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Down to Cases- Rescission is right when insured is "wrong"

On May 28, a much-watched case against Blue Shield of California--for revoking medical coverage of an injured policyholder--ended abruptly

By Barry Zalma | Updated on August 31, 2009

On May 28, a much-watched case against Blue Shield of California–for revoking medical coverage of an injured policyholder–ended abruptly when the plaintiffs, Cindy and Steve Hailey of Cypress, admitted that they “willfully” made crucial errors and omissions on their insurance application to obtain health coverage. They obtained the policy by deceiving the insurer with intentionally and willfully false representations.

The verdict came after years of reports in newspapers, radio and television claiming that insurers engaged in improper “post-loss underwriting” and deprived honest and ill people of their “right” to insurance. The pleas of the wronged were taken up by the mavens of the plaintiffs’ bar, the state Dept. of Insurance, legislators and others who refused to accept that an insurance policy is a contract in which both parties owe the utmost good faith to the other. In this case, the Haileys filed suit claiming their health insurance was improperly rescinded and the insurer did them wrong sufficient to require their insurance to be reinstated and for the insurer to pay excessive exemplary damages.

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