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"Reduce-Pay at 65" MetLife Plan- 7th Cir.

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  • "Reduce-Pay at 65" MetLife Plan- 7th Cir.

    In a recent case out of the 7th Circuit, the court addressed a "non-standard" plan offered by MetLife and purchased by the Plaintiff. The Plaintiff was distraught to learn that this plan more than doubled her premiums at 67 years old and brought this action, which was originally dismissed by the district court for failure to state a claim.

    The court found that the two most relevant documents to this case were MetLife's "Long-Term Care Facts" brochure and the policy itself. The brochure advertised: "By paying more than the regular premium amount you would pay each year up to the Policy Anniversary on or after your 65th birthday, you pay half the amount of your pre-age 65 premiums thereafter." However, the brochure noted that it merely provided an overview, and that the policy would govern the terms of the agreement.

    The policy included a lone reference to the Reduce-Pay option, noting:
    "In addition, you have selected the following flexible premium payment option: Reduced Pay at 65 Semi-Annual Premium Amount:
    Before Policy Anniversary at age 65 $3231.93
    On or after Policy Anniversary at age 65 $1615.97"

    The court found:

    Elsewhere, the policy reserves MetLife’s right to change the premium. On the first page, MetLife announces that “PREMIUM RATES ARE SUBJECT TO CHANGE.” The same paragraph continues with the statement that “[a]ny such change in premium rates will apply to all policies in the same class as Yours in the state where this policy was issued.” In a section titled “Premiums,” MetLife “reserve[s] the right to change premium rates on a class basis.” Similar language is included in the “5% Automatic Compound Inflation Protec-tion Rider.” The policy defines more than 30 terms, but the word “class” is not among them. And the appended “Contin-gent Benefits Upon Lapse Rider,” which provides coverage options in the event of a “Substantial Premium Increase,” in-cludes a table illustrating that that term’s meaning varies with the policyholder’s age at the time the policy was issued. The table accounts for policyholders who were issued their policy at ages up to “90 and over.” Newman had the opportunity to review the policy for 30 days and return it for a full refund if she was dissatisfied.

    From the outset, Newman paid the elevated premium as-sociated with her Reduced-Pay option. When she reached age 65, her premium was cut in half. After Newman turned 67, however, MetLife doubled the premium. MetLife represents that this increase has been imposed on a class-wide basis, which it said at oral argument means all long-term-care poli-cyholders, including Reduced-Pay policyholders over the age of 65. MetLife defends the increase by noting that Newman still pays half the premium of a Reduced-Pay policyholder who has not yet reached age 65, and far less than she would if she had not purchased the Reduced-Pay option. Neverthe-less, at age 67, Newman’s semi-annual premium jumped to $3,851.80, greater than it has been at any other point during the life of the plan.

    Newman filed a four-count complaint on behalf of herself and a proposed class. She has alleged that raising her post-anniversary premium is a breach of the policy, violates the Illinois Consumer Fraud and Deceptive Business Practices Act, and renders MetLife’s representations and practices fraudulent. The district court granted MetLife’s motion to dismiss for failure to state a claim. In its view, the contract unambiguously permits MetLife to raise Newman’s premium, even after she reached age 65. This meant also that she had no claim for deceptive or unfair business practices or common-law fraud, because MetLife did nothing wrong. Newman’s appeal from that decision is now before us.
    Ultimately, the court found that the allegations set forth in the Plaintiff's complaint were sufficient to state a claim. As such, the court reversed the district court's decision, and remanded the case for further proceedings. The opinion is attached below.

    Attached Files
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