YET ANOTHER TROUBLED INSURANCE CARRIER IS PLANNING TO MOVE ITS POLICIES INTO AN INDEPENDENT TRUST - HOW THIS WILL AFFECT PENNSYLVANIA POLICYHOLDERS
PHILADELPHIA INSURANCE CLAIMS LAWYER, JEFFREY REIFF, SPEAKS OUT
Over the past few weeks, many Americans learned about the AIG insurance crisis and the lawyers and staff at the Pennsylvania insurance claims law firm of Reiff and Bily received many phone calls from insurance agents, clients and other concerned Pennsylvania citizens. It appears that there is more trouble on the horizon for the beleaguered insurance industry and potentially a number of Pennsylvania citizens may be affected. According to a recent article in Investment News, the benefits of some 164,000 long term care policyholders at Conseco Senior Health Insurance Company may be in danger as they are moved to an independent trust. Conseco, an Indiana-based insurance company, without notice to policyholders decided to move 144,000 long term care policies in a trust that may have devastating consequences for senior care citizens. Earlier this year, the Pennsylvania Insurance Department found that Conseco had violated insurance claims handling practices and fined the company $32.3 million dollars. Acting Pennsylvania Insurance Commissioner, Joel Ario, defined the bulk of the fines as “restitution to consumers who were harmed”. Conseco reported a second quarter loss of $487.1 million dollars or $2.64 at diluted share. Conseco also disclosed recently that it held $103 million in securities with American International Group and Lehman Brothers Holdings, both in New York and Washington Mutual in Seattle. (Investment News article)
Bensalem, Pennsylvania-based Conseco Senior is a subsidiary of Conseco Inc. of Carmel, Indiana and according to industry critics is a victim of its own underwriting, signing on more policyholders than it could afford, leading to the creation of the trust. According to the Investment News article written by Darla Mercado, Frank Darras, managing partner of Shernoff Bidart Darras & Echeverria LLP of Claremont, California, stated “This product is oversold, underpriced and poorly performing because they underwrote everybody. These policyholders will either lapse on their payments or the unhealthy people will be so ill that there won’t be enough premiums to keep the trust going.” A spike in premium rates could force healthy policyholders to terminate their LTC insurance with Conseco Senior leaving the unhealthy with coverage that is so costly that the premiums approach the cost of the claim for each contract, according to Philip J. Bieluch an Avon, Connecticut insurance consultant at Insurance Strategies Consulting LLC.
For many years, I have been paying for a policy of long term care which would benefit my mother. I purchased the policy for my mother many years ago when she was 60 years old with the belief that the cost of care would triple or quadruple based upon conservative government estimates of a 5% inflation rate by the time it was necessary. Unfortunately, as many have come to find out, unlike the insurance policies that we purchase for our home or car, many of the long term care policies are not standardized. Things covered by one company may be slightly different than those covered by another company. As I have practiced law specializing in the area of insurance claims for many years, I have found that insurance salesmen too often do not disclose all of the relevant facts to their clients until it is too late. Problems such as those revealed with Conseco indicate that the risk with long term health insurance not only is expensive, but as with health coverage, you must keep paying to keep it in force. With downturns of the economy or premium rises, you may have to drop the coverage possibly losing everything that you have paid. Many policies are packed with a number of catches that can keep you from collecting. Finally, as results now publicly indicate, there is no guarantee that the long term care insurers, many of which have weak balance sheets, will be around 20, 30, 40 years from now when we go to “cash in”.
According to our research, more than 8 million customers in the U.S. have bought into long term care policies and the numbers have apparently been growing. According to an article in the New York Times on March 26, 2007, it was reported that thousands of policyholders have been denied benefits. An example is cited of an insurance company acting in bad faith, namely Conseco. According to this story, an 81 year old widow was denied benefits even though she had paid into a policy since 1990. The company kept coming up with one excuse after the other and in the end her family had to pay approximately $70,000 at a long term care facility and Conseco did not pay anything. Records indicate that many policyholders have filed thousands of complaints against companies such as Conseco, its affiliate Bankers Life, Penn Treaty and John Hancock Insurance Company. Penn Treaty received one complaint for every 1,207 long term care policyholders compared with Jenworth Financial, the largest long term care insurer that received only one complaint for every 12,134 policies. According to the New York Times, Conseco collected more than $4.2 billion dollars in premiums in 2006 of which long term policies contributed 21%.
The Pennsylvania Department of Insurance appears to be working with Conseco to approve the trust, according to a report released by the Pennsylvania Insurance Commissioner last May. The Pennsylvania Insurance Department lead a multi-state investigation into Conseco practices which resulted in a $2.3 million dollar fine, an additional $30 million dollars in claim handling, improvements and restitutions. Conseco’s self reported serious issues and complaint and claims handling and blame the problems on the challenges of integrating various computer systems. Pennsylvania insureds were given a deadline of September 30th in which to make public comment for Conseco’s proposed formation of the Senior Healthcare Transition Trust which is expected to take place in the 4th quarter, pending approval from Pennsylvania Insurance Commissioner Joel Ario. Evidently, the trust will be later folded into an independent trust fund by John W. Wells, Senior Vice President of Conseco’s LTC business and will off load 142,000 policies under Conseco Senior plus another 22,000 policies of other Conseco insurers.
As a practicing insurance claims attorney for almost 30 years, I can honestly state that I have never seen the climate so adversarial or poor for insureds. Any companies struggling to stay alive have discovered they can make money or stay afloat by simply paying out less evidenced by increasing tactics of delay, deny and defend claims. A senior executive at the National Association of Insurance Commissioners, a group representing those who are supposed to oversee the industry stated “the bottom line is that insurance companies make money when they don’t pay claims.” Conseco Insurance Company was recently named 5th on a list of the 10 worst insurance companies of America by the American Association for Justice. According to the study, the CEO of Conseco, C. James Prieur, received $2.6 million dollars in compensation for the year 2007. Apparently and unfortunately, Conseco used the deteriorating health of its policyholders to its advantage because the company knows that if it waits long enough to pay out the, the customers will die. Conseco’s customers are some of the most vulnerable members of the population. Former CFO of Conseco, Rollin S. Dick, and former Chief Accounting Officer James S. Adams admitted to filing misleading statements with regulators between March 1999 and April 2000. In 2006, an Indiana court ordered that Dick and Adam be prohibited from serving as a Director or Officer of a public company for five years and ordered them to pay civil penalties of $110,000 and $90,000 respectively.
If you have any questions regarding the Conseco crisis and how it affects you, please contact the Pennsylvania Insurance Department, Bureau of Consumer Services at 1-717-787-2317 or visit their website at www.insurance.state.pa.us
The experienced insurance claim law firm of Reiff and Bily has been representing catastrophically injured individuals since 1979 and has had a multitude of experience dealing with insurance company liquidations, insolvencies, defaults, and bankruptcy on behalf of their injured clients. We are all too familiar with the insurance company practices of defend, deny and disclaim. We welcome the opportunity to put our clients on level playing ground with these companies. Our track record of success speaks for itself. If you have any concerns regarding any of the issues set forth in this article or if you were involved in an accident or claim with an insurance company and they are refusing to pay you the money you deserve, please feel free to contact us for a free consultation at 1-800-421-9595 or online at www.reiffandbily.com.
