LTCi Carrier Secures Dismissal of Class Action Case Alleging ERISA Violations Stemming from LTC Insurance Premium Rate Increases

A federal judge has dismissed a putative class action case brought by a plaintiff asserting ERISA violations against The Prudential Company of America (“Prudential”) and Tufts University (“Tufts”), stemming from premium rate increases to an ERISA group long-term care insurance plan sponsored by plaintiff’s employer, Tufts, and issued by Prudential.

On July 12, 2022, United States District Judge Richard Stearns granted Tufts and Prudential’s respective motions to dismiss the action, Parmenter v. Prudential Insurance Company of America, et al., No. 1:22-CV-10079, Dkt. No. 43 (D. Mass. July 12, 2022), which was originally filed on January 20, 2022 in the United States District Court for the District of Massachusetts.

The plaintiff had alleged that Prudential issued group long-term care insurance certificates nationwide to group certificate holders under various ERISA-governed employee benefits plans, and that those certificates promised that Prudential could only increase premium rates in the future “subject to the approval of the [state of insurance] Commissioner of Insurance.” The plaintiff further contended that on January 21, 2019, Prudential notified her that her group long-term care insurance premium would be increasing by 40%, and that in 2020, she exercised a non-forfeiture option in response to a second, 19% rate increase. The plaintiff argued that in several states where plans such as hers were offered, including the Commonwealth of Massachusetts, state insurance regulators have no rate approval authority over group long-term care insurance, and that Prudential thereby breached its fiduciary duty owed under ERISA by imposing premium rate increases, even where state insurance commissioners had not approved of the rate increases.

The plaintiff also alleged that, prior to enrolling in the at-issue plan, she had attended a presentation by Prudential in which it was represented that any future premium increases would need to be approved by the Massachusetts Commissioner of Insurance, and that Prudential had thus made a material misrepresentation in violation of its fiduciary duty. In the action, the plaintiff thus sought to represent a class of “all former or current Prudential ERISA governed group long-term care insurance certificate holders, who (1) were issued coverage under a group long-term care policy which states premium rate increases will only be permitted if first approved by their home state insurance regulator and (2) who were issued their certificate of coverage in a state where group long-term care insurance rates were unregulated at the time of a premium rate increase instituted by Prudential.” Id. at Dkt. No. 22.

In a text-order, the Court rejected the plaintiff’s arguments, holding that she could not state a sufficient claim for breach of fiduciary duty. The Court first found that the plaintiff’s argument that Prudential had breached its fiduciary duties because it did not first secure approval from the Massachusetts Commissioner of Insurance prior to instituting premium rate increases on her policy was meritless.  Specifically, the Court explained that “to date the Commissioner has declined to exert its regulatory authority over premiums for group employer coverage,” and agreed with Prudential that the plaintiff’s interpretation that Prudential could thus never raise its group premium rates in Massachusetts until the Commissioner began to review and approve such increases would be “nonsensical,” because “it could lock in premiums for participants for years, ‘possibly decades[,] while the cost of medical expenses and inflation continue to rise.’” Rather, the Court determined that Prudential had proffered the “common-sense” interpretation of the at-issue certificates — that premium increases under the group long-term care insurance plans would be subject to Commissioner approval “if and when the Commissioner opts to require such approval.” Additionally, the Court found that the plaintiff’s assertion that Prudential and Tufts had made a material misrepresentation at the presentation she had attended prior to enrolling in her plan failed to meet the heightened pleading standard set forth at Federal Rule of Civil Procedure (9)(b) for ERISA claims of breach of fiduciary duty stemming from fraud. Specifically, the plaintiff was required to specify the time, place, and contend of the alleged misrepresentation, but the plaintiff had failed to specify either the time or place.

Ultimately finding that the plaintiff had failed “to allege any plausible facts establishing any potential wrongdoing” by either of the defendants, the Court granted the defendants’ motions to dismiss the action with prejudice, thus marking a significant win for the long-term care insurance industry.

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About the Author: Jamie Campisi

Jamie Campisi provides strategic guidance to clients as they navigate the legal complexities of the insurance industry. As a summer associate with the firm, Jamie assisted with a range of matters, including the development of institutional guidelines and a handbook for supporting employees undergoing a gender transition to ensure the client’s compliance with applicable laws. She served as a clerk for Justice Barry T. Albin of the Supreme Court of New Jersey prior to returning to the firm, and was a judicial extern for Chief Judge Jose L. Linares of the U.S. District Court for the District of New Jersey during law school. Visit Jamie’s bio on the Faegre Drinker website.

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