Federal Judge Blocks UL Rate Hike

Matz writes in an explanation of the Yue ruling that the language of the policies in question permits Conseco Life only to determine and charge a "current" or "present" COI rate, not a "delayed" rate beginning at some future date.

"The Court finds that the modifier 'current' serves as a limitation on Conseco's ability to set deferred COI rates," Matz says. "To the extent that the phrase 'current monthly cost of insurance rates' is ambiguous, under established principles of contract law, the ambiguity must be resolved against the drafter–here, that is, against Conseco."

Matz concludes that the plaintiffs have demonstrated that Conseco's decision to adopt a COI rate increase for reasons other than what the policies permit violates the contracts' provisions, even if the changes would not go into effect until a future date.

Matz also rejected Conseco's method of justifying a rate increase based on a report produced by an actuarial consultant. The actuaries who wrote the report sought to calculate a COI rate increase that would generate COI charges high enough to eliminate anticipated losses in future years based on an expected "mortality experience."

"The Court agrees with Yue that 'expectation as to future mortality experience,' means expectation of the 'rate of mortality,'" Matz says. "It does not mean something that would allow COI rates to be based on a comparison of the cost of projected death claims against the amount of revenue derived from the COI charges to be received from Policyholders."