Long-Term Care Insurance Company Breached Policyholder’s Contract by Raising Premiums

A U.S. court of appeals rules that a long-term care insurance company breached its contract with a policyholder who purchased a “Reduced-Pay at 65” policy when it raised her premiums after age 65. Newman v. Metropolitan Life Insurance Company (U.S. Ct. App., 7th Cir., No. 17-1844, Feb. 6, 2018).

Margery Newman purchased a long-term care insurance policy from Metropolitan Life Insurance Company when she was age 56. She chose an option called “Reduced-Pay at 65” in which she paid higher premiums until she reached age 65, when the premium would drop to half the original amount. The long-term care insurance contract set out the terms of the reduced-pay option. It also stated that the company could increase premiums on policyholders in the same “class.” When Ms. Newman was 67 years old, the company notified her that it was doubling her premium.

Ms. Newman sued MetLife for breach of contract and fraudulent and deceptive business practices, among other things. The company argued that the increase was imposed on a class-wide basis and applied to all long-term care policyholders over the age of 65, including reduced-pay policyholders. The district court granted the company’s motion to dismiss, ruling that the contract permitted the company to raise Ms. Newman’s premium. Ms. Newman appealed.

The U.S. Court of Appeals, 7th Circuit, reverses, holding that the company breached its contract when it raised Ms. Newman’s premium. According to the court, “none of the four references in the policy to [the company’s] right to change premiums sufficed to disabuse a reasonable person of the understanding that purchasing the Reduced-Pay option took her out of the class of policyholders who were at risk of having their premium increased after their post-age-65 anniversary.” The court also allows Ms. Newman’s fraudulent and deceptive business practices claim to proceed, ruling that she showed evidence that the company’s marketing of the policy was deceptive and unfair.

For the full text of this decision, go to: http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2018/D02-06/C:17-1844:J:Wood:aut:T:fnOp:N:2103594:S:0

David Wingate is an elder law attorney at the Elder Law Office of David Wingate, LLC. The elder law office services clients with powers of attorneys, living wills, Wills, Trusts, Medicaid and asset protection. The Elder Law office has locations in Frederick and Montgomery Counties, Maryland.