A Window Into Long-Term-Care-Insurance “Agency” and Coverage Issues

In Gunnarson v. Transamerica Life Insurance Company, a federal district court in the state of Washington issued a November 6, 2014 order remanding the case to state court on diversity grounds, rejecting the company’s argument that joinder of an individual sales agent as a defendant in the case was merely a step to prevent the out-of-state corporate entity from removing the case to federal court.

In rejecting the fraudulent joinder argument, the federal district court outlined several pending factual and legal issues between the parties arising from the dispute over long-term care insurance (LTCI) coverage.  The issues include:

• whether the defendant agent’s relationship with the insurance company, Bankers United (Transamerica’s predecessor), was “disclosed” to the purchasers, relevant because under Washington Law, joint and several liability applies to agents of undisclosed principals;
• whether written promotional materials on LTCI provided by Bankers United barred a claim for misrepresentation in light of alleged oral misrepresentations by agent at the time of sale regarding dementia care; and
• whether a claim of misrepresentation, for a policy of LTCI sold 18 years ago, is barred by the statute of limitations, or whether there is an issue of fact about whether and when the purchaser knew or should have discovered that benefits would be paid only for “nursing home” facility care.

In Washington, as in many states, state law changed to expressly require LTCI insurers to cover non-nursing home based care; however, the statutory change apprently occured after the effective date of the policy in question. 

The federal court order linked above resulted in remand to the state court for further proceedings under Washington law. (Allegations, of course, are not the equivalent of proof.)