Class action: CNA Financial improperly raised long-term care insurance policy rates

By Scott Holland | May 11, 2018

CNA Financial Corp. is facing a federal class action complaint accusing it of improperly raising rates on long-term policyholders.

Carlton F. Gunn, of California, filed a complaint May 9 in Chicago. He purchased a certificate for long-term care insurance offered to people covered by the federal judiciary’s group policy and accused CNA of imposing rate increases at different times and in different amounts in different states, rather than following its advertised claim to uniformly change premiums only by age group or premium class.

Gunn said be bought the policy, with an effective date of Jan. 1, 2000, while an attorney in the federal public defender’s office in Tacoma, Wash. He quoted the premium section in the policy document reading: “We cannot change the insured’s premiums because of age or heath. We can, however, change the insured’s premiums based on his or her premium class, but only if we change the premiums for all other insureds in the same premium class.”

While the policy doesn’t provide an additional definition of “premium class,” Gunn cited rate schedules showing variance based only by age and benefit level, and not by the customers’ residence or place of purchase. He expected to pay $30.64 biweekly, or $737.52 per year. On Nov. 9, 2017, he received a letter from CNA informing him of a 25 percent premium increase on Jan. 1, 2018, resulting in a new annual premium of $921.90. The letter also indicated CNA’s plans to implement 25 percent increases in 2019 and 2020, a cumulative increase of 95.3 percent that would leave the premium at $1,440.

Elizabeth Fegan  

According to the complaint, CNA offered two alternatives to the new premium: reducing coverage to lower the cost or discontinuing premium payments and accepting a reduced benefit. Gunn found neither acceptable. Gunn also noted the letter mentioned the possibility some states would not approve the increases or would grant approval only for smaller percentages. He noted: “For insureds in the same premium class and risk pool under the same policy form issued in Washington, D.C., CNA has sought only two 10 percent rate increases.”

The complaint said CNA filed public documents in 2017 showing an average annual premium of $931 and $1,026 in Washington, D.C., for the relevant policy forms.

“While the last 10 percent increase sought in Washington, D.C., would bring the local average to $1,129, the 95 percent increase sought in Washington and other states would bring the nationwide average premium to $1,820.11.”

Gunn said the increases violate the policy terms because they are not uniform and also effectively render CNA’s “brochure and other marketing materials unfair, deceptive and misleading.” He said the class would include thousands of nationwide customers and put the value of the damages sought at more than $5 million.

Formal allegations include breach of contract, breach of the implied covenant of good faith and fair dealing, violation of the Washington, D.C., Consumer Protection Procedures Act, fraud and fraudulent concealment. Gunn wants the court to prevent CNA from increasing premiums other than by the means detailed in the policy agreement and to either force rescission and return of all premiums paid by putative class members or award compensatory, statutory and punitive damages.

Representing Gunn in the matter, and putative class attorneys, are attorneys Steve Berman, Elizabeth Fegan, Robert Carey and John DeStefano of the firm of Hagens Berman Sobol Shapiro LLC, with offices in Seattle, Phoenix and Chicago.

A spokesman for CNA said the company "does not comment on matters involving litigation."

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Organizations in this Story

CNA Financial Corporation Hagens Berman Sobol Shapiro, LLP U.S. District Court for the Northern District of Illinois

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