BAD FAITH: POSTCLAIMS UNDERWRITING
Nazaretyan v. California Physicians’ Service, (Second District, March 23, 2010) --- Cal.Rptr.3d ----, 182 Cal.App.4th 1601, 2010 WL 1038685, 10 Cal. Daily Op. Serv. 3660
A husband and wife who were denied healthcare insurance benefits relating to the premature birth of their twin girls when Blue Shield rescinded their coverage, filed an action against the carrier, asserting causes of action for bad faith, declaratory relief, and violation of Business and Professions Code section 17200. The plaintiffs alleged that the defendant rescinded their coverage after discovering that the woman had undergone in vitro fertilization, and that the plaintiffs had failed to disclose their previous and ongoing infertility treatment in the original application. The plaintiffs further alleged that Blue Shield had engaged in “postclaims underwriting” in violation of Health and Safety Code section 1389.3, which prohibits healthcare service plans from rescinding, canceling, or limiting a plan contract due to the plan’s failure to complete medical underwriting and resolve all reasonable questions arising from written information submitted on an application.
Blue Shield moved for summary judgment, asserting that its underwriting process was reasonable as a matter of law. The trial court granted summary judgment but the court of appeal reversed, holding that the facts failed to establish as a matter of law that Blue Shield made reasonable efforts to ensure that the application was accurate and complete, and that a reasonable trier of fact could conclude from the evidence that the plaintiffs did not willfully misinform the carrier in their application:
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