Robert Rakes v. Life Investors Insurance Co. ( 2009 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 08-2626
___________
Robert Rakes, individually, and on *
behalf of all others similarly situated;
*
Robert Hollander, individually, and on*
behalf of all others similarly situated,
*
* Appeal from the United States
Appellants, * District Court for the
* Northern District of Iowa.
v. *
*
Life Investors Insurance Company *
of America, *
*
Appellee. *
___________
Submitted: March 12, 2009
Filed: September 18, 2009
___________
Before WOLLMAN, RILEY, and COLLOTON, Circuit Judges.
___________
WOLLMAN, Circuit Judge.
Robert Rakes and Robert Hollander (plaintiffs), the named plaintiffs in a
purported class action lawsuit against Life Investors Insurance Company of America
(Life Investors), appeal from the district court’s1 order denying their motion for a
continuance under Federal Rule of Civil Procedure 56(f) and granting summary
1
The Honorable Linda R. Reade, Chief Judge, United States District Court for
the Northern District of Iowa.
judgment in favor of Life Investors on their claims of fraud and tortious breach of the
implied covenant of good faith and fair dealing (bad faith). We affirm.
I. Background
Rakes and Hollander purchased long term care (LTC) insurance from Life
Investors. Their policies were guaranteed renewable for life, and Life Investors
reserved the right to change their premiums based on premium class. After their
premiums were raised, Rakes and Hollander filed a class action complaint, alleging that
Life Investors used inflated lapse rates2 to purposefully underprice its LTC insurance
products and gain market share.
A. Overview of LTC Insurance
LTC insurance provides payment towards the cost of services like nursing home
care, assisted living care, and home care. To receive benefits, the policyholder must
meet a benefit trigger, such as requiring assistance in two activities of daily living (e.g.,
bathing, eating, dressing). LTC insurance policies are usually purchased long before
the policyholder will require services, when the policyholder is younger and the
insurance premiums are lower.
LTC insurance is a relatively new product. It has been available since the mid-
1970s and experienced substantial growth in the 1990s. In 2003, the Kaiser
Foundation published the report, “Regulation of Private Long-Term Care Insurance:
2
Lapse is the cancellation of coverage due to death or nonpayment of premiums.
Lapse rate refers to the percentage of policyholders whose policies lapse before long
term care services are required. Persistency rate is the percentage of policyholders
who renew their policies.
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Implementation Experience and Key Issues.”3 The report described the pricing of
LTC policies as “subject to considerable uncertainty,” and it listed a number of
variables—including lapse rates—that affect the reliability of premium calculations.
Appellants’ Appendix (App.) 296. “As a result [of the variables], two insurers pricing
the same policy can come up with very different rates. One using very optimistic
assumptions might charge half as much as a more conservative insurer, with the risk
of needing rate increases later on.” Id.
States regulate LTC insurance, and most states do not allow insurers to raise a
policyholder’s premium on an individual basis. State regulators might approve a rate
increase applicable to an entire class of policyholders, however, if an insurer is able to
show that more revenue is needed to cover current or future costs. When LTC
insurance was first introduced, state regulators tended to treat it like health insurance
and focused on the affordability of the premiums. According to the Kaiser Report,
“[t]here was no examination to assure that premiums were not too low; on the contrary,
insurers were discouraged from including any margin for error.” Id. The report further
remarked that “[s]ome less scrupulous insurers” deliberately set “unrealistically low
initial premiums to gain market share, knowing that they might have to raise rates later
on.” Id. Rakes and Hollander argue that Life Investors falls into this “less scrupulous”
category.
LTC insurance rate hikes have sparked class action litigation across the country,
with mixed results. E.g., Alvarez v. Ins. Co. of N. Am., No. 06-4326, 2006 WL
3702641 (E.D. Pa. Dec. 12, 2006) (unpublished) (granting defendant life insurance
company’s motion to dismiss for failure to state a claim on which relief can be
granted), aff’d 313 F. App’x 465 (3d Cir. 2008) (unpublished); Hanson v.
