Los Angeles Injury Lawyer Blog

The Los Angeles Times reported that individual patients dropped by Blue Shield insurance may file a class action lawsuit for cancelling policies after policyholders submitted claims. A three-judge panel in the California 2nd District Court of Appeal ruled that canceling an individual health insurance policy for omitting information or making a mistake on an application after claims are submitted is strictly prohibited under state law. This is a victory for consumers and opens the way for class-action lawsuits against insurers that have improperly dropped policyholders.

This suit was filed by a Los Angeles jeweler, Augusto Ticconi, whose policy was canceled after his appendix burst and he submitted medical bills totaling more than $100,000. He believes that Blue Shield investigated his application only as a way to avoid paying his bills. In addition he stated that Blue Shield failed to attached his application to his policy when it issued it, which would invalidate the recision. The first trial court ruled in favor of Blue Shield and rejected the class action; however, the appeals court came to a different conclusion.

The practice of California health insurance companies waiting until after individuals incur medical expenses before they analyze policies for misstatements was called into question by the California Court of Appeals. The practice of looking back at claims after expenses are submitted is called post-claims underwriting and is not allowed. All three judges were unanimous in this decision and added that insurers must attach a copy of the application to the policy in order to cancel it. This decision could open the door to several class-action lawsuits against insurance companies.

Blue Shield of California Life & Health Insurance Co. insists that it is following state law which allows insurers to cancel individual policyholders who omit information or make false statements on applications. A spokesman for Blue Shield stated that the ruling was limited to whether or not a class can be certified and that the court ruled that it could. But other experts agree that this is a blow for Blue Shield and other insurance companies and a victory for patients.