Class action challenges denial of long-term health care claims

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January 23, 2014

Class action challenges denial of long-term health care claims 

Steven M. Sellers

CNA Financial Corp. abruptly changed its interpretation of long-term health care policies and denied claims for care in assisted living facilities that previously had been approved, according to a class action filed recently. The company justified the denials by strictly reinterpreting Connecticut statutory definitions of “assisted living facilities” and “managed residential communities,” the plaintiffs say.

CNA Financial Corp. abruptly changed its interpretation of long-term health care policies in Connecticut without alerting policyholders and then denied claims for care in assisted living facilities that previously had been approved, according to a class action filed in federal court. The plaintiffs allege that CNA justified the denials by strictly reinterpreting state statutory definitions of “assisted living facilities” and “managed residential communities”—they argued the move was a pretext to allow the insurer to reduce the burden of long-term health care policies it issued in the 1990s. (Gardner v. CNA Fin. Corp., No 3:13-cv-01918-JBA (D. Conn. filed Dec. 27, 2013).)

The lead plaintiff, Marie Gardner, purchased a long-term care policy from CNA in 1993. She broke her hip in 2008 and moved into the Village at Buckland Court (the Village), an assisted living facility in Windsor, Conn. Gardner filed a claim with CNA, and it was approved. When her condition improved, CNA terminated coverage for the claim in 2011, advising Gardner that if her “care needs change or increase in the future,” the company would review her policy. In 2012, Gardner fell down a flight of stairs, fractured her sacrum, and reapplied for benefits under the policy. CNA denied the claim, noting that the Village was “not a qualified provider.” Gardner’s complaint said a company representative denied her claim because a nurse was not on the premises at all times and because the Village was a “managed residential community” (MRC), not a licensed assisted living services agency (ALSA). Gardner disputed both contentions.

Before filing suit, Gardner and her representatives protested to CNA that a previous class action’s settlement terms already allowed her claim. (Pavlov v. Continental Ins. Co., No. 07-02580, Doc. 107 (N.D. Ohio Oct. 7, 2009).) In Pavlov, the plaintiffs contended that Continental Casualty Co., the underwriter for CNA, refused to pay long-term health insurance claims because policyholders were being treated in facilities outside the insurance contract. The settlement terms require that CNA recognize (subject to state licensing requirements) that “the combination of an MRC and an ALSA is meant to constitute a Connecticut assisted living facility.” Gardner also argued that the Village did have a nurse on call at all times, consistent with state licensing requirements and the Pavlov settlement, but CNA persisted in denying her claim.

Gardner’s lawyer, Sean Collins of Boston, said the case is part of the insurer’s larger strategy to shed costly long-term health care policies at the expense of elderly people in need. “CNA is attempting to exploit Connecticut’s long-term care facility licensing scheme to escape claim liability for stays at assisted living facilities—stays it had previously been covering,” said Collins. “This change in policy interpretation is particularly egregious given that CNA increased premiums by 30 percent without disclosing to policyholders that it would no longer be covering stays at assisted living facilities in Connecticut.”

Collins explained that CNA’s strategy is driven by the increasing popularity of assisted living facilities and senior communities to serve a growing senior population. “Long-term care insurers underwrote a significant amount of risk in the early 1990s, utilizing policy forms with broad language as to what type of facilities would be covered in the event an insured’s medical condition required long-term care,” said Collins. “After reaping substantial profits for years, a combination of low policy lapse rates, increases in claims, increases in life expectancy, and smaller gains on investments are proving disastrous for many long-term care insurers. In order to combat this, one tactic insurers are using to avoid claim liability is narrowly interpreting policy provisions that define what type of facility is covered,” he said. “Policies are redefined to include coverage only for stays at nursing homes, at the exclusion of assisted living facilities—even when nursing care is provided at the assisted living facility.”

Collins urged plaintiff attorneys to examine their elderly clients’ long-term care policies, adding that he is inquiring whether CNA is using this strategy in other states. “Insurers are performing simplistic reviews designed to deny claims rather than aid insureds who have expended tens of thousands of dollars in premiums—and faced substantial rate increases—over the last twenty years,” he said.


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