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Class Action Against CalPERS Proceeds to Trial

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Kershaw, Cook, & Talley is one of the law firms appointed as Class Counsel in a class action against CalPERS on behalf of approximately 123,000 class members.  The case was filed in August 2013 in the Los Angeles County Superior Court.

The class action arises from CalPERS decision to implement an 85% premium increase on policyholders who purchased Long-Term Care (LTC) policies between 1995- 2004. Following announcement of this increase in 2013, the Plaintiffs filed a complaint asserting five causes of action against CalPERS: breach of fiduciary duty; breach of contract; breach of the implied covenant of good faith and fair dealing; rescission; and declaratory and injunctive relief.

In March 2017, CalPERS filed a Motion for Summary Judgement seeking to dismiss the case in its entirety. With respect to Plaintiffs’ breach of fiduciary duty, CalPERS argued that it had immunity.  With respect to Plaintiffs’ claim for breach of contract, CalPERS urged that it had the right to raise the policy premiums for any reason and, in any event, that the claim was barred by the statute of limitations.

Class Counsel vigorously opposed CalPERS’ motion, which was heard by the Court on June 2, 2017. During the hearing, Honorable Judge Ann Jones largely agreed with Plaintiffs and the Class.The Court rejected CalPERS’ argument that the Class’ breach of contract claims were barred by the statute of limitations.  The Court found the time period to contest the 85% rate increase did not begin to run until CalPERS actually announced the rate increase in 2013.  The Court also found that the rate increase potentially violated certain provisions in the insurance contract that prohibited rate increases that are “a result of” the increasing benefits that were being provide to policyholders who purchased inflation protection.  Since CalPERS primarily implemented the rate increase on policyholders who purchased inflation protection, the Court found that a jury could infer that the rate increases were implemented as a result of this benefit.

Although CalPERS has indicated that it will attempt to “decertify” the class, this was nevertheless a significant decision on behalf of the Class.  If the case is not decertified, the Class will likely proceed to trial in the Spring of 2018 in Department 308 of the Los Angeles Superior Court.

For more information about the class action against CalPERS, call Kershaw, Cook, & Talley at 916-779-7000.

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