Acceleration Life Ins. Co., No. CIV A3-97-152, 1999 WL 33283345 (D.N.D. Mar. 16,
3
The plaintiffs have relied on the Kaiser Foundation report and included it in
their appendix. App. 286-346. We have used information from the report to draft
this overview.
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1999) (unpublished) (certifying class action and denying defendant insurance
company’s motion for judgment on the pleadings), 2000 WL 33340298 (D.N.D. June
21, 2000) (unpublished) (memorandum and final order on approval of settlement);
Rose v. United Equitable Ins. Co., 632 N.W.2d 429 (N.D. 2001) (reversing grant of
defendant insurance company’s motion for summary judgment), 651 N.W.2d 683
(N.D. 2002) (affirming class certification). The plaintiff in Hanson v. Acceleration
Life Insurance Co. experienced a rate increase of more than four hundred percent over
nine years. He testified in a hearing before the Senate Special Committee on Aging,
and cases like his caused the National Association of Insurance Commissioners to
change their model regulations.
B. Factual Background
1. Life Investors
Janet Soppe, Life Investors’s LTC division president throughout the 1990s,
testified that Life Investors intended that the policies at issue would be level premium
policies; that is, the premium would remain the same throughout the life of the policy.
Robert Darnell, the actuary who priced the policies that Rakes and Hollander
purchased, testified repeatedly that there was no intention to raise premiums and that
“there was never discussion of any plan to increase the Life Investors long-term care
insurance premium rates.” Supplemental Appendix (S.A.) 721. Darnell was confident
that all of Life Investors’s policies were appropriately priced, and when asked whether
Life Investors planned to require policyholders to bear some of the risk of inadequate
pricing due to higher than expected claims costs, Darnell responded:
There was no plan for it because the plan was based on the claims cost
that we priced in there. We expected our claims cost to be adequate.
...
Now then if they were not adequate then there’s different ways of
looking at it. And if there would have been a rate increase then—then
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the rate increase going forward would take care of it. But there was no
plan at all for ever having a rate increase throughout the 90’s.
S.A. 717.
The policies at issue were priced in the 1990s with the actuarial assumption that
the projected lapse rate would be a certain percentage in the first policy year and a
different, lower percentage thereafter. The actual lapse rate, however, was lower than
expected. Soppe explained that “in the early nineties, mid nineties, there was no
discussion in the industry about the concern about lapse rates getting too low” and that
lapse rates did not become an issue until the late 1990s or early 2000s. S.A. 2599,
2602. Ross Bagshaw, the president of the LTC division, joined Life Investors in 2000.
He analyzed data and reports related to the insurance products at issue, determining
that the “lapse assumptions in the pricing and in the reserving were too high.” App.
570. Under Bagshaw’s direction, the company instituted rate hikes and informed its
policyholders that further premium increases were likely.
2. The Named Plaintiffs
Rakes purchased an LTC insurance policy from Life Investors in 1994. Before
purchasing the policy, an insurance agent met with Rakes at his home in McLean,
Virginia, two or three times. The first page of his policy stated:
THIS POLICY IS GUARANTEED RENEWABLE FOR LIFE
WE HAVE A LIMITED RIGHT TO CHANGE PREMIUMS
Your timely payment of premiums is all that is needed to keep this
Policy in force until benefits have been exhausted. We cannot cancel or
refuse to renew this Policy. Your premiums will not increase due to a
change in Your age or health. We can, however, change Your premiums
based on Your premium class.
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Compl. Ex. A. From 1994 until his policy anniversary in 2004, Rakes paid an annual
premium of $1006.20.
In 2004, Rakes’s annual premium increased to $1408.68. In the letter notifying
Rakes of the rate hike, Life Investors stated that it was necessary to raise premiums
because “sometimes claims significantly exceed anticipated levels.” Compl. Ex. C.
