Major California Insurer Sued For “Bait and Switch” Tactics
November 11, 2011 – A class action lawsuit recently filed in California state court alleges that insurance giant Blue Cross engaged in illegal “bait and switch” tactics while increasing annual deductibles and premiums during the middle of a deductible year. The suit claims the company violated state laws, including the Knox-Keene Act which prohibits health care plans from using misleading advertisements and deceptive coverage descriptions.
The first red flag came when, two months into the deductible year, Blue Cross notified policyholders by letter that their plan’s predetermined annual deductible would increase while the extent of their coverage would decrease. In addition to the premium increases, policyholders’ co-pays would increase along with their yearly prescription drug deductibles.
Blue Cross was able to implement these changes by modifying the terms of the policy from one year to one month, so that with 60 days’ notice it could alter the terms of the agreement when the policy renewed each month. This meant Blue Cross could change someone’s plan as often as six times each year. According to the complaint, once the policyholders were locked into a policy, their deductibles and premiums increased by as much as 20 percent.
The class action claim against Blue Cross accuses the insurer of breaching their contract and bad faith by breaking the implied covenant of good faith and fair dealing that applies to all insurers doing business within California.
Bad faith involves the intentional deceit of others. Here, Blue Cross faces bad faith charges for selling policies to customers who believed they were getting one thing, when in fact the customers received something that they did not agree.
Despite the Blue Cross position that they work tirelessly to keep insurance as affordable as possible, many believe that insurance companies who reserve the right to change their policies at will have nothing but their bottom lines in mind. The pending class action may help determine whether that is the case.
This kind of breach of bad faith claim is unusual. Frequently, people seek California insurance claim lawyers when their claims are denied, delayed or insufficiently paid. In December, Blue Shield of California settled a claim with the County and City of Los Angeles for improperly rescinding coverage on hundreds of policyholders.
If you are having a dispute with your insurer over benefits or claims, you should speak with a Los Angeles insurance bad faith attorney. An experienced lawyer can review your claim and