Supreme Court At-a-Glance Contributor Amie DiGiampaolo is a Senior, Associate at The Jacobs Law, LLC in Boston, MA focusing on business litigation and business law.

No. 2019-0727

February 17, 2021

Reversed and remanded.

 

  • Whether the trial court correctly dismissed the plaintiff’s claim that the defendant’s regulations violate the contract clauses of the State and Federal Constitutions.
  • Whether the trial court erred in entering summary judgment for the defendant regarding the plaintiff’s claims that the defendant’s regulations are ultra vires and violate the takings clauses of the State and Federal Constitutions.

 

The Long-Term Care Insurance Act (LTCI) governs policies which cover costs associated with long-term care and requires the Insurance Commissioner to issue reasonable rules promoting premium adequacy and to protect the policyholder in the event of significant rate increases, as well as to promote the public interest, promote the availability of LTCI policies, and facilitate flexibility and innovation while developing LTCI coverage. In 2014, the Commissioner proposed amended regulations which, among other things, would allow insurers to increase rate once every three years, subject to the Commissioner’s approval, and would cap the maximum percentage rate increases for LTCI policies based upon the attained age of policyholders. The amended regulations also applied retroactively to rate increases on all LTCI polices.

The Court found that the Commissioner’s statutory authority requires the Commissioner to issue reasonable rules that support or encourage insurers in their efforts to maintain premiums at sufficient levels to cover anticipated costs of claims over the life of an LTCI policy. The Court also found that the rate-increase caps in the amended regulations did not promote premium adequacy which, in turn, restricted insurers in their ability to achieve premium adequacy, especially given the unique difficulties in predicting long-term costs for LTCI policies. The Court, therefore, held that, because the amended regulations deprive the Commissioner of discretion to evaluate, on a case-by-case basis, whether increases exceeding the rate-increase caps are necessary to ensure that insurers can maintain premium adequacy, the rate-increase caps in the amended regulations do not promote premium adequacy. Since the Commissioner lacks discretion in the amended regulations to approve increases that exceed the caps and the amended regulations do not protect policyholders from substantial rate increases, the amended regulations are not reasonable rules that promote premium adequacy. Thus, the amended regulations are ultra vires and invalid.

 

Cook, Little, Rosenblatt & Manson, of Manchester (Arnold Rosenblatt and Kathleen M. Mahan on the brief), and Saul Ewing, of Philadelphia, Pennsylvania (Paul M. Hummer and Sean T. O’Neill on the brief, and Mr. Hummer orally), for the plaintiff. Gordon J. MacDonald, attorney general (Samuel R.V. Garland, assistant attorney general, and Anthony J. Galdieri, senior assistant attorney general, on the brief, and Mr. Garland orally), for the defendant.