An Illinois appeals court finds that a company that provides home health care but has a waiting period for assistance with pre-existing conditions is selling insurance without a license.
Homeward Bound Services, Inc., provides elderly individuals with assistance with bathing, dressing, toileting, and other daily tasks. Customers sign an "Assisted Living Service Contract," which lasts one year. The fee depends on the health of the customer, and there is a six-month to one-year waiting period, during which customers cannot receive help for a condition that existed at the time the contract was signed. The service is marketed as protection against future events.
The Illinois Department of Insurance determined that Homeward Bound was selling insurance without a license and ordered it to discontinue its services. Homeward Bound appealed.
The Illinois Court of Appeals affirms, holding that the nature of the arrangement between Homeward Bound and its customers was that of insurance. According to the court, because customers can't receive care for a pre-existing condition during the waiting period, Homeward Bound shifted risk based on a contingency, which is the essence of insurance.
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