Friday, December 20, 2019

No. 346: Long-Term Care Insurance—The Pending Settlement of the Newman Lawsuit Against Metropolitan Life

In No. 253 (February 15, 2018) and No. 336 (October 10, 2019), I wrote about a class action lawsuit filed by Margery Newman, an Illinois resident, against Metropolitan Life Insurance Company relating to long-term care (LTC) insurance. Recently the judge granted preliminary approval to a settlement of the case. Here I discuss the settlement. (See Newman v. Metropolitan, U.S. District Court, Northern District of Illinois, Case No. 1:16-cv-3530.)

Newman was 56 when she bought an "LTC Premier" policy in September 2004. It 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.
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 the judge dismissed the complaint without prejudice. 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. Five days later, at a hearing, the judge denied the motion and dismissed the case with prejudice.

Newman appealed to the Seventh Circuit. In February 2018 a three-judge panel unanimously reversed the district court's ruling and sent the case back to the district court for further proceedings. (See Newman v. Metropolitan, U.S. Court of Appeals for the Seventh Circuit, Case No. 17-1844.)

Metropolitan petitioned for a rehearing by the full appellate court. Newman opposed the petition. The panel denied the petition and filed a slightly amended ruling. Here is the final paragraph of the panel's amended ruling:
Newman asserts that Metropolitan 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 Metropolitan pull the rug out from under her. Neither Metropolitan's brochure nor the terms of the policy forecast this possibility. These allegations were enough to state a claim under the theories Newman presented. We therefore REVERSE the district court's grant of Metropolitan's motion to dismiss and REMAND for further proceedings.
Back in the district court, the case dragged on for more than a year. The deliberations included mediation discussions and actions by several plaintiff-intervenors. Finally, on November 7, 2019, the judge granted preliminary approval to a settlement of the case.

The Settlement
The judge named Newman and three plaintiff-intervenors as class representatives. For the purposes of the settlement only, the judge conditionally certified the following class:
All individuals who purchased from Metropolitan Life Insurance Company a Long-Term Care Insurance Policy with the Reduced-Pay at 65 Option, which is either still in-force as of October 24, 2019, or which lapsed within ninety (90) days of their receipt of notice of a premium increase after they had attained the age of 65. Notwithstanding the foregoing, the Settlement Class does not include persons whose policies lapsed before receiving notice of a premium rate increase.
The judge set the fairness hearing for February 20, 2020. Class members who wish to be excluded from the settlement must file their requests for exclusion not later than 30 days before the fairness hearing. Objections to the settlement must be postmarked not later than 30 days before the fairness hearing.

Under the heading "What Does the Settlement Provide?," the class notice includes one paragraph. It reads:
The Settlement will result in cash refunds totaling approximately $1,300,000 to: (i) Class Members who have already been subjected to a premium rate increase after they turned 65; (ii) Class Members who reduced the amount of their coverage in order to avoid a premium rate increase after they had turned 65; and (iii) Class Members who had LTC policies that lapsed within 90 days of a post-age 65 premium increase. In addition, Metropolitan has agreed not to increase premiums on any Class Member in the future who is or becomes 65 or older after such person reaches age 65. For those Class Members who were already subject to one or more post-age 65 premium increases, Metropolitan has agreed not to collect any premium amounts above 50% of each such Class Member's last pre-age 65 premium amount. The Settlement also includes Metropolitan's payment of attorneys' fees as approved by the Court up to $5,000,000, the reimbursement of certain expenses not to exceed $80,000 incurred by Class Counsel, incentive awards not to exceed $20,000 in total to Plaintiff and other parties, and the costs of the administration of the Settlement.
Under the heading "How Will the Lawyers Be Paid?," the class notice includes three paragraphs. They read:
  • Class Counsel will ask the Court for attorneys' fees not to exceed $5,000,000. Metropolitan shall pay such sums for attorneys' fees and expenses as may be approved by the Court. Class Members are not personally liable for any such fees or expenses.
  • The attorneys' fees and expenses requested will be the only payment to Class Counsel for their efforts in achieving this Settlement and for their risk in undertaking this representation on a wholly contingent basis. Since the case began in 2016, Counsel has conducted all of the investigation, briefing and motions practice necessary to prepare the case for trial. To date, Counsel has not been paid for their services, nor reimbursed their expenses. Class Counsel has expended significant hours of attorney time in prosecuting the Class's claims and will ask the Court for certain expenses incurred in prosecuting the Litigation to be paid by Metropolitan in an amount not to exceed $80,000.
  • Class Counsel shall file a formal motion with the Court for approval of the Settlement and their request for attorneys' fees and reimbursement of expenses not later than 30 days prior to the Fairness Hearing.
General Observations
Attorneys' fees and expenses in this case far exceed amounts to be paid to class members. I believe there are three primary reasons for that result. First, the policies involved—those containing the "reduced-pay at 65 option"—probably represent a small portion of Metropolitan's LTC insurance offerings. Second, the granting of Metropolitan's motion to dismiss, requiring the class's attorneys to appeal the ruling, probably enlarged the efforts needed by them. Third, the long delays in the district court after the appellate ruling probably enlarged the efforts needed by them. In my opinion the large ratio of attorneys' fees and expenses to class members' benefits is justified.

Available Material
I am offering a complimentary 20-page PDF consisting of the judge's November 2019 preliminary approval of the settlement, which includes the notice to be sent to class members. Send an email to and ask for the December 2019 package about Newman v. Metropolitan.