Recent Developments in LTC Rate Increase Litigation

A relatively consistent flow of premium rate increase litiga­tion has been filed against long-term care (LTC) carriers over the past several years. Following the plaintiffs’ bar having early success in a limited number of LTC rate increase class actions in the early 2000s, the tide turned definitively in favor of carriers in what we think of as the first generation of such litigation, where the plaintiffs’ bar focused primarily on an alleged duty to disclose possible rate increases and challenging the language of the contract itself. Despite the industry’s over­all success, premium rate increase litigation has attracted an increased level of sophistication from the plaintiffs’ bar, which shifted to more creative theories based on extra-contractual rep­resentations (e.g., marketing materials) in what we view as the second generation of premium rate increase litigation. While the industry remains mostly successful in warding off rate in­crease litigation, a new trend may be developing as recent cases focus on more nuanced contractual limitations and rate increase implementation issues.

First Generation Premium Rate Increase Litigation

First generation premium rate increase complaints typically as­serted claims of some combination of breach of contract, fraud, bad faith, violations of unfair trade practices statutes, and unjust enrichment, supported by allegations that the carriers knew the policies were underpriced at the time of sale, intended to close blocks knowing that doing so may lead to financial losses, and intended to raise premiums to encourage “shock lapse.”

Alvarez is one of the industry’s early generation class action vic­tories and it set the tone for the industry’s defense against chal­lenges to insurers’ contractual right to raise premiums. In Alva­rez, the plaintiff’s complaint was a typical bait-and-switch theory.

READ THE FULL ARTICLE IN THE SOA LONG-TERM CARE NEWS.

About the Author: Nolan Tully

Nolan Tully advocates for insurance and financial services clients facing challenges in various aspects of their businesses. Nolan assists life, long-term care and disability insurers as well as annuity issuers with product development, regulatory compliance, and dispute resolution and litigation. Visit Nolan's bio on the Faegre Drinker website.

About the Author: Sandra K. Jones

Sandra Jones partners with insurance industry clients to address and resolve legal and regulatory challenges, as well as coverage and claims disputes that may be impeding their businesses. Visit Sandra's full bio on the Faegre Drinker website.

About the Author: Steven H. Brogan

Steven Brogan represents insurers and third-party administrators in litigation, regulatory compliance, premium rate increases, claims administration, compliance training and audits, and fraud prevention, with particular focus on long-term care insurance matters. In litigation, he represents long-term care insurers in class action and individual litigation related to a wide range of matters, including complex coverage issues, bad faith claims and premium rate increase litigation. Visit Steve's full bio on the Faegre Drinker website.

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