Calif. Rescission Case Judge Rules For Blue Shield

LOS ANGELES_A judge ruled Thursday that Blue Shield of California was right to drop the policy of a man who sued the health insurer on claims that he was wrongly dropped after an accident left him with huge bills.

In a directed verdict in the middle of trial, Orange County Superior Court Judge Peter Polos found that Blue Shield acted in good faith when the company investigated the medical history of Steve Hailey and dropped his policy.

Hailey had brought a civil case against the insurer, saying Blue Shield dropped his coverage wrongly after a car wreck left him with more than $400,000 in medical bills.

In a statement, Blue Shield called the verdict "a complete vindication" after five years of litigation.

"The Haileys finally admitted what Blue Shield maintained all along," Blue Shield general counsel Seth Jacobs said in a statement. "The evidence of deceit by the Haileys was overwhelming."

A call to Hailey's attorney, Michael Nutter, was not immediately returned Thursday afternoon.

The judge's order supersedes a jury's decision.

In the ruling, the judge called Blue Shield's investigation procedures reasonable, adding that the Haileys "willfully misrepresented" information on their Blue Shield application.

Steve Hailey's wife, Cindy, filled out his application for him and had not listed his full medical history, which included high blood pressure and chest pains.

During opening statements on May 20, attorneys on both sides agreed on a timeline of events: Blue Shield approved the Haileys for an insurance policy on Dec. 15, 2000; Hailey was in a major auto accident in March 2001; and Blue Shield canceled the policy in June 2001.

An attorney for the insurer said a February 2001 trip to the emergency room is what led Blue Shield to investigate Hailey's insurance application, not the massive claims that followed the car wreck.

When it first came to light, Hailey's case helped prompt state regulators to target questionable health insurance rescissions. More than $13 million in fines for rescissions have been collected from Anthem Blue Cross, Health Net Inc., PacifiCare, Kaiser Permanente and Blue Shield.

The Hailey lawsuit was dismissed in 2005, but in 2007 a state appeals court ruled that it should go to trial.

There are a number of lawsuits on state dockets alleging health insurers dropped coverage after policyholders made pricey claims.

One of them is a $1 billion lawsuit brought against Blue Shield by the Los Angeles city attorney's office. It contends the company dropped hundreds of policyholders illegally and used deceptive advertising. The next procedural hearing in that case is set for June 17.