(CN) - A federal judge will not certify a class that claims Prudential stopped selling a certain health insurance policy to lock in sick customers to rising rates.
Lead plaintiff Beverly Clark sued Prudential Insurance in Newark Federal Court, alleging deception, bad faith, and violation of California's Unfair Competition Law.
Clark accused Prudential of "closing the block" - that it stopped selling a certain health insurance policy to new customers so as to unlawfully increase premiums. When healthy policyholders left, the sick were locked into the increasingly costly policy and locked out of other options due to their pre-existing condition, Clark claims.
The class claimed that Prudential falsely claimed higher premiums would result from the increasing age of the insured and rising medical costs, not from block closure.
On Feb. 5, U.S. District Judge Dickinson Debevoise denied class certification on multiple grounds and partially Prudential partial summary judgment based on the statute of limitations.
Debevoise ruled that the proposed 17,000-member class spanning a 30-year period across four states was not fit for class treatment.
Last week, Debevoise refused to reconsider or to redefine the class to be certified solely for purposes of liability, not damages.
He found that "the proposed class and subclass still do not overcome the problems of class-wide treatment discussed at length above: materiality, varied conduct, or calculation of damages by common proof. The post-2001 policyholders were subject to the sharp premium increases once Prudential lifted the cap. As a result of these sharp increases, the post-2001 policyholders were understandably likely to call Prudential as to the cause of their increased bills and to seek assistance in lowering the premium. Indeed, the court's individualized review of these varied communications with agents later led to dismissal of two of the four challenged class representatives, who all held on to their policy after 2001, due to the triggering of notice and running of the statute of limitations."
Debevoise also tossed the claim that Clark lacked reason to suspect the basis of her death spiral-based claims.
"(T)he record shows that Ms. Clark had reason to at least suspect that a type of wrongdoing had injured her, and that continuous suspicion was supported by her knowledge of the closed block, the escalating premiums, and Prudential's proffered reasons for the rises," Debevoise wrote. "The record shows that this factually supported suspicion was triggered in 1993, approximately fifteen years prior to the filing of this suit. No reasonable trier of fact could conclude otherwise. Prudential did not need to articulate the word 'death spiral' for her to suspect that a fraud was upon her."
Nor did the court overlook a factual or legal issue that may alter its disposition, the ruling states.
"Mss. Clark and Drogell did not learn any new facts to form the fraud basis of their claims," Debevoise wrote. "They simply waited too long to file the claim. Ms. Clark had already uncovered the factual basis of her claims in 1993, outside of the statute of limitations. That her attorney at that time, whom she knew was not knowledgeable in insurance law, did not identify the correct legal theory here is inapposite. The same is true as to Ms. Drogell as per her phone call with a Prudential agent on May 27, 2003, also outside of the statute of limitations."
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