Ruling on Policy Cancellations Could Spur Class-Action Suits
On Tuesday, a state appeals court ruled in favor of policyholders seeking to bring a class-action lawsuit against Blue Shield of California for canceling policies after members submitted treatment claims, the Los Angeles Times reports.
Blue Shield contends that state law permits insurers to rescind individual policies for omissions or mistakes on applications, even if they are discovered after claims are submitted.
However, the three-judge panel ruled unanimously that post-claims underwriting, or reviewing applications after claims are submitted, "is flatly prohibited."
The judges added that insurers cannot cancel a member's policy if they do not attach a copy of the application to the policy.
David Seldin, a Blue Shield spokesperson, said the "only issue that the court was considering was the very narrow, technical issue on whether a class can be certified, and they ruled that a class can be certified."
However, William Shernoff, who represents policyholders, said, "This decision will likely invalidate thousands of health insurance rescissions."
Bryan Liang, executive director of the Health Law Institute at California Western School of Law, said the decision was "really going to open the doors to changes in policies by the insurers or a lot more lawsuits."
Jamie Court, spokesperson for the Foundation for Taxpayer & Consumer Rights, called for regulators to determine how many policies were canceled improperly under these new standards and move to reinstate them so that patients can begin receiving treatment (Girion, Los Angeles Times, 12/5).