The notification included a Frequently Asked Questions (FAQ) document, wherein
Life Investors stated that the policyholder should expect another increase in two years
and that it had requested approval for the increase from the state department of
insurance. Moreover, Life Investors disclosed that it might apply for other premium
increases in the future.
Rakes contacted the Virginia Bureau of Insurance, seeking information and
expressing concern about the rate increase. The Bureau replied that it had reviewed
and approved the rate increase, that Life Investors had closed the individual LTC
insurance block, and that premiums would likely increase due to the declining numbers
of policyholders and an increasing numbers of claims. Rakes decided to keep his LTC
insurance and maintain the original scope of coverage. When Life Investors
implemented another rate hike in May 2007 to $1901.64 per year, however, Rakes
opted to convert the policy to a contingent nonforfeiture benefit.4
Rakes did not believe that his premium would increase, and he did not read
closely the documents he received from Life Investors. Rakes testified that his
insurance agent told him that “the only way my rates could go up is if my class
changed.” S.A. 657.
4
The contingent nonforfeiture benefit provided a maximum benefit equal to the
total of the premiums that the insured had paid under his LTC insurance policy.
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Hollander purchased an LTC insurance policy from Life Investors in June 2001
through the National Education Association, an organization of which he is a member.
An insurance agent met with Hollander in his home in Creve Couer, Missouri, to
discuss the policy. Hollander’s insurance certificate stated:
INSURANCE CERTIFICATE
GUARANTEED CONVERTIBLE TO GUARANTEED RENEWABLE
PREMIUMS SUBJECT TO CHANGE
Compl. Ex. B. His certificate also stated that Life Investors had a right to change
premiums: “Premiums will not increase due to a change in Your age or health. We
can, however, change Your premiums based on Your premium class.” Id. From 2001
until 2005, Hollander paid an annual premium of $1368 for his LTC insurance.
In June 2005, Hollander received a letter from Life Investors, similar to the letter
Rakes received, informing him of a rate hike and warning him that a future rate
increase was probable. Hollander complained to the Missouri Department of
Insurance, which contacted Life Investors to investigate the complaint. Life Investors
responded that the premium rate increase had been approved by the Department. In
August 2005, Hollander’s annual premium increased to $1846.80. Hollander has
maintained his policy and its original scope of coverage.
Hollander testified that he knew that his LTC insurance premium could change.
Q: At the time that you purchased your policy in June of 2001, your
policy from Life Investors, did you have an understanding as to
whether Life Investors could increase the premiums?
A. There was a reference to it. And I’m sure I asked [the insurance
agent] about it. The reference said about your premium class.
There was no other—there was no explanation, . . . I don’t think
I had an idea at the time as to why it would occur.
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S.A. 509. Hollander’s insurance agent also testified that he advised Hollander that
LTC premiums could increase over time, referring to part of a brochure that explains
that “premiums would not be—or could not be increased due to age or to change in
health. They could only be increased within their class.” S.A. 672.
C. Procedural Background
Rakes and Hollander filed this class action lawsuit against Life Investors in July
2006, alleging that Life Investors had used inflated lapse rates to purposefully
underprice LTC insurance products with the intent to raise premiums in the future.
Although the policies and marketing material disclosed that the insureds’ rates could
increase, Rakes and Hollander alleged that Life Investors had planned to increase
premiums from the outset, yet failed to disclose the plan at the time the insureds bought
their policies or upon renewal. The policies’ “guaranteed renewable” language was
thus untrue and misleading because the rate hikes caused the policies to become
unaffordable. The complaint asserted that “[b]y selling the LTC policies . . . as
guaranteed renewable policies, Life Investors affirmatively represented that the LTC
policies would also be affordable for life.” Compl. ¶ 28.
