Gunn v. Continental Casualty

This case was found for Continental but it is being appealed by the US 7th Circuit Court of Appeals. The plaintiff’s claim concerns whether premium increases are discriminatory to class. Part of the plaintiff’s argument relies on the fact that states have jurisdiction over rate increases, but there is no uniformity across states. For example, if one state has an annual cap of 2% but another state has no cap, then a policyholder in the latter state is extremely disadvantaged compared to the policyholder living in the former state. This case seems to test the notion of state, rather than national, jurisdiction over rate increases.

Seems like a tough argument. But, upon reading, you be the judge. The case is an interesting read, despite what you might think of the claim(s) contained within.

On Sept. 3rd, 2019, the judge for the case found for the defendant. The attorneys for the case, HAGENS BERMAN SOBOL SHAPIRO LLP, then appealed to the 7th Circuit Court of Appeals.


There are 2 cases we are tracking. Both are moving targets:

The claims in each are different. The Introductions help explain differences:

This action challenges a deliberate, long-term scheme by defendant Genworth, an insurance holding company, and by its affiliated defendants, to bleed capital from GLIC, a wholly-owned insurance subsidiary of Genworth upon which over a million policyholders depend for long-term care insurance benefits in the event that they become disabled.


This case does not challenge Genworth’s right to increase these premiums, or the need for premium increases given changes in certain of Genworth’s actuarial assumptions. Nor does this case ask the Court to reconstitute any of the premium rates or otherwise substitute its judgment for that of any insurance regulator in approving the increased rates. Rather, this case seeks to remedy the harm caused to Plaintiffs and the Class from Genworth’s partial disclosures of material information when communicating the premium increases, and the omission of material information necessary to make those partial disclosures adequate. Without this material information, Plaintiffs and the Class could not make informed decisions in response to the premium increases and ultimately made policy option renewal elections they never would have made had the Company adequately disclosed the staggering scope and magnitude of its internal rate increase action plans in the first place.


The Burhkart case is about bleeding capitol and leaving Genworth LTCI vulnerable threatening PHs and agent/brokers who are reliant on a sustainable company. See related blog Novation. The SKOCHIN case has to do about inadequate disclosures that would enable PHs to make informed choices at critical timeframes. Given that these are lengthy documents and despite how these cases are eventually resolved, there is much more to the story(s) that are teaching moments for those interested in the internals of the LTCI industry.

Given the importance of the cases, not only to Genworth’s PHs but potentially other carriers too, we will track updates:

  1. SKOCHIN case
  2. Burkhart case

We will be adding our own commentary in later posts but we would be remiss in not pointing out what appears on Page 9 of the Skochin filing:

“29…For the first time, however, the 2018 increase announcement candidly disclosed that Genworth “plan[s] to request at least 150% in additional premium increases over the next 68 years.” Such an increase would raise annual premiums on a $5,000 policy to nearly $28,000 a year!

30… To make matters worse, the disclosure of at least 150% increase over the next 6-8 years was not even a full disclosure. At the same time Genworth made that announcement to policyholders, its internal projections demonstrated the need for an increase of more than 300% for the PSC Series III policies over the same period. Such an increase would result in annual premiums of over $40,000 a year. A truly absurd result…”.

This is consistent with our findings in a recent research report of ours — that many LTCI contracts are headed towards a parabolic increase of rates over time.

Margery Newman v. MET

Parties agreed to settle this case in the 7th US Circuit Court of Appeals.

Briefly, the case was about policyholders who selected a Reduced At Age 65 payment option. These PHs elected to pay a higher premium before the age of 65 in exchange for a half-pay once they reached the age of 65. Policyholders usually did this on the premise that during their pre-retirement years the higher premium would still be affordable; but, once retired, the half-premium would be affordable on a reduced fixed-income and, with the understanding that the half-premium was a fixed amount in the contract, that there would be no premium volatility.

Meanwhile, the carrier had other plans as time went on. It was their belief that they could raise premiums like the many that chose to pay annually. It turns out not to be the case.

This raises the question for PHs with contracts from other carries or other payment options. Does this case offer them any possibilities? You be the judge.

There was one other ruling from the case that is very important, but you have to read the case with discerning eyes. A quiz later on.

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