Transamerica Wins Long-Term Care Benefits Appeal

A gavel on a judge's bench in a courtroom

The U.S. Court of Appeals for the 9th Circuit has sided with Transamerica Life Insurance Co. in a long-term care insurance benefits case.

A three-judge panel at the court found that the claimants, Akop Arutyunyan and his daughter, Anahit Arutyunyan, failed to comply with the district court's requests for information.

The panel also found that the Arutyunyans' lawyer failed during oral arguments for the appeal to give an accurate description of how he handled the district court's orders.

"In view of the frivolous nature of this appeal and the multiple misstatements made by counsel at oral argument, we have ordered defendants and their counsel, by separate order filed contemporaneously herewith, to show cause why this court should not impose sanctions against them," Circuit Judge Daniel Collins wrote in an opinion for the 9th Circuit panel. "Defendants' counsel is likewise ordered to show cause why this court should not refer this matter to the State Bar of California."

Transamerica declined to comment on the case.

The lawyer for the Arutyunyans could not immediately be reached for comment.

The policy: Akop Arutyunyan, a resident of North Hollywood, California, bought a flexible-premium adjusted life insurance policy with a long-term care insurance rider from Transamerica in 2016.

He was put in the preferred nonsmoker risk class.

The policy was payable to age 121.

The policy had an initial death benefit of $500,000, with a monthly premium of $580.41 for the policy and $33.34 for the long-term care rider.

The basic interest account on the account option menu paid a minimum interest rate of 2%.

The four index-linked options on the menu were an S&P 500 account, an S&P 500 Plus Index account, a Global Index account and a Global Plus Index account. Those options had a minimum interest rate of 0%.

The claim: In 2018, Akop Arutyunyan said he needed to file a claim because he had torn his left rotator cuff and had spinal arthritis. A nurse assessed him in January 2019. Arutyunyan and his daughter said he could not perform activities of daily living, such as driving a car or shopping for groceries. They said Serob Pzdikyan was the man's caregiver and cared for him for two to five hours in his home every day.

Transamerica began paying benefits, then decided it should investigate Akop Arutyunyan's claim.

Transamerica sent an investigator to conduct surveillance in February 2019 and March 2019, then again in April and May of 2019, a third time in August 2019 and a fourth time in September 2019.

During the first surveillance period, "Transamerica's surveillance revealed that Mr. Pzdikyan never once came to Akop's home," according to the complaint Transamerica filed with the district court. "Nor did Akop ever meet with Mr. Pzdikyan at any other time or place during the period of surveillance. Akop and Mr. Pzdikyan never saw one another. No care was provided."

The investigator also found that Akop Arutyunyan behaved "in a highly independent and functional manner, with no apparent limitations at all," Transamerica reported. "He was seen walking his dog, reaching and bending, lifting objects with both hands, driving a car, shopping for groceries and other items, walking without a limp or any assistive device (such as the walker he claimed to need and use), and performing other movements and tasks he specifically represented to Transamerica he was unable to perform."

Pzdikyan did not visit the Arutyunyan home during the second, third or fourth surveillance periods, either, according to Transamerica.

The litigation: Transamerica sued the Arutyunyans in May 2020 to recover the long-term care benefits it paid them.

The judge at the district court level asked the Arutyunyans for their social media passwords to see if Akop Arutyunyan was as impaired as the Arutyunyans said, and the judge asked for Anahit Arutyunyan's tax returns, to see if she had a financial motive to commit fraud.

The Arutyunyans did not provide the requested documents.

The district court judge entered a default judgment in Transamerica's favor in January 2022, and Transamerica filed an appeal in February 2022.

The Arutyunyans argued in their appeal that the district court's order to produce the materials was an abuse of discretion. The Arutyunyans also objected to the district court's decision to enter a default judgment.

The 9th Circuit ruling: The 9th Circuit panel found that the district court judge had the right to ask for the specified materials and that issuing the default judgment was not an abuse of the district court's discretion.

"The district court applied a measured and gradational approach in responding to defendants' non-compliance with the court's orders and the local rules," and the Arutyunyans' lawyer "repeatedly minimized, if not misrepresented, his lack of compliance with the district court's orders in this case," Collins writes.

Even if the lawyer's comments about his response to the district court's orders "were not deliberate misstatements, it seems clear that they were at least made to this court with reckless disregard for their accuracy," according to the opinion.

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