Rakes and Hollander identified a number of fraudulent omissions, centering on
the defective nature of the policies and Life Investors’s plan to pass the risk of loss to
its insureds by instituting rate hikes. The plaintiffs pleaded that Life Investors further
misled them in the documents accompanying the premium increase notification, using
false reasons to justify the rate increases. Specifically, they identified the following
allegedly false statements from the materials accompanying the notification of the rate
hike:
a. “We make every effort to provide quality coverage at reasonable and
affordable premium rates.”
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b. “However, sometimes claims significantly exceed anticipated levels.”
...
c. “The company has the right to adjust your premiums in accordance
with the terms of the policy.”
d. “When long term care insurance policies like yours were originally
filed and approved there was limited actuarial and claims experience data
available that could provide an accurate forecast of how the actual
experience would develop.”
Compl. ¶ 50 (emphasis omitted).
The complaint alleged four counts: actual fraud, constructive fraud, tortious
breach of the implied covenant of good faith and fair dealing (bad faith), and punitive
damages. Rakes and Hollander sought to represent all individuals who bought certain
LTC insurance policies from Life Investors “and whose premiums on those policies
were increased at any time after 2000.” Compl. ¶ 63.
Life Investors moved to dismiss, and the district court granted the motion as to
the punitive damages count. The district court tentatively determined that Iowa had the
most significant relationship to the case because the fraudulent scheme likely
originated from or was ratified in Iowa, where Life Investors is incorporated and
maintains its home office, rather than in Missouri or Virginia, where Rakes and
Hollander purchased their policies. Accordingly, it applied Iowa law to the motion to
dismiss, noting that it would revisit the choice of law question at class certification and
after the parties completed discovery related to choice of law.
The parties submitted a proposed scheduling order and discovery plan, which
bifurcated discovery. The first phase encompassed class certification and fact
discovery as to the named plaintiffs; merits discovery was allowed to the extent the
discovery sought pertained to both class certification and the underlying claims. The
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second phase was scheduled to begin following the court’s ruling on class certification
and included any remaining discovery. The magistrate judge5 adopted the parties’
proposed scheduling order.6
The parties engaged in extensive discovery during phase one, and the magistrate
judge carefully considered each discovery dispute. Document production was
voluminous, and Rakes and Hollander requested, among other things, data relied upon
by the actuaries in pricing the policies and information regarding the policies’
anticipated and actual lapse rates. After Rakes and Hollander moved to compel the
production of those documents, Life Investors stated that it had produced all
documents regarding the pricing of the plaintiffs’ policies. The magistrate judge
ordered Life Investors to produce the requested information, to the extent it had not
already done so, and to identify documents pertaining to “the original expected
termination and/or lapse rates and expected loss ratios” for the policies at issue. Rakes
v. Life Investors Ins. Co. of Am., No. C06-0099, 2008 WL 429060, at *3 (N.D. Iowa
Feb. 14, 2008) (unpublished). In response to an interrogatory, Life Investors stated
that it also had produced information related to initial rate filings, rate increase filings,
and related correspondence with state regulators for each of its LTC insurance policies
in Virginia, Missouri, and Iowa. Rakes and Hollander deposed a number of people,
including the actuaries who priced their policies, the executives and actuaries who
pursued the policy rate increases, and Life Investors’s Federal Rule of Civil Procedure
30(b)(6) corporate designee.
5
The Honorable Jon S. Scoles, United States Magistrate Judge for the Northern
District of Iowa, who took a liberal view of the phased discovery, ordering the
production of documents and extending the discovery schedule.
6
The parties filed their briefs and appendices under seal pursuant to their broad
confidentiality stipulation and order. We conclude that it is unnecessary to seal this
opinion, however, as it contains no information that we deem confidential.
