A judge will allow a class action lawsuit to continue against insurer Continental Casualty, as the judge found the company may have improperly raised premiums state-by-state, rather than nationwide as promised in its policies, allegedly leaving policyholders in certain states to allegedly pay disproportionately more in premiums than others.
The March 15 decision was rendered by U.S. District Judge Mary Rowland, of the Northern District of Illinois. Her ruling kept alive a putative class action brought April 30, 2021, against Continental Casualty by named plaintiffs Damian B. Brown and James Mueksch, of California and Arizona, respectively.
Brown and Mueksch work for Wells Fargo & Company and obtained coverage, via their employer, through a group long-term care insurance policy issued by Continental. Brown's policy began in 2010 and Mueksch's in 2013.
Plaintiffs alleged their policies said Continental would never hike premiums except on a nationwide basis for certain age groups. However, Continental boosted premiums state-by-state at different times and by varying amounts, according to plaintiffs. The plaintiffs said they learned this information, after Continental informed them their premiums were going up 45 percent over the next three years, beginning in 2017.
As a consequence, plaintiffs claimed they were subjected to increases depending upon their state, bearing "disproportionate" costs and subsidizing the premiums of other insureds, all in violation of their policies. They sued, claiming fraud, breach of contract and unfair competition.
Continental argued for dismissal of the suit, but Judge Rowland refused.
"It remains plausible that Defendant intentionally concealed the true nature of its intentions — to disparately raise premiums on a State-by-State basis. Plaintiffs have plausibly raised that a significant portion of reasonable consumers could have been misled based upon Defendant’s alleged promise to not raise premiums unless it could do so on a nationwide basis," Rowland concluded.
Continental maintained there was no way plaintiffs could believe premiums could only be raised nationwide, because each state regulates premiums. But Rowland determined Continental was "not powerless to promise consistent nationwide premiums," but rather could have increased premiums to the extent allowed by the most restrictive state. As a consequence, the state-by-state regulatory framework does not foreclose plaintiffs' interpretation the policy guaranteed that nationwide increases were restricted to age groups, Rowland concluded.
Continental also contended it concealed nothing, because states govern premiums by public law, which meant plaintiffs should have been aware premiums could go up on a non-uniform basis.
Rowland was not persuaded, noting state regulations do not, "in and of themselves," force premiums to be raised state by state. Rowland quoted a 2021 Chicago federal district court decision, saying, state regulations "'do not necessarily conflict with a promise of uniformity."
In Rowland's view, "Plaintiffs have plausibly pled that Defendant told a half-truth — that it would only raise premiums on a nationwide basis for a particular age group — while omitting the entire truth that the premium increases would vary by an insured’s State of residency."
A status hearing is set for April 26.
Brown and Mueksch have been represented by attorneys Robert B. Carey, Steve W. Berman and John M. DeStefano, of Hagens, Berman, Sobol & Shapiro, of Seattle and Phoenix; Jeffrey S. Goldenberg, of Goldenberg Schneider, of Cincinnati; and attorney Sean K. Collins, of Boston.
Continental has been defended by attorneys Michael L. McCluggage, Brent R. Austin, Caroline P. Malone and Gregory M. Schweizer, of the Chicago firm of Eimer Stahl.