Sonnenschein recently won a significant appellate decision involving long-term care (LTC) insurance on behalf of insurance client AEGON and its subsidiary, Life Investors Insurance Company of America (now Transamerica Life Insurance Company), defeating a putative 150,000-policyholder nationwide class action. In Rakes v. Life Investors Ins. Co. of America, --- F.3d ---, 2009 WL 2981976 (8th Cir. 2009), the U.S. Court of Appeals for the Eighth Circuit on Sept. 18 unanimously affirmed the grant of summary judgment to our client by the U.S. District Court for the Northern District of Iowa, dismissing the plaintiffs’ fraud, constructive fraud and bad faith claims, which alleged that Life Investors fraudulently and defectively under-priced its LTC insurance policies during the 1990s with an undisclosed plan to implement rate increases later on. This was Sonnenschein’s first litigation for AEGON/Transamerica.

Previously, plaintiffs’ counsel in the matter had defeated summary judgment and obtained class certification and monetary settlements against several other long-term care insurers represented by different defense counsel.

The district court’s dismissal had focused on the LTC care policy language, which stated that the company could raise rates, and the plaintiffs' admissions that they knew when they purchased their policies that their rates could increase or, alternatively, that they had not bothered to read their policy. The Eighth Circuit, however, went well beyond the district court’s decision and reviewed the massive evidentiary record, finding that there was no evidence that Life Investors committed fraud. The court found that even though the plaintiffs had pointed to evidence that other insurers may have fraudulently under-priced their longterm care policies, the plaintiffs had not pointed to any evidence that Life Investors did so in this case. The Eighth Circuit found that the record evidence cited by the plaintiffs supported Life Investors’ argument that it priced its long-term care policies in an appropriate fashion.