The State Worker

May 29, 2014

Judge hands CalPERS 1st-round loss in long-term care lawsuit

CalPERS can be sued for allegedly mishandling its privately-funded long-term care insurance program, a Los Angeles court has tentatively ruled, clearing the way for a trial.

The State Worker

Jon Ortiz chronicles civil-service life for California state workers

CalPERS can be sued for allegedly mishandling its privately-funded long-term care insurance program, a Los Angeles court has tentatively ruled, clearing the way for a trial.

Judge Jane Johnson turned aside CalPERS request to throw out the case, which contends that the fund’s board members violated their personal duty to watch out for members’ best interests. The fund also breeched policy contracts and dealt unfairly with policyholders, according the the lawsuit.

The Los Angeles Superior Court complaint, if granted class-action status, would represent about 150,000 CalPERS members who purchased long-term care insurance between 1995 and 2004 to cover convalescent care, in-home living assistance and similar services. Nearly all the policies guaranteed inflation-adjusted payments for the life of the policyholders, many of whom believed their premiums would never be increased.

CalPERS stopped selling the so-called “lifetime, inflation-protected” policies a decade ago. It incrementally raised premiums on existing policyholders because the program was going broke. Officials have blamed under-performing investments, underpriced policies and higher-than-expected payouts for the trouble. Private-sector insurance carriers have had the same experience long-term-care coverage. Many have exited the business.

Lawyers got involved, however, when CalPERS announced it would hike premiums 85 percent for the most lucrative plans starting next year. Members who had purchased policies and paid premiums for nearly a decade or more were outraged.

CalPERS asked the court to throw out the case for a variety of reasons, but Johnson ruled that none were valid. The tentative ruling isn’t yet final, however such decisions are rarely overturned.

In an unusual legal move, the fund’s lawyers asked the judge to certify her final ruling for an immediate appeal. Normally parties don't have the right to appeal until a case concludes. If the judge goes along, plaintiffs’ attorney Stuart Talley said, it could delay a final resolution.

“The judge did not indicate how she would rule on this but we intend to oppose the request,” Talley said in an email, “since most of our class is older and cannot afford to wait years for this case to resolve.”

CalPERS spokeswoman Rosanna Westmoreland said, assuming the tentative decision becomes final, that the fund wants it appealed now “ before the case progresses and CalPERS is forced to expend additional resources in connection with discovery and class certification which could be unnecessary or lessened if the Court of Appeal agrees with us.”

CalPERS Sanchez - Demurrers to Corrected FAC 5-21-14 (Tentative Ruling)

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