On June 3, 2019, the Appeals Court rejected the appeal of the Genworth Life Insurance Company (“Genworth”) against the Massachusetts Commissioner of Insurance (“Commissioner”).
In 2017, the Commissioner had rejected Genworth’s 2012 rate filings increasing the premium on long-term care insurance policies affecting approximately 14,500 policyholders in Massachusetts. At the time the Commissioner denied the insurer’s rate increases, 
Genworth had already sued the Commissioner, arguing that under the applicable rate statute its filings were deemed approved in 2016, by operation of law.
If Genworth’s rate increases had taken effect, some of the policyholders affected would have had rate increases of up to 134%.
The Appeals Court decision, Genworth Life Insurance Company v. Commissioner of Insurance, affirmed a 2017 decision of the Business Litigation Session of the Superior Court that sustained the Commissioner’s position that Genworth had improperly filed its notice to initiate a 30-day statutory period for the Commissioner to act on Genworth’s pending rate increases before they were “deemed” approved automatically.
The “deeming statute” and the commissioner’s 2008 bulletin on filing notice through SERFF
Long-term care insurance policies are purchased by insureds to finance or defray the cost of long-term care needs if they become disabled later in life. Long-term care insurance pays for home health care, assisted living facilities, and nursing home care. The Commissioner has exclusive authority to review and approve or disapprove rate-increase requests for long-term care insurance policies and to withdraw approval of previously approved rates under Massachusetts law.
Because of several factors, including increased longevity, price inflation in nursing home costs, and incorrect actuarial assumptions, long-term care insurance has generated substantial losses to carriers. As a result, insurers that wrote long-term care insurance have sought significant rate increases that regulators have resisted.
Since 2009, the Commissioner has required rate submissions through the SERFF system
Since 2009, the Division of Insurance (“Division”), through its Bulletin 2008-08, has advised carriers to submit all forms and rates electronically, through the Division’s System for Electronic Rate and Form Filing (“SERFF”). SERFF replaced the prior paper-based process and allowed insurers to electronically submit forms, policies, and endorsements to the Commissioner and allowed the Division to manage the regulatory review process on-line with greater efficiency and speed.
The Commissioner’s SERFF Filing Instructions advised carriers that any rates submitted for approval with an implementation date “on approval” are not eligible to be deemed approved. Any time after filing its rate “on approval” a carrier may subsequently amend its filing and request an effective date. This change of the submission from “on approval” to a specified date, results in the filed rate’s automatic approval if the Commissioner takes no action with the 30-days before the rate is deemed effective. However, under the Division’s SERFF instructions the carrier should file the effective date for its rate to take effect through the Division’s SERFF System.
Genworth rate increase request in limbo from 2012 until 2016
In December 2012, Genworth filed proposed rate increases on its Massachusetts long-term care insurance policies issued between September 1988 and September 2005. Genworth sought premium increases of up to 134 percent over existing premium rates on some of 14,500 of Genworth’s long-term care insurance policies. Genworth filed for its rate increases through the Division’s SERFF system under the statute giving the commissioner authority to approve or disapprove long-term care insurance rates. Under that law, if the Commissioner does not reject a rate filing within thirty days, the filing is ‘deemed’ approved.
Because the thirty day period does not allow adequate time for the Division to evaluate some rate filings, the 
Commissioner encourages carriers to opt out of the “deemer” mechanism of the statute and submit rate-increase requests to become effective, “on approval.” When Genworth filed its proposed rate increase in 2012, it did not set an effective date but instead made the rates effective “on approval.”
During the following four years, the Division of Insurance raised questions and sought additional information about the filings by way of “Objection Letters” filed through the SERFF system. Information was exchanged, and negotiations between Genworth and the Division of Insurance followed. Also, during this period, Genworth amended its filings twice through the SERFF system, changing the rate increase it was requesting. However, Genworth did not make any post-submission filing through the SERFF system seeking to impose a specific approval deadline.
Finally, after discussions with the Division, on October 21, 2016, Genworth sent notices advising the Commissioner that it would treat its rates as deemed approved in thirty days under M.G.L. c. 175, § 108(2)(a), unless the Commissioner disapproved the filings in writing in the interim. Genworth emailed the letters to the Commissioner, with copies sent by Federal Express overnight delivery. The commissioner received the notices on October 21, 2016, and requested extensions of the thirty-day deadline, which Genworth granted. Genworth’s final extension expired on December 16, 2016, with the Commissioner having neither approved nor disapproved Genworth’s filings.
At the time Genworth sent its notice, the Commissioner was negotiating with sixteen other long-term care insurance carriers over proposed rate increases and reached agreement with these other carriers to implement more modest rate increases. See Agency Checklists’ article of January 24, 2017, “Long-Term Care Policyholders’ Rates May Rise 40% Under Agreement With 16 Carriers.”
Genworth was not one of the 16 carriers agreeing to the rate increase limitations for its long-term care insurance policies.
On January 9, 2017, Genworth filed suit in the Superior Court for Suffolk County seeking a declaration that its filings had taken effect based upon its notice to the Commissioner of when its rates would take effect, and the Commissioner’s lack of action.
On February 21, 2017, the Commissioner rejected Genworth’s 2012 rate filings and claimed that Genworth’s notices by letter seeking to have the filings deemed approved were not valid because Genworth had not filed these notices through SERFF.
Superior Court decision in favor of the Commissioner
In the Superior Court, the Commissioner restated his argument that since Genworth only sent its requests by overnight mail and email and had not filed any notices through SERFF, Genworth’s notices were insufficient to trigger any statutory approvals of Genworth’s filings.
The Superior Court found that the Commissioner’s administrative instructions “requiring that the applicant set a specific Effective Date in its filing and that any change to that filing be made through SERFF” were valid.
The Superior Court judge ruled Genworth’s failure to comply with these instructions meant the rate increase notice to the Commissioner never took effect. Instead, Genworth’s 2012 filings remained subject to the Commissioner’s disapproval authority, which the Commissioner validly exercised in February 2017. See Agency Checklists’ article of October 3, 2017, “No 134% Rate Increase For Genworth Life Due to Failure to Properly File Notice of Effective Date.”
Genworth appealed to the Appeals Court and sought direct appellate review by the Supreme Judicial Court. However, that court denied Genworth’s request for an immediate appeal.
Appeals Court confirms Genworth did not follow the proper notice procedure
Before the Appeals Court, Genworth argued that under the applicable statute its requested rate increase was “deemed approved” on December 16, 2016, because its October 21, 2016 letters had provided the requisite 30-day notice. Genworth furthered argued that since the commissioner did not explicitly disapprove the increase within thirty days as required.
Genworth claimed its failure to file the request through SERFF was insignificant because the Commissioner had actual notice of the requested increase. Genworth also argued that the Division’s rules for filing through SERFF exceeded the Commissioner’s authority.
The Commissioner position before the Appeals Court was again that because Genworth’s statutory notices to the commissioner were not valid because Genworth did not file them through SERFF, as required. Thus, the statute did not control; the new rates were not deemed approved; and were, in fact, validly disapproved in the Commissioner’s February 2017 letter to Genworth after it had filed suit.
The Commissioner pointed the court to the instructions to the 2008-08 bulletin state explicitly, under the section titled “Deemer Provision,” that “[t]his section does not apply . . . to any filings that are effective on approval.”
The court noted the parties did not dispute that when on October 21, 2016, Genworth amended its pending rate request by letters to opt into the rate statute’s 30-day deemer provision, Genworth sent its notices to the Commissioner via Federal Express and e-mail, and not through SERFF, as the 2008-08 bulletin required.
The court affirmed the Superior Court decision that Genworth’s letters did not trigger the statute’s 30-day deemer provision. Therefore, the requested rate increase did not become effective, and the Commissioner’s explicit disapproval in February 2017, of Genworth’s rate increases, controlled.
The court’s final ruling was;
We are satisfied that the [Superior Court] judge’s view was correct here and that the sub-regulatory guidance provided by the 2008-08 bulletin was an appropriate exercise of the Commissioner’s authority. As a result, Genworth has not carried its “formidable burden” of demonstrating that the Commissioner’s interpretation, and administration, of [the statutes involved] were incorrect.”
Twenty days to apply for further appellate review to the Supreme Judicial Court
The Massachusetts Appeals Court is an intermediate appellate court. The ultimate judicial authority resides with the Supreme Judicial Court. Parties dissatisfied with an Appeal Court’s decision may apply for further appellate review. However, the allowance of any further appeal is discretionary with the Supreme Judicial Court.
Genworth had initially requested the Supreme Judicial Court allow a direct appeal bypassing the Appeals Court. The Supreme Judicial Court denied that application on March 29, 2018. Under the circumstance of this case, there is little doubt Genworth will make a second application for appellate review by the Supreme Judicial Court.
Under the Massachusetts Rules of Appellate Procedure, Genworth will have until June 24, 2019, to apply for further appellate review.
Agency Checklists will keep its readers posted on any further appellate proceedings in this case.