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Before the motion for class certification was due, Life Investors moved for
summary judgment, arguing that the law from the plaintiffs’ home states should apply,
that the fraud claims were barred because Life Investors disclosed potential rate
increases, and that the complaint failed to state a claim for the tort of bad faith. Rakes
and Hollander moved for a continuance and asked that the summary judgment motion
be dismissed without prejudice pursuant to Federal Rule of Civil Procedure 56(f),
which allows the district court to grant appropriate relief to a party that cannot present
facts essential to justify its opposition to a summary judgment motion. Rakes and
Hollander also substantively opposed Life Investors’s motion.
The district court denied the plaintiffs’ Rule 56(f) motion, concluding that
further discovery into Life Investors’s disclosures was unnecessary, and granted the
motion for summary judgment, ruling that Life Investors’s “numerous disclosures of
its right to raise premiums negates any alleged misrepresentation or Plaintiffs’
reasonable reliance on a belief their rates would not increase.” Rakes v. Life Investors
Ins. Co. of Am., 622 F. Supp. 2d 755, 767 (N.D. Iowa 2008). Because Iowa, Missouri,
and Virginia law require that a plaintiff’s reliance on the alleged fraudulent
representations or omissions be reasonable, the district court found no conflict of law
and determined that summary judgment was appropriate under the law of each of the
three states. The district court also dismissed the plaintiffs’ claim of “Tortious Breach
of Implied Covenant of Good Faith and Fair Dealing (Bad Faith)” for failure to plead
the tort of bad faith. Rakes and Hollander did not resist summary judgment based on
their constructive fraud claim and have not appealed its dismissal.
II. Analysis
We review de novo the district court’s grant of summary judgment, viewing the
evidence and inferences that may be reasonably drawn from the evidence in the light
most favorable to the nonmoving party. St. Paul Fire and Marine Ins. Co. v. Compaq
Computer Corp., 457 F.3d 766, 769 (8th Cir. 2006). Summary judgment is appropriate
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if there are no genuine disputes of material fact and the moving party is entitled to
judgment as a matter of law. Fed. R. Civ. P. 56(c). A dispute is genuine if the
evidence is such that it could cause a reasonable jury to return a verdict for either party;
a fact is material if its resolution affects the outcome of the case. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248, 252 (1986). We review for abuse of discretion the
district court’s denial of a Rule 56(f) continuance, upholding the decision if the
nonmoving party was not deprived of a fair chance to respond to the summary
judgment motion. Nord v. Kelly, 520 F.3d 848, 852 (8th Cir. 2008); Elnashar v.
Speedway SuperAmerica, LLC, 484 F.3d 1046, 1054 (8th Cir. 2007).
A. Summary Judgment
Rakes and Hollander argue that there exist genuine issues of material fact as to
whether they reasonably relied on Life Investors’s statements that its policies were
“guaranteed renewable for life” and that Life Investors had only a limited right to
change premiums. They contend that their knowledge that Life Investors might raise
premiums does not preclude their fraud claim because (1) Life Investors planned to
raise premium rates when it sold the LTC insurance policies, yet it did not disclose the
planned rate hike; (2) at some point, Life Investors realized that its actuarial
assumptions were wrong and thus rate increases were inevitable, yet it did not disclose
that information, causing the insureds to unwittingly renew their policies; and (3) Life
Investors lied about its reasons for instituting the rate hikes when it stated that the
claims significantly exceeded anticipated levels and that limited actuarial and claims
experience data failed to provide an accurate forecast. Rakes and Hollander further
argue that their claim for tortious breach of the implied covenant of good faith and fair
dealing (bad faith) should be reinstated.
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1. Actual Fraud
We agree with the district court that summary judgment was appropriate under
Iowa, Virginia, and Missouri state law. Because no conflict of law exists, we need not
determine which state law applies to the plaintiffs’ fraud claim. Prudential Ins. Co. of
Am. v. Kamrath, 475 F.3d 920, 924 (8th Cir. 2007).
To establish a claim for actual fraud, the plaintiffs must prove a false
representation of a material fact, made knowingly and intentionally, with the intent to
mislead, justifiable reliance, and damages. Magnusson Agency v. Pub. Entity Nat.
