LOS ANGELES (CBSLA.com) — A class action lawsuit filed Tuesday accuses CalPERS of intentionally misleading over 100,000 retirees over the past 18 years by selling them long-term insurance that turned out to be insufficiently funded and under duress for a decade.
CalPERS is reportedly raising rates as a result of the underfunding, despite consistent promises to the contrary, and some policy holders will reportedly see their rates increase as much as 1000 percent over the duration of the policy.
CalPERS began offering long term care (LTC) insurance in 1995 with approximately 119,000 people signing up. As of May 2012, there were 150,000 people enrolled in the program. CalPERS reportedly continued to promise that those who were insured through the program would have fixed rates, "reasonably priced" rates that would not rise based on age or health.
In 2013, however, CalPERS announced that it would increase the premiums of most policy holders by 85 percent by 2015. As a result, 125,000 class members, the majority of whom are senior and are on fixed incomes, will be placed in untenable positions.
"Wonderful people were duped into thinking they had purchased protection in the event they were no longer able to care for themselves. Unfortunately, the peace of mind so many sought turned out to be a worthless bill of goods," Gregory L. Bently of Shernoff Bidart Echeverria Bentley LLP said. "Once the exorbitant increases take place in 2015, members of the class, many on fixed retirement incomes, will be unable to make the outlandish payments which in turn will result in the cancellation of the insurance. All of the hard-earned money entrusted to CalPERS will go down the drain. It's not right."
The lawsuit alleges the following:
• That CalPERS claimed that it had the requisite experience to properly underwrite the LTC policies so as to insure that the funds were carefully and prudently managed.
• That, in uniform promotional materials, CalPERS repeatedly touted the financial stability and strength of it's LTC policies program.
• That CalPERS unexpectedly and suddenly advised it's policy holders that it's LTC insurance program was grossly underfunded, and that CalPERS, unbeknownst to plaintiffs and the other members of the class, had stopped enrolling new members in 2009.
• That CalPERS admitted that it had engaged in an improper investment strategy.
• That CalPERS failed to warn policy holders of the program's financial problems, and, in fact, told policy holders the opposite.
The plaintiffs are being represented by attorneys from Kershaw, Cutter & Rattinoff, LLP, Shernoff Bidart Echeverria Bentley LLP, and Kreindler & Kreindler LLP.
Shernoff Bidart Echeverria Bentley LLP leads the nation in protecting policy holders from company abuse.
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