(Please note: the names and locations of all parties have been changed to protect the confidentiality of the participants in this automobile accident/insurance coverage case and its proceedings.)
BLUE SHIELD DID NOT COMPLETE ITS MEDICAL UNDERWRITING OR TAKE STEPS TO ANSWER ALL REASONABLE QUESTIONS ARISING FROM THE INFORMATION CONTAINED IN THE APPLICATION BEFORE ISSUING COVERAGE.
Health and Safety Code section 1389.3, enacted in 1991, provides as follows:
No health care service plan shall engage in the practice of postclaims underwriting. For purposes of this section, postclaims underwriting means the rescinding, canceling, or limiting of a plan contract due to the plan’s failure to complete medical underwriting and resolve all reasonable questions arising from written information submitted on or with an application before issuing the plan contract. This section shall not limit a plan’s remedies upon a showing of willful misrepresentation.
On December 24, 2008, the Court of Appeal issued its decision in plaintiffs’ appeal from an earlier order in this case granting defendant’s first motion for summary judgment. See Sally Lawrence v. California Physicians’ Service, 158 Cal.App.4th 452, 69 Cal.Rptr.3d 789, 2007 Cal.App. LEXIS 2083 [mod. January 22, 2008, with no change of judgment, ___ Cal.App.4th ___ (2008)]. See also plaintiffs’ request for judicial notice of the Lawrence opinion filed concurrently with this opposition. In that opinion, the Court of Appeal specifically determined that, with each application, health plans must take reasonable steps and make reasonable inquiries outside the four corners of the application to confirm the accuracy of the information provided before issuing coverage. The rational for the requirement is to prevent the very calamity that has befallen plaintiffs in this case, i.e., the postclaims rescission of a plan contract that would not have been issued initially if the plan had done its medical underwriting and true risk assessment before issuing coverage.
In this case, it is clear that Blue Shield did not complete its medical underwriting before issuing its contract. Defendant’s separate statement merely confirms that it did no more than examine its own internal records to see whether plaintiffs had any prior health history with Blue Shield.
It knowingly limited its review in this manner even though the application contained information regarding Bob Lawrence’s overweight condition and Sally Lawrence’s disclosed irritable bowel syndrome, conditions which would have told a reasonably prudent underwriter that there was unknown risk that required follow-up investigation (outside the application and Blue Shield’s internal, show-nothing records) before a decision to grant coverage could issue.
The Court of Appeal has already determined that questions concerning Blue Shield’s completion of its medical underwriting and whether Blue Shield took reasonable steps to ensure the accuracy of the application are fact issues requiring trial. Blue Shield’s separate statement further confirms the Court of Appeal’s initial, law of the case decision. (See Part 10 of 11.)
For more information you are welcome to contact Sacramento personal injury lawyer, Moseley Collins.