Blue Cross Must Face Juries in Health Plan Cancellation Cases

Ray Mattison

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In an opinion handed down on April 23d, The California Court of Appeals rejected the attempt of Blue Cross of California and Blue Cross Life to force consumers whose health coverage was canceled (legally referred to as "rescinded") to binding arbitration rather than the jury trial to which they would otherwise be entitled.  A copy of the opinion  in Rodriguez v. Blue Cross of California can be found at the Court of Appeals website.  The Blue Cross health coverage of Raudel and Maria Rodriguez was rescinded unilaterally by Blue Cross after Raudel incurred over $100,000 in medical bills.  The Court of Appeals agreed with the trial court's ruling that Blue Cross of California and BC Life & Health Insurance Company, a Blue Cross subsidiary, violated provisions in the Health and Safety Code requiring a clear and specific warning be given to the consumer before he or she can be forced to give up their right to a jury trial in a claim against the company.  Represented by Robert Gianelli of the Los Angeles firm of Gianelli & Morris, Rodriguez filed a class action alleging that the companies had engaged in a practice of unfairly and illegally canceling health insurance coverage once the companies discovered that the customer had incurred large medical expenses, a prohibited practice known as "post claims underwriting".  The Rodriguez case is one of the class actions against Blue Cross and BC Life which have been joined together in Los Angeles.  It is believed that more than 6000 consumers have been victims of this practice, according to Gianelli.  Judge Peter Lichtman is currently conducting settlement proceedings in these cases.  "This is an important victory for my clients and all of those who have been victims of this practice.  Consumer advocates uniformly believe, as I do, that forcing consumers into binding arbitration - which deprives a citizen of their day in court - is unfair and limits both their rights and the right of the public to know.  Now, Blue Cross will be forced to explain their conduct in a public courtroom before a jury of citizens."  Recently, a San Luis Obispo Judge granted class action status to a similar group of consumers accusing Blue Shield of California of engaging in the same cancelation practices.  If the Blue Cross actions are not resolved, the customers will be entitled to have a jury hear their claims, as well as the defenses of Blue Cross, rather than a single arbitrator who would hear the case in private at the expense of the consumer.  Binding arbitration rulings do not create legal precedent, generally cannot be appealed to a higher court, and can cost $100,000 or more in fees -  half of which must be paid by the consumer.