Back in 1996, Monterey resident Janice O’Brien, then 75, began paying almost $5,000 per year for long-term care insurance. Her idea was that should she ever need them, per-diem payments from the Continental Casualty Co. policy would prevent her ever becoming a burden to her seven children.
It hasn’t exactly worked out that way for Mrs. O’Brien, a past president of the League of Women Voters of the Monterey Peninsula, one of whose sons, Pete O’Brien, played first base for the Texas Rangers, Seattle Mariners and Cleveland Indians for 11 seasons.
Her case and the lawsuit her family filed over it serve as a cautionary tale for policy buyers, but a large judgment or settlement might also be a warning to recalcitrant insurance companies.
Now almost 92, Mrs. O’Brien began sensing signs of dementia in 2011 and she, her children and doctors determined she should no longer live alone. She also had frequent dizziness, interfering with her mobility, and needed help doling out her medications, getting to the toilet and bathing. All of those are among the criteria for payouts from long-term care insurance policies.
So she and her family brought in home care providers, expecting Continental Casualty, usually called CNA, to pay the daily rate called for in her policy. The family made sure her premium payments were always up to date.
The lawsuit says CNA refused to cover more than 49 hours per week, saying the round-the-clock care Mrs. O’Brien got was not medically necessary, even though every doctor consulted said it was. No one in the family was wealthy enough to keep paying caregivers $20 to $24 per hour for all but 49 hours per week.
Eventually, the family gave up on CNA paying much and a daughter, in her 60s, sold her travel agency in Washington state to move in with her mom as a full-time caregiver. Still, CNA refused to pay up.
Nationally, state insurance commissioners receive more than 5,000 complaints yearly of payment refusals by long-term care insurance companies. Most don’t become high-profile lawsuits, but the O’Briens found their way to a Claremont-based law firm headed by William Shernoff, who has won hundreds of millions of dollars from insurance companies that refuse to pay on policies.
Their suit, filed by Shernoff partner Samuel Bruchey, calls CNA’s claims process “abusive” and says it victimizes “society’s most vulnerable . . . CNA deliberately places demands on policyholders that . . . could only be (intended) to cook up grounds to deny claims.”
A CNA spokeswoman said the company won’t discuss pending litigation, but Bruchey said after the suit was filed, the company offered to compensate the O’Briens for everything they have spent on home care this year. Bruchey says his clients won’t be satisfied with mere compensation for what they’ve spent this year.
Even before she gave up her business, the daughter said, she and her siblings were taking care of their mom in relays, each staying with her 30 days at a time. The family wants compensation for what it’s gone through along with punitive damages to deter similar practices.
California law requires that long-term care policies list seven conditions, any two of which can trigger payouts. But the lawsuit charges Mrs. O’Brien’s policy, sold after that law took effect, only included five, making it tougher to qualify for payouts.
“It was never the intent of the drafters of the law to demand impairment so great that people would be forced into nursing homes before they could get payment,” said Bonnie Burns, a Scotts Valley-based insurance consultant who helped write the law. “Long-term care benefits are not intended just for people with impairment so great they need 24-hour care.”
One 2008 report indicated that about 25 percent of all long-term care claims go unpaid because insurance companies insist policy holders be so impaired that almost no one can qualify. The O’Briens want their lawsuit to at least limit that alleged practice.
The bottom line for insurance buyers barraged by television commercials and direct mail ads pushing long-term care insurance: Make sure any policy you buy contains all seven conditions California requires and says only two must be met in order to trigger payouts.
It’s a classic “caveat emptor” – buyer beware situation that has already left many thousands of policy holders frustrated and living less well than they expected in their later years.
Thomas Elias is a California author. Reach him at [email protected]