34 Attorneys General Say Conseco LTC Settlement Needs More Input

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A Pennsylvania court weighing approval of a proposed class action settlement for a group of policyholders with long-term care contracts of Conseco companies heard unexpectedly from a large group of state attorneys general.

A decision on the settlement is expected late next week or soon after, according to a representative for Judge John Herron of the Philadelphia Court of Common Pleas who is hearing the case.

Several people familiar with the case have previously said there was a good chance the settlement agreement would be approved.

But just one day before the hearing, 34 state Attorneys General–including those from California, Florida, Massachusetts, New Jersey, Pennsylvania and Texas–weighed in on the issue with a letter filed with the court on Feb. 12.

The letter says “the proposed settlement is of obvious national importance, affecting approximately 750,000 persons nationwide, the vast majority of whom are senior citizens or persons approaching retirement age.

“It is complex and far reaching and will have very serious consequences to the insurance coverage and financial situation of those persons who are made class members,” the letter states.

Consequently, the letter continues, the court should seek additional input from the National Association of Insurance Commissioners, Kansas City, Mo.; the American Association of Retired Persons, Washington; and Consumers Union, Washington.

A request is also made in the letter to allow for comment to be made by state insurance regulators and state attorneys general.

The NAIC says that “if the court decides to consult with state insurance regulators concerning the proposed settlement, they would certainly be willing to consider providing assistance to the court.”

The hearing was held to get final input on a proposed settlement that covers up to 750,000 contract holders who purchased contracts from 1975 to present. The proposed settlement is valued at $25 million to $30 million. Policyholders were supposed to have sent an election form postmarked Feb. 4, 2002 if they were opting into the settlement.

Most policyholders chose to retain their policies, according to a Conseco spokeswoman. A specific breakout of options chosen was expected to be available shortly, she adds.

When asked about the letter from the attorneys general, the Conseco spokeswoman said the company had no reaction and that the letter was part of the court discussion.

Among the options available to contract holders are accepting a new Conseco policy, accepting a nonforfeiture benefit or holding on to their existing Conseco LTC policy.

Additionally, these policyholders can also purchase a new Conseco annuity contract or indexed universal life policy. The right to purchase the annuity or UL policy can also be passed on to family members.

Those who chose the option to replace their current Conseco LTC policy with a new Conseco policy will receive a contract that is based on attained age and current medical underwriting.

The letter from the state attorneys general follows strenuous objections from individual AGs such as the office of the Texas Attorney General in Austin. The Texas AG is objecting to the proposed settlement and the AARP has joined in a memorandum opposing it.

Texas Attorney General John Cornyn said in papers filed with the Philadelphia court that “the proposed class action settlement before this court is seriously flawed and undeserving of this court’s imprimatur.”

Cornyn also noted that the settlement impacts “the business of insurance” and the regulatory and enforcment efforts of state government entities and has importance that goes “beyond the parties to the litigation.”

The Attorney General requested that the court reject the class action settlement to the extent that it affects Conseco’s 65,000 policyholders in Texas and that it allow Texas policyholders’ interests to be represented in a lawsuit filed in Texas by the AG’s office.

Texas filed a lawsuit in district court in Travis County against Conseco Senior Health Insurance Company. The policies were originally sold by American Travellers Life Insurance Company, the company named in the Pennslyvania action. The suit states that the AG believes Conseco “has engaged in and will continue to engage in unlawful practices”

The Texas amicus brief in the Pennsylvania hearing states that the parties have “failed to sustain their burden of establishing the fairness, reasonableness, and adequacy of the proposal”

Deborah Zuckerman, an attorney with the AARP Foundation that filed the memorandum supporting objections to the class settlement, says that if objections of class members are overridden, those members can file a court appeal. AARP appeared on behalf of three AARP members on Feb. 13. The organization’s future involvement in the action will depend on the action its members decide upon, she says.


Reproduced from National Underwriter Life & Health/Financial Services Edition, February 18, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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