Maybe you have heard about long-term care insurance policies. The idea behind these types of insurance policies is that you will receive coverage or benefits if you can no longer take care of yourself. As you might imagine, these type of policies are marketed to the older portion of our population.
There have been some growing concerns that long-term care insurance companies are taking advantage of the fact that many, if not all, of their insureds are elderly. As a matter of fact, the industry was investigated by Congress in 2008 (I promise to blog about this later)
Although long-term care policies are heavily regulated by Washington statutory and regulatory law, few, if any, Washington decisions have addressed or interpreted long-term care policies…until now.
On February 7th, 2011, Division 1 of the Court of Appeals issued a decision in Bushnell v. Medico Ins. Co.. The case centered on an elderly woman named Evelyn Bushnell who purchased a long-term care policy from Medico Insurance Company in 1987. Evelyn paid all of her premiums on time. On February 21, 2007, Evelyn suffered a stroke and her doctor determined that she needed full-time nursing care.
The policy that Evelyn purchased required that she be hospitalized for three days prior to receiving full-time nursing care. However, a year after Evelyn purchased her long-term care policy from Medico, the Long-Term Care Insurance Act (RCW 48.84) came into effect. The Long-Term Care Insurance Act stated that any type of hospitalization requirement were invalid in long-term care policies issued in Washington.
Notwithstanding the Long-Term Care Insurance Act, Medico denied Evelyn’s claim for benefits based on the three-day hospitalization requirement. Apparently, Evelyn had not been hospitalized for three days when she had a stroke. Evelyn brought a suit against Medico for, among other things, bad faith and violations of the Insurance Fair Conduct Act.
Medico argued that it did not have to comply with the Long-Term Care Insurance Act because it issued Evelyn’s policy before the act became effective. Further, Medico argued that Evelyn’s policy should not even be considered a long-term care policy.
The Court dismissed Medico’s rather silly argument that Evelyn’s policy was not a long-term care policy. The Court examined on the broad definition of long-term care policy found under RCW 48.84.020, which provided:
Any insurance policy or benefit contract primarily advertised, marketed, offered, or designed to provide coverage or services for either institutional or community-based convalescent, custodial, chronic, or terminally ill care.
Thus, Evelyn’s policy was clearly a long-term care policy.
Next, the Court turned to Medico’s claim that the Long-Term Care Policy Act did not apply to Evelyn’s policy because her policy was issued before its effective date. The Court noted that the policy contained a “Conformity With State Statutes,” provision that read:
The provisions of the policy must conform with the laws of the state in which you reside on the Policy Date. If any do not, this clause amends them so that they do conform.
Further, the Court noted that a new insurance contract is formed every time an insurer pays a premium. The Court concluded:
[U]nder the terms of the long-term skilled nursing care policy issued by Medico to Bushnell, upon acceptance of each renewal premium, a new contract was formed. Accordingly, after the effective date of the regulations implementing the Act, the three-day hospital stay requirement no longer applied. Further, under the conformity clause of the policy, upon acceptance of Bushnell’s renewal payment after implementation of the regulations in January 1988, the policy was amended to conform with state law.
The Court then remanded the case back to the district court to determine if Medico engaged in bad faith or violated IFCA when it denied Evelyn’s claim for benefits.
I imagine that we will be seeing more long-term care disputes as the baby boom generation retires. But for now, Bushnell v. Medico is one of the few decisions in Washington interpreting and construing a long-term care policy.