Lorrayne Hartnett, a 94-year-old woman, purchased a long-term care insurance policy in 1998 that covered care in nursing or assisted living facilities. During the COVID-19 pandemic, she fractured her hip and, fearing infection in a facility, received post-surgical care at home instead. Her physician recommended home care, but the insurer, Jackson National Life Insurance Company, denied the claim. The policy included an 'alternative plan of care' benefit, but it required the insured to already be receiving benefits under the policy and for the insurer to agree to the alternative plan. Hartnett sued for breach of contract, arguing that Illinois regulations prohibited conditioning home care benefits on prior institutional care. The district court granted summary judgment for the insurer, and the Seventh Circuit affirmed.
The Seventh Circuit reviewed the case de novo, focusing on whether Hartnett's policy 'provides benefits for home health care' under Illinois administrative code section 2012.70(a)(2). The court rejected the plaintiff's argument that the regulation applied, reasoning that the regulation only prohibits conditioning home care on prior institutional care if the policy itself provides home health care benefits. The court found that Hartnett's Nursing Care Policy did not guarantee home care; it only offered a discretionary alternative plan of care if specific conditions were met, including prior receipt of benefits in an institutional setting. The court distinguished this from a Comprehensive Long Term Care Policy, which explicitly designates benefit amounts for home care. The court further addressed the claim of bad faith, noting that the implied covenant of good faith cannot override express contract terms. Since the policy explicitly required the insured to be receiving benefits before an alternative plan could be triggered, and Hartnett was not, the insurer was entitled to deny the claim under the contract's express terms.
The decision clarifies that Nursing Care Policies in Illinois do not automatically trigger state protections against conditioning home care on prior institutional care unless the policy explicitly provides home health care benefits. Insurers may continue to deny home care claims under alternative plan provisions if the insured has not first received benefits in a nursing facility. The ruling leaves open the question of whether alternative plan provisions should be certified to state courts in future cases involving similar ambiguities in the Illinois administrative code.
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