Memorable Personal Injury Cases Attorney in Claremont, California
CalPERS Class Action
CalPERS Class Action
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CalPERS class action is a fascinating case. In fact, it’s going to trial on June 10 of this year. We’ve been at it for six years. CalPERS, in 1995, decided to go into the long-term care insurance business. This is the type of coverage which you access when you are no longer able to bathe, and feed yourself, and you have problems with continence, and toileting, and transferring. It’s different than health insurance. It’s basically when you need help in your later years.
And rather than go to the insurance industry who sell that kind of coverage, CalPERS decided to set up their own plan. And they sold it beginning in 1995 until 2004. And they promised people that if they paid an additional premium, they would get an elevated benefit for what’s called inflation protection. In other words, where their benefits would go up every year five percent so that if they started paying in 1995, but they didn’t access the care until 2015 or 2020, whatever, when they got older, that it would keep up with inflation. And they used examples of how much at the time when they bought it, it was like $40,000.00 a year, and then by 2015, it would be $100,000.00 a year.
So 103,627 California public employees purchased that coverage with the enhanced benefits of inflation protection or lifetime benefits. Right after they set up the program in ’95, they had a second opinion from the actuarial firm to look at the program to see was it sound? Because the nature of these programs are such that their financial solvency depends upon the assumptions they make of how much they’re going to spend in claims, how much investment income they’re going to get once they take in the money. And they were told in 1996 by an independent actuarial firm, Coopers Lybrand, that they had overpromised and underpriced the product, and that it was not viable. That ultimately, it would hit the wall.
And that’s exactly what happened. But they never told anybody. They continued to sell people the same product. In fact, even though the Coopers Lybrand warned them that they were more than 30 percent underpriced with the competition, they used that as a marketing tool to say, “We’re cheaper than everybody else.” At the time that they found out about the problem, only 13,000 people had purchased it, but they continued to sell it to the point to where we represent 103,000+ people who basically bought the product.
And then, of course, as should have been known to them and was known, but not known to the subscriber policy holders, in 2013, overnight, then, they send out a notice that said, “Your premiums are going up 85 percent.” And they were promised from the beginning if they paid the additional premium, their premiums would stay flat. And so now, they’re saying the amount of damages are so great, they’re over $1 billion, that if we have to pay that, the fund will be broke. So that’s their defense now is we can’t pay it. [Laughter] And we think that’s wrong. So that’s the case.
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Los Angeles, CA personal injury lawyer Michael J. Bidart talks about a memorable case involving a class action lawsuit against an insurance company. He explains that the CalPERS class action case is truly captivating, and it is scheduled to go to trial on June 10 of this year after six years of legal proceedings. In 1995, CalPERS, the California Public Employees’ Retirement System, made the decision to venture into the long-term care insurance business. This type of coverage is designed to provide assistance when individuals are no longer able to perform daily tasks such as bathing, feeding themselves, or managing their toileting needs. It differs from traditional health insurance as it focuses on providing support during later stages of life.
Instead of collaborating with established insurance companies offering such coverage, CalPERS opted to create its own long-term care plan. They began selling the product in 1995 and continued until 2004. CalPERS promised policyholders that if they paid an additional premium, they would receive enhanced benefits, particularly inflation protection. This meant that their coverage would increase by five percent annually to keep up with rising costs. Using examples, CalPERS showcased how a $40,000 yearly benefit at the time of purchase would grow to $100,000 by 2015.
A total of 103,627 California public employees purchased this coverage with the expectation of enjoying the benefits of inflation protection or lifetime coverage. However, shortly after establishing the program in 1995, CalPERS sought a second opinion from an actuarial firm, Coopers Lybrand, to assess its viability. The firm concluded that CalPERS had made unrealistic promises and underpriced the product, making it financially unsustainable in the long run.
Despite this warning, CalPERS continued selling the same product, even using its lower price as a marketing advantage over competitors. By the time CalPERS became aware of the program’s flaws, only 13,000 individuals had purchased the coverage. Nevertheless, CalPERS continued to sell it, resulting in over 103,000 people being represented in the class action lawsuit.
In 2013, without prior notice, CalPERS suddenly announced an 85 percent increase in premiums for the policyholders. This directly contradicted the initial promise that premiums would remain stable for those who paid the additional premium. CalPERS justified the increase by claiming that the potential damages exceeded $1 billion, which would bankrupt the fund if paid out. Their defense now rests on their inability to cover the damages. However, we firmly believe this defense is unjust.
In summary, the CalPERS class action case revolves around CalPERS knowingly overselling and underpricing their long-term care insurance product, failing to inform policyholders of its financial unsustainability, and subsequently imposing drastic premium increases. The case seeks to rectify the damages caused by CalPERS’ actions and hold them accountable for their deceptive practices.
