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Resolving Long Term Care Insurance Disputes

By Glenn R. Kantor, Esq. and Corinne Chandler, Esq


Attorneys and courts are well versed in “traditional” insur- ance claims: those involving life, health or disability insur- ance and those pertaining to a property loss. These types of cases have been litigated for decades and there are hundreds of cases interpreting the policy provisions at issue.

In the past few years, we have seen a new type of insurance dispute; those involving long term care policies. Primarily, the insurance disputes arise out of policies that were writ- ten in the late 1980's or early 1990's by insurers who are no longer writing business today. The companies were assumed or purchased by larger companies, such as Transamerica, Conseco or AIG, who are now administering the business. The policies that were sold during that time period were poorly written and the actuarial calculations, which were the basis for the pricing of the policies, were flawed. As a result, these older policies are not profitable to the acquiring companies. However, they are valuable to the senior clients, who have paid the premiums for years. These clients are now primarily on fixed incomes and, due to their age, are unable to qualify for more modern products.

The insurers are incurring tremendous losses from these policies. To stem the losses, the companies have resorted to two techniques: First, they have repeatedly raised premi- ums on the policies. Some companies have raised premi- ums by as much as 50% in a seven-year time span. Many insured cannot afford to pay the increased premiums, and they have let the policies lapse. In other circumstances, the insurer may offer an alternative to the increased premium: they offer a lower level of benefit for the same premium price. For example, an insured may have purchased a policy in the late 1980's, which provided “lifetime” benefits. If he or she cannot afford the new, increased premium, an insurer may offer reduced coverage, such as seven years of benefits, for the same premium price.

The second manner in which an insurer may avoid large losses is to deny legitimate claims or to change the manner in which it administers claims. This has resulted in recent litigation, where the courts are presented with new issues involving policy interpretations that have never been liti- gated before.

At Kantor & Kantor, we have seen this new trend of claim denials and successfully litigated the issues to obtain bene- fits for our clients. The reasons we see most frequently for a claim denial include:

  • The facility in which the insured resides is not an “eligible facility.” Frequently, this may arise when the Policy requires “supervision” by a RN or MD, which the insurer now interprets as a 24-hour staffing requirement.
  • The policy may only require that the facility be “appropriately licensed.” Yet, the insurer now requires that a facility be licensed as an “intermediate” or “skilled care” facility.
  • The caregiver is not licensed by the state.
  • The insured lives independently in an Assisted Living Facility and receives caregiver services in the Assisted Living Facility. The insurer denies benefits on the basis that the insured is not receiving benefits in a “residence.”
  • The Policy has lapsed due to cognitive impairment of the insured. Despite policy provisions that protect against such a lapse, the insurance company refuses to reinstate in the policy.
  • The insured does not require the care giving assistance provided by a home health aide.
  • The policy has an “alternate plan of care” provision that provides for flexibility of benefits. Despite this provision, a carrier may refuse to provide flexible benefits.
  • The insured was not “hospitalized” prior to the receipt of care.
  • The insured has met their “per occurrence” maximum under the Policy and is not entitled to further benefits.
  • The insured is not receiving a weekly “RN visit.”
  • The facility is not appropriately staffed with a physician or a RN.
  • “Catch all” reasons which have no basis in the Policy for denial such as, the insurer will not pay benefits until the client first pays for the services; the “nursing notes are inadequate,” or there is no proper “plan of care” in place, etc.
• “Catch all” reasons which have no basis in the Policy for denial such as, the insurer will not pay benefits until the client first pays for the services; the “nursing notes are inadequate,” or there is no proper “plan of care” in place, etc.

Case Studies:

“Eligible Facility” Issues

The policies that were written in the late 1980's or early 1990's were written before the current popularity of Assisted Living Facilities. Therefore, the facility type of policies, or “Nursing Home Policies” provide for benefits received in a “skilled nursing” or “intermediate care” facility. However, with the advent of Assisted Living Facilities, clients can secure the care they need in the more economical, comfort- able setting of an Assisted Living Facility. Does the client have to move to a more expensive nursing facility to obtain benefits? Often, they do not.

For example, one of our cases involves clients who reside in a secure unit of an Assisted Living Facility, which is licensed as a “Residential Care Facility for the Elderly.” The clients purchased their policy in 1988 and have been paying premi- ums for over twenty years. The policy provides benefits for care provided in a licensed facility, providing “intermediate care” in the State of California. To be an eligible facility, the Policy requires that it be “licensed in the State in which it operates.” The clients presented a claim for benefits and the carrier denied the claim, contending that the facility had to have a specific license from the State, as an “intermediate care facility,” to be eligible for benefits. We believe that this is inappropriate since the facility has a “license” in the State where it operates–it has a Residential Care License.

Licensing of an In Home Care Giver

Another popular policy that was available in the late 1980's was a “Home Health Care Policy.” This type of policy provides benefits to pay for a caregiver who provides

services in one’s “home.” Often, a policy may provide bene- fits for an aide to provide “personal services” in her home. The Policy also states that the care must be provided by a “licensed” home health care agency, if licensing is required in the state where they reside.

One of our clients required the assistance of a caregiver to assist her with bathing, grooming and transferring in her home. These types of services are unquestionably “personal care” services covered by the Policy. However, the caregiver who was providing the services was not from an agency that was “licensed” as a Home Health Care Agency. Rather, the Agency had a business license. As a result, the insurance company denied the claim.

We were successful in obtaining the client’s benefits because the State of California does not require that a Home Health Care Agency be licensed to provide personal care services, i.e., the type of services that were at issue in the case.

Home Health Care In an Assisted Living Facility

Many of our clients have lived in Assisted Living Facili- ties for years. They have moved into these facilities when independent and then, when they subsequently required care assistance, they have sought and received care in their “homes” from the facility or an outside vendor. When the clients presented claims for the services they have received, the carriers have denied the claims on the basis that the care was not rendered in the client’s “home.” We have success- fully argued that the Assisted Living Facility is in fact the insured’s “home,” and that benefits should be paid under the Policy.

Per Occurrence Maximum Benefit

Some of the older policies provide for two tiers of benefits, up to a full policy maximum. The first “tier” of benefits provides a certain dollar amount of benefits for a particular “occurrence,” which can be either an illness or an injury. To be entitled to the remaining benefits under the Policy, one must sustain a second “occurrence,” which also requires care. For example, if one has surgery and receives care for the surgery, they are entitled to benefits up to the first “per occurrence” maximum limit. Once that limit is paid, the insured is not entitled to further benefits unless there is another “occurrence.”

We have had clients who have been receiving benefits for one occurrence, who then unfortunately, sustain another “occurrence,” such as a fall, while on claim. Again, we have successfully argued that, when there is more than “occur- rence” which contributes to a client’s need for care, the full amount of the Policy must be paid.

Assisting Clients With Long Term Insurance Coverage

Frequently, the children of our clients are unaware that their parents have purchased long term care coverage. They should be encouraged to review papers and documents with their parents to determine if there is coverage in place. Long term care carriers are required, if asked, to notify a third party designee if the policy is in danger of lapsing. A relative, who is not of the same age, should be included as a third party designee on all policies.

We have seen clients “give up” when faced with the hurdles of claim processing for a long term claim. The claim process is not particularly difficult, but insurers do have a bureau- cratic system. We encourage clients to put all communica- tions in writing and to keep a log or journal of all telephone calls with the insurer. We have helped many, many clients recover their benefits, and we are happy to provide consul- tations, without a fee, to assist your clients.

(Glenn R. Kantor, Esq. and Corinne Chandler, Esq. are in practice with Kantor & Kantor, LLP in Northridge, CA)