Blue Shield of California to Pay Los Angeles $2 Million for Bad Faith Claims

California Insurance Bad Faith News

In late December, Blue Shield of California settled a bad faith insurance claim with the County and City of Los Angeles, agreeing to pay $2 million for withdrawing health insurance benefits after members became ill. The health insurer came under fire for engaging in what former Los Angeles City Attorney, Rocky Delgadillo, called “post-claims underwriting.”

Blue Shield was accused of rescinding the health insurance benefits of several hundred policyholders who became very ill with various ailments and would require expensive medical treatments. The cancellation of coverage saved the insurance company millions.

All of the policyholders in the lawsuit had their coverage revoked before 2008. According to the Los Angeles Times, health insurance rescissions were reaching their height at that time, totaling almost 5,000 a year.

In response, California legislators created the Patient Protection and Affordable Care Act, which went into effect in August 2010. The new law made it illegal for insurance providers to rescind coverage except in cases where they could show intentional fraud.

In the settlement, Blue Shield did not have to admit any wrongdoing. A company spokesperson said the company agreed to settle to avoid the cost of protracted litigation.

This isn’t the first time Blue Shield has found itself in hot water over health insurance rescissions. In 2009, the company faced $12.6 million in fines after refusing to reimburse 700 policyholders for out-of-pocket expenses that should have been covered by the insurer. The company avoided the penalty by paying the benefits and reinstating coverage.

Bad Faith Insurance Claims in California

When insurers issue a health care policy, they agree to pay for medical expenses in exchange for the payment of health insurance premiums. When insurers refuse to pay or delay payment for health care coverage, they are not following through on the terms of the contract. Californians whose health care claims have been denied without good cause may have a bad faith insurance claim.

Bad faith claims arise when insurers breach their duties of good faith and fair dealing. Every insurer in California must adhere to this standard. Los Angeles insurance bad faith attorneys are available to help people whose coverage has been rescinded, denied or delayed due to bad faith on the part of the insurer.