A federal appeals panel has cleared an Illinois woman to continue a class action complaint accusing Metropolitan Life Insurance Company of bait-and-switch tactics.
Seventh Circuit Chief Judge Diane Wood and Circuit Judges Frank Easterbrook and Ilana Rovner heard arguments Sept. 19 and issued an opinion Feb. 6 in a dispute between Margery Newman and MetLife. Newman alleged she bought a long-term care insurance plan at age 56, and although her payments were supposed to be reduced at age 65, they doubled when she was 67. Newman sued MetLife in federal court in Chicago, but U.S. District Judge Thomas Durkin dismissed the complaint for failure to state a claim.
Wood wrote the opinion, noting two documents inform the case: MetLife’s “Long-Term Care Facts” brochure and Newman’s 29-page policy. The brochure described the payment option Newman chose, “Reduced-Pay at 65,” under which premiums would be cut in half after her 65th birthday because she paid more than regular premiums up to that point. The policy includes only one reference to the reduced-pay option, showing Newman’s semi-annual premium to be $3,231 up to age 65, and $1,615 thereafter.
Newman’s premium did decrease when she turned 65, but it spiked after her 67th birthday to $3,851.80. MetLife said the increase was imposed on all long-term care policyholders, including those on her payment plan. She accused MetLife of breaching the policy terms and violating the Illinois Consumer Fraud and Deceptive Business Practices Act. Durkin said MetLife’s contract terms unambiguously gave it the right to change premiums.
MetLife maintained that although Newman’s premium did double, she still was paying half the premium of a Reduced-Pay policyholder who had not turned 65. But the Seventh Circuit judges said it was reasonable to see how Newman inferred from her policy that her premiums were hers, and not those of an entire class of long-term policyholders.
“Four times in the policy MetLife reserves its right to change premiums,” Wood wrote. “Three of those instances reserve MetLife’s right to do so on ‘a class basis’ or for a ‘class as yours.’ These passages do not resolve the ambiguity, because the word ‘class’ is undefined. It might mean age, in which case class membership is independent of payment arrangements. But it might refer to the payment arrangement, so that everyone in the Reduced-Pay group comprises a single class and the effect of class membership is defined by the terms of the reduced-pay option.”
With the policy’s ambiguity in question, the panel said it is appropriate to remand Newman’s breach of contract claim for further proceedings.
As to the fraud allegations, the panel also supported Newman’s position because the policy did not clarify any ways the sales brochure might have misled a reasonable consumer. That situation satisfies the barrier to allege deception, the judges said.
The panel also said she sufficiently alleged unfairness because MetLife’s options for her once the premium spiked — accepting reduced benefits, buying a different plan or letting the policy lapse and relying on a contingent coverage rider — did not adequately account for her investment in choosing to pay elevated premiums for eight years. The same elements essentially satisfied the panel’s needs to determine her common law fraud and fraudulent misrepresentation and concealment should sustain.
“She took the deal and spent nine years investing in a plan, only to have MetLife pull the rug out from under her,” Wood wrote. “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.”
The panel sent the case back to district court for further proceedings.
Newman is represented in the action by attorneys from the firm of Cronin & Co. Ltd, of Chicago and the Duncan Law Group LLC, of Chicago, and attorney Frank H. Tomlinson, of Birmingham, Ala.
MetLife is represented by the firm of Drinker Biddle & Reath LLP, of Philadelphia, Los Angeles and Chicago.