CalPERS responds to long-term care lawsuit
04/08/2014 1:41 PM
04/08/2014 3:51 PM
Editor's note, 3:50 p.m.: This post has been amended to include information about the law firms spearheading the long-term care lawsuit against CalPERS.
CalPERS has asked a judge to throw out a lawsuit alleging that the fund and individual board members, among other things, failed to watch out for members’ best interests when the fund increased rates on long-term care insurance plans.
The fund’s attorneys said in a recent Los Angeles court filing that CalPERS has a “clear contractual right to impose the complained-of increases,” that CalPERS’ actions reflect trends in the long-term care industry and that, even if the plaintiffs’ allegations are correct, CalPERS and its board members are immune from liability.
The plaintiffs’ complaint was triggered by CalPERS’ decision to increase the rates of its most expensive long-term care policies by 85 percent in 2015 and 2016. The fund under-priced the policies when it launched the program nearly 20 years ago, the lawsuit contends, and sold them with a lie: that rates “would be fixed and would never rise based on the consumer’s age or health.” After CalPERS mismanaged its investments, the lawsuit says, it wrongly forced policyholders to make up the losses by jacking up long-term care rates.
CalPERS’ rebuttal to the lawsuit notes that policyholders received a document that says, “Your premiums will never increase due solely to age or health. CalPERS can, however, change your premiums, but only if we change the premium on an issue-age basis for all similar coverage issued in your state on the same form as this coverage.”
The fund’s translation, according to its court filing: No one’s individual rate can be adjusted because they get old or sick, but raising premiums on a particular class of policyholder is possible, and the document that explains policy coverage says so in three different places.
The plaintiffs – who want to get their complaint certified for class action – say that CalPERS and the board has a fiduciary duty to the policyholders, so they must be held responsible. Otherwise, they argue, how can you say someone has a fiduciary duty and then give immunity from breaching it?
As to the language in the contract, the plaintiffs say “issue-age” is a vague term that most people don’t understand. Put that with advertising materials that highlight the policies’ fixed pricing and CalPERS knowingly deceived policyholders about the cost of the insurance, the suit claims.
A Los Angeles Superior Court judge will hear debate about the validity of the case on May 21 and could rule immediately or take a few weeks to issue a decision.
Three law firms are heading up the lawsuit. Click here for more information about them and frequently asked questions about class-action litigation.
About This BlogJon Ortiz launched The State Worker blog in 2008 to cover state government from the perspective of California government employees. Every day he filters the news through a single question: "What does this mean for state workers?" Join Ortiz for updates and debate on state pay, benefits, pensions, contracts and jobs. Contact him at email@example.com or 916-321-1043. Twitter: @TheStateWorker.
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