Co.-Midwest, 560 N.W.2d 20, 27-28 (Iowa 1997); Evaluation Research Corp. v.
Alequin, 439 S.E.2d 387, 390 (Va. 1994); Emerick v. Mu. Ben. Life Ins. Co., 756
S.W.2d 513, 519 (Mo. 1988). A misrepresentation, which serves as the basis for a
fraud claim, can be based upon a failure to disclose information in certain
circumstances. See, e.g., Nelson v. DeKalb Swine Breeders, Inc., 952 F. Supp. 622,
628 (N.D. Iowa 1996) (citing Cornell v. Wunschel, 408 N.W.2d 369, 374 (Iowa
1987)); Andres v. Albano, 853 S.W.2d 936, 943 (Mo. 1993); Clay v. Butler, 132 Va.
464, 474 (Va. 1922).
Plaintiffs have not shown that their LTC insurance policies contained a
fraudulent representation. The plaintiffs were not guaranteed a level premium for life;
they were guaranteed the right to renew their LTC insurance policies. Accordingly,
Life Investors could not cancel or refuse to renew their policies for any reason other
than their nonpayment of premiums. Life Investors disclosed its right to change
premium rates on the first page of its policies, in boldface, capital letters. This right
was limited, in that Life Investors could not change premiums on an individual basis.
Moreover, although Rakes and Hollander believed that their premium rates would not
increase, both testified that they were aware that the rates could increase. Thus, there
is no genuine issue of material fact as to whether the policies’ guaranteed renewable
language constituted a fraudulent representation.
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Despite the substantial document production, written discovery, and depositions
in this case, the plaintiffs have failed to support their assertion that Life Investors
fraudulently omitted that it had initially underpriced its LTC insurance policies,
intending to seek a series of premium increases and to shift the risk of loss to its
policyholders. Plaintiffs have directed us to statements, reports, studies, similar cases,
and their expert’s affidavit to show that some companies in the LTC insurance industry
deceptively underpriced policies, but they have failed to create a genuine issue of
material fact that Life Investors did so in this case. Plaintiffs failed to support the
following sweeping allegations with record citations:
LI’s internal documents establish that it knew because it was using
inappropriately high lapse rates when initially pricing the policies,
persistency would cause losses within the blocks of insurance. LI
intended, but did not disclose, that it would pass its persistency risk to its
insureds in the form of rate increases.
Appellants’ Br. at 20.
Where the plaintiffs have provided citations, the documents and testimony
support Life Investors’s position that it priced the policies using appropriate lapse
rates. For example, the plaintiffs have cited a letter dated April 12, 1993, from actuary
Darnell to the Florida Department of Insurance. The department had disapproved
Life Investors’s filing because the regulators believed that Life Investors would not
meet its filed loss ratio because its assumed lapse rates were too low. In support of
Life Investors’s position that its lapse rate assumptions were appropriate, Darnell
disclosed that the actual lapse rate for the LTC insurance product at issue was the
same as its assumed lapse rate in the first year and the actual lapse rate was slightly
lower than the assumed lapse rate in the second year. Darnell wrote, “I realize that
these persistency rates are somewhat above the industry average. At Life Investors,
we work hard to keep to keep our policies in force. . . . Then, as now, high lapse rates
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were unacceptable to Life Investors and they should be unacceptable to our industry.”
App. 718
Taken in the light most favorable to the plaintiffs, the other evidence cited
shows that Life Investors realized in the early 2000s that its lapse rate assumptions
were too high. Plaintiffs cite a 2000 LTC status report, board meeting minutes from
2000, and LTC division president Bagshaw’s testimony that, after he joined Life
Investors in 2000, the company discovered that its lapse rate assumptions were higher
than the lapse rate it was experiencing. Former LTC division president Soppe also
testified that she became aware around that time period that lapse rates were an issue.
Plaintiffs contend that Life Investors had a duty to disclose that its lapse rate
assumptions were wrong and that rate increases were thus inevitable, but they have
cited no law that requires an insurance company to disclose its actuarial assumptions
to its policyholders, and the record reflects that Life Investors did not consider rate
increases until 2001 or 2002.
The alleged misrepresentations in the documents accompanying the notification
of the rate hike are not actionable. Life Investors stated that it implemented rate
increases because “sometimes claims significantly exceed anticipated levels.” Compl.
Ex. C. Viewing the evidence in the light most favorable to the plaintiffs, Life
Investors misrepresented that the rate hikes were due to increased claims, but the
plaintiffs have failed to explain how this misrepresentation was material or how they
relied on it. Moreover, Life Investors disclosed that future rate increases were likely,
a representation that would be material to the insured’s decision whether to renew his
policy. The FAQ accompanying Rakes’s notification stated:
You have told me that you are going to increase my premiums. Can
I expect another increase in the future?
Yes. When we notified the Department of Insurance of the need for this
premium increase, we requested one additional increase to be effective
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two years from now. . . . Further, it is our hope that it will not be
necessary to consider any additional increases beyond these two, but it
is possible.
Id. In response to the FAQ accompanying Hollander’s notification, Life Investors
stated, “It is probable that in the future you will receive additional premium
increases.” Compl. Ex. D.
B. Bad Faith
We affirm the district court’s dismissal of the plaintiffs’ claim for tortious
breach of the implied covenant of good faith and fair dealing (bad faith). In the
insurance context, the Iowa Supreme Court has held that “[t]he tort of bad faith arises
in situations where the insurer has denied benefits or has refused to settle a third-
party’s claim against the insured within the policy limits.” Vos v. Farm Bureau Life
Ins. Co., 667 N.W.2d 36, 51 (Iowa 2003). Plaintiffs have not made a claim for
benefits under their policies, and we decline the invitation to extend Iowa law to fit
their allegations.7
C. Rule 56(f) Motion
We conclude that the district court did not abuse its discretion in denying
plaintiffs’ Rule 56(f) motion for a continuance. Plaintiffs had a fair chance to oppose
Life Investors’s motion, and the discovery sought was not relevant to the district
court’s decision.
On appeal, the plaintiffs contend that they were denied access to merits
discovery related to Life Investors’s disclosures to policyholders and Life Investors’s
7
Plaintiffs have conceded that they have not pleaded a cause of action for bad
faith under Virginia or Missouri law.
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regulatory filings. As stated above, the plaintiffs were entitled to fact discovery as to
the named plaintiffs and merits discovery pertaining to both class certification and the
underlying claims. Presumably, then, Rakes and Hollander were entitled to discovery
related to the disclosures Life Investors made to them, which they requested.
Although the plaintiffs had not deposed the executives who had knowledge related to
the drafting of the policy language and the correspondence to policyholders, it is not
clear whether plaintiffs noticed those depositions. Moreover, we have concluded that
the policy’s “guaranteed renewable” language was not a misrepresentation and that
the plaintiffs have failed to support their fraudulent omissions contention because they
made no showing that Life Investors used a deceptively low lapse rate to underprice
its LTC insurance products. As for the contention that Rakes and Hollander were
denied discovery of Life Investors regulatory filings, Life Investors produced
documentation related to its initial rate filings and rate increase filings with state
regulators for each of its LTC insurance policies in Virginia, Missouri, and Iowa.
Plaintiffs have not identified what they were missing or explained how they were
prevented from opposing the motion for summary judgment without discovery related
to Life Investors’s filings in the forty-seven other states.
Conclusion
In light of our holding, we need not discuss Life Investors’s arguments that
plaintiffs’ action is barred by the filed rate doctrine, that Rakes’s claims are barred by
the statute of limitations, and that Hollander’s claims are barred by the Employee
Retirement Income Security Act.
The judgment is affirmed.
______________________________
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