Recently the largest health insurer in California, Blue Cross of California, was sued in a series of ten separate lawsuits. The allegations are that Blue Cross systematically reviews large claims submitted shortly after a policy goes into effect and then rescinds those policies for no good reason other than to get out of paying the submitted claims. I’ve commented before on some of the unique aspects of rescission cases.
I’m litigating two separate rescission cases right now that make me pretty sure the cases I’ve linked to in the L.A. Times story have some merit. In both of my cases the health insurers retrospectively reviewed my clients’ applications based on claims that were submitted within three or four months after the policies went into effect. In each case the insurers found relatively minor discrepancies between the answers on the insurance application and my clients’ health histories. In neither case did the alleged misstatement or omission have anything to do with the claims that were submitted by my clients after their policies went into effect. And once we got hold of the insurers’ underwriting guidelines it became clear that the "misstatements" my clients supposedly made were insignificant and wouldn’t have called for the insurers to decline coverage even if they had been disclosed.
Every time I have a person call about a rescission claim I take a hard look at it. In my experience, insurers often rescind policies for very flimsy reasons. When big claims come in shortly after a policy goes into effect, insurers often look hard at whether they can rescind the policy to get out of paying those claims. In fairness to insurers, when large claims come in soon after coverage goes into effect it is sometimes true that a person has lied during the application process in order to get coverage for a serious medical condition that presents the need for immediate treatment. If a person is willing to knowingly misrepresent their health history about a serious medical condition to get coverage and that medical condition thereafter results in significant expense, the insurer should be able to rescind. But insurers use rescission as a strategy to avoid paying valid claims far more often than in that limited situation. The availability of rescission can act on an insurer like crack to a drug addict.