Thursday, October 10, 2019

No. 336: Long-Term Care Insurance—An Update on the Newman Lawsuit Against Metropolitan Life

In No. 253 (February 15, 2018), I wrote about a class action lawsuit filed in March 2016 by Margery Newman, an Illinois resident, against Metropolitan Life Insurance Company relating to long-term care (LTC) insurance. She was 56 when she bought an "LTC Premier" policy in September 2004. The policy included a "reduced-pay at 65 option," which Metropolitan had described as follows in a marketing brochure:
By paying more than the regular annual premium amount you would pay each year up to the Policy Anniversary on or after your 65th birthday, you pay half the amount of your pre-age 65 premiums thereafter.
Before Newman turned 65, the semiannual premium was $3,813.68. In September 2012 the semiannual premium declined by 50 percent, to $1,906.84. In March 2015, Metropolitan increased the semiannual premium by 102 percent, to $3,851.81.

The Complaint
In her March 2016 complaint and June 2016 amended complaint, Newman alleged breach of contract, violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, fraud, and fraudulent concealment. In July 2016 Metropolitan filed a motion to dismiss the complaint for failure to state a claim. In March 2017 U.S. District Court Judge Thomas A. Durkin dismissed the complaint without prejudice. His ruling is in the complimentary package, which is still available, offered at the end of the above-mentioned No. 253.

In April 2017, in accordance with the judge's ruling, Newman filed a motion for leave to file a second amended complaint and attached a proposed second amended complaint. The judge denied the motion and dismissed the case with prejudice. (See Newman v. Metropolitan, U.S. District Court, Northern District of Illinois, Case No. 1:16-cv-3530.)

The Appeal
Newman appealed to the Seventh Circuit, and the case was assigned to a three-judge panel. On February 6, 2018, the panel unanimously reversed the district court's action and sent the case back to the district court for further proceedings. Here is the final paragraph of the panel's ruling (the full ruling is in the complimentary package, which is still available, offered at the end of the above-mentioned No. 253):
Newman asserts that MetLife lured her into a policy by promising a trade of short-term expense for long-term stability. She took the deal and spent nine years investing in a plan, only to have MetLife pull the rug out from under her. Neither MetLife's brochure nor the terms of the policy forecast this possibility. These allegations were enough to entitle her to prevail on the liability phase of her contract claim, and they are enough to permit her to go forward on her other theories. We therefore REVERSE the district court's grant of MetLife's motion to dismiss and REMAND for further proceedings.
On February 20, 2018, Metropolitan petitioned for a rehearing by the full appellate court. On March 7 Newman opposed the petition. On March 22 the panel denied the petition and filed an amended ruling. There were only a few changes from the panel's original ruling. One of the changes was in the next-to-the-last sentence of the final paragraph quoted above. That sentence in the amended ruling reads: "These allegations were enough to state a claim under the theories Newman presented." The amended 17-page appellate ruling is in the complimentary package offered at the end of this post. (See Newman v. Metropolitan, U.S. Court of Appeals for the Seventh Circuit, Case No. 17-1844.)

Recent Developments in the District Court
On April 18, 2018, Metropolitan filed an answer to Newman's complaint. During the next few months several individuals sought to intervene in the case, and three were allowed to do so. During that time, there were also discussions of mediation with the goal of settling the case. In August 2018 the parties held a settlement conference. In November the judge held a telephone conference to discuss settlement issues, but the parties were not able to reach a settlement. In December the judge ordered the parties to submit a proposed discovery plan for class certification.

On January 3, 2019, the parties submitted a proposed discovery plan for class certification. On January 24 the parties said settlement discussions were ongoing. On January 27 the parties said they have agreed to private mediation. On March 5 Newman filed a motion for a stay pending the outcome of the private mediation. On March 12 the judge granted the motion. On April 25 the parties said they are proceeding with private mediation.

On September 24, I emailed an attorney on each side asking whether they think the private mediation eventually will succeed or whether they think the case will go to trial. One acknowledged the email but declined to comment. The other did not acknowledge the email.

General Observations
Newman is an interesting case. However, I will not speculate on whether the private mediation will succeed, or whether the case will go to trial. I plan to report significant further developments in the case.

Available Material
I am offering a complimentary 17-page PDF consisting of the March 22, 2018 appellate panel's amended ruling. Email and ask for the October 2019 package relating to Newman v. Metropolitan.