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August 9, 2013 / Akinyemi Ajayi

Blue Shield of California: Shielding Profits and Not Its Insureds

A recent lawsuit filed in Los Angeles, California against insurance giant, Blue Shield of California, alleges that the insurance company uses deception and misrepresentations to sell policies with “hidden deductibles”, often making insureds pay double, sometimes triple the out-of-pocket expenses they expect to pay normally.

Lead Plaintiffs, Arthur Bodner and Michael Felker, bring this class action lawsuit on behalf of all California residents who have enrolled or are currently enrolled under a “Vital Shield” health insurance policy.  The lawsuit alleges fraud, intentional misrepresentation, and breach of contract, amongst other allegations.  Specifically, Bodner and Felker allege that policy names, sales brochures, Internet advertisements, press releases, and other marketing materials misrepresented the true expenses policyholders would incur before the plan they purchased would begin to cover their medical expenses.  The complaint alleges, for example, that the policies in questions “require insureds to meet a second tier ‘hidden deductible’ in addition to the policies’ stated annual deductible before such services will be covered.”  This in effect, increases an insureds out-of-pocket costs many times what they should reasonably expect from a review of marketing materials and policy language.

Under California law, insurance policy language should be interpreted to give effect to the insured’s reasonable expectations. (Garcia v. Truck Ins. Exchange, 36 Cal 3d. 426, 438 (1984).)  Furthermore, “[i]n the case of standardized insurance contracts, exceptions and limitations on coverage that the insured could reasonably expect, must be called to his attention, clearly and plainly, before the exclusions will be interpreted to relieve the insurer of liability or performance.” (Logan v. John Hancock Mut. Life Ins. Co., 41 Cal. App. 3d 988, 995 (1st Dist. 1974) (emphasis in original).)  The plaintiffs seek restitution (repayment of insurance premiums) and disgorgement of profits (any profits made by Blue Should of California be taken away) from the wrongful conduct.

If you or anyone you know has been a victim of fraudulent advertising and misrepresentations by insurance companies, contact Khorrami Boucher Sumner Sanguinetti, LLP for a confidential consultation.


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