State Bans on Mandatory Hospitalization Requirements Do Not Apply to LTC Policies Already in Effect

The Sixth Circuit holds that long-term care policies purchased by residents of Ohio and Florida remained in force continuously from their effective dates, so they were not affected by both states’ subsequent ban on long-term care policies requiring a hospital stay prior to coverage. Smith v. Continental Casualty Co. (6th Cir., No. 20-3004, Oct. 6, 2021).

Ohio resident Maybelle Smith and Florida resident Mary Fleming each bought long-term care insurance policies from Continental Casualty Company and paid yearly premiums. The policies stated that they were “guaranteed renewable for life” and required that Ms. Smith and Ms. Fleming spend three days in a hospital before they would qualify for long-term care coverage. After the women bought their policies, Ohio and Florida banned the sale of long-term care insurance policies that had mandatory hospitalization requirements.

Ms. Smith and Ms. Fleming entered long-term care facilities without staying in a hospital first. The insurance company denied coverage. Ms. Smith and Ms. Fleming sued Continental, arguing that each annual premium they paid was consideration for a new year-long contract, so when the states banned mandatory hospitalization requirements, it applied to their policies. The district courts dismissed their claims, and they appealed.

The U.S. Court of Appeals for the Sixth Circuit affirms, holding that the Florida and Ohio laws outlawing mandatory hospitalization requirements did not apply to the long-term care policies because the policies remained in force continuously from when they became effective. The court finds that the original contracts were not intended to last only a year because each year the limitations period did not restart, lifetime benefits did not reset, and the policies could not be renegotiated. Instead, the court holds that the policies’ “provisions make clear that the parties intended their contract[s] to extend indefinitely.”

For the full text of this decision, go to: https://www.opn.ca6.uscourts.gov/opinions.pdf/21a0450n-06.pdf