Post-Claims Underwriting by Blue Cross of California in Health Insurance May Be Bad Faith
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UPDATED: Aug 13, 2020
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Blue Cross and Blue Cross of California are being investigated by California regulators after 10 lawsuits were filed against Blue Cross in March 2006 claiming that the company had a special department specifically set up to systematically look for any excuse to refuse coverage for large claims and that it had not acted in good faith to prevent fraud.
Insurance companies have a duty of good faith and fair dealing with the people they insure. This means that these companies have a duty to protect the interests of the people they insure in the same way they protect their own interests. The company has to act fairly and to move quickly to resolve claims. This duty of good faith and fair dealing is required from the insurance company whether or not it appears in any written contract.
In California, companies that provide medical insurance must review the application of an insured at the time the policy is written. Insurance companies may not wait until the insured submits a big claim and then review the application for an excuse to cancel the policy. This illegal practice is called post-claims underwriting and is considered a violation of the insurance companies’ duty of good faith to the policyholder.
People who have their insurance policies cancelled after filing a large claim can bring a legal action against the insurer for bad faith. When the company issues a medical insurance policy, the person insured thinks he or she has medical coverage and relies on it. If the company has a legitimate reason for denying coverage and tells the person at the time of the insurance application, the person can find other coverage. If the insurance company doesn’t review applications until claims are filed and then retroactively cancels the policies, the people insured by the company find themselves without insurance and liable for all the medical expenses that they thought were covered by their medical insurance. This is a very serious injury caused by the insurance company’s bad faith failure to review the application in a timely manner.
It’s also bad faith for an insurance company to make up excuses to cancel a policy that would not have been sufficient to refuse coverage at the time of the insurance application.
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If you have Blue Cross of California and your coverage has been cancelled after you have become seriously ill, consider contacting an experienced bad faith lawyer regarding your legal rights.