of 15% of certain amounts related to Special Election Options selected by the Settlement Class, which shall be no less than $10,000,000 and no greater than $24,500,000. None of the attorneys' fees will be deducted from payments made by Genworth to Settlement Class members.
The plaintiffs' attorneys will also request an award of litigation expenses of not more than $75,000. With regard to the three named class representatives, the plaintiffs' attorneys will request approval of service payments of up to $25,000 for each of them for the time, work, and risk they undertook. None of the service payments will be deducted from payments made by Genworth to class members.
The Indiana Motion to Intervene
On April 10, after the settlement administrator mailed the class notices, the Indiana Department of Insurance (IDOI) moved to intervene to seek a temporary stay. Here is the first sentence of the motion:
Pursuant to Federal Rule of Civil Procedure 24, the Indiana Department of Insurance moves to intervene for the purpose of seeking a temporary stay of the proceedings in this case due to the on-going national emergency resulting from the COVID-19 virus.
On the same day, IDOI moved for a temporary stay and filed briefs in support of both motions. On April 17, the plaintiffs opposed the IDOI motions. On April 23, IDOI responded to the opposition. The judge has not yet ruled on the matter. Court documents relating to the IDOI effort are in the complimentary package offered at the end of this post.
Seven Policyholder Objections
Seven policyholders filed objections with the court. On April 20, a Florida policyholder objected. On April 22, a Colorado policyholder objected. On April 28, a Michigan couple objected. On May 1, a New York policyholder objected. On May 1, an Idaho policyholder objected. On May 5, a California policyholder objected. On May 5, a North Carolina couple objected. Court documents relating to the seven objections are in the complimentary package offered at the end of this post.
Excerpt from Genworth 10-Q
On May 6, Genworth filed its 10-Q report for the quarter ended March 31, 2020. On page 63, the report describes the Skochin case. Here are the last two sentences of the description (the full description is in the complimentary package offered at the end of this post):
Based on the Court's preliminary approval of the settlement, we do not anticipate the outcome of this matter to have a material adverse impact on our results of operations or financial position. If the court does not approve the final settlement, we intend to continue to vigorously defend this action.
General Observations
In other posts of mine about settlements of lawsuits involving premium increases on LTC insurance policies, there have sometimes been references to the size of a "settlement fund." Such a figure helps to evaluate the reasonableness of the proposed compensation of the plaintiffs' attorneys. Without a "settlement fund" figure, an evaluation is difficult.
It seems strange that the plaintiffs' attorneys oppose the eminently reasonable IDOI request for a temporary stay due to the pandemic. I hope the judge will grant the IDOI motions and will order a temporary stay.
I am an Indiana resident. I am impressed by and grateful for my home state department's effort. At the same time, I an disappointed that no other state insurance regulators have sought a temporary stay—not even Genworth's home state of Virginia, where the case is being tried. Also, the Virginia commissioner chairs an LTC Insurance Task Force that was created by the National Association of Insurance Commissioners and that hopes to get its arms around the problems of the LTC insurance business.
Available Material
I am offering a complimentary 81-page PDF consisting of the class notice (9 pages), court documents relating to IDOI's effort to obtain a temporary stay (54 pages), court documents relating to seven policyholder objections (17 pages), and the 10-Q description of the Skochin case (1 page). Email jmbelth@gmail.com and ask for the May 2020 package about the Skochin lawsuit against Genworth.