Genworth facing legal woes over long-term care insurance division
Americans who purchase long-term care insurance pay premiums for years and often decades in the expectation that a significant portion of their costs for assisted living, nursing and in-home care will be covered in their later years. Therefore, it’s understandably concerning that Genworth Financial is facing a family battle of sorts with two recently-filed lawsuits that involve its LTC insurance as well as class-action suits.
The suits filed by two different shareholders on behalf of Genworth name a number of directors and executives of the company as defendants. Interestingly, Genworth is also named as a “nominal defendant” in both suits. The company itself is also facing two class-action suits filed by two cities’ employee retirement systems.
One shareholder suit against the Virginia-based company claims that directors and executives reported false financial information between 2011 and 2014. The company has faced a drop in its stock price and losses in recent years. It reported a $1 billion-plus loss for 2014 and another $193 million loss as of June 2015. The losses were reportedly caused by the fact that Genworth’s LTC division had to set aside hundreds of millions in reserves in 2014.
The other shareholder lawsuit also faults executives’ and directors’ handling of the company’s LTC business and their alleged failure to let shareholders know about the problems that the LTC business was facing. According to the suit, the company’s current chief executive officer made nearly $12 million in 2013 — the year before Genworth declared losses due to the reserves set-aside.
The two shareholder suits are attempts to get the directors and executives to cover the cost of their alleged mismanagement, which they say has led to a steep drop in its stock value. The plaintiffs assert that the mishandling of the business is what brought about the class-action suits. As one suit states, this class-action litigation “exposed the company to potentially massive liability.” This liability could run into nine-figure payouts. They are asking that the defendants’ assets be impounded in order to provide restitution to the company.
Some people may not be interested in the legal and financial problems of their LTC insurance provider. However, we should all care about the solvency of the company to whom we are paying money to help ensure a comfortable life for ourselves and our spouses should we become unable to live independently.
Source: Richmond BizSense, “Genworth execs slapped with two lawsuits,” Michael Schwartz, Aug. 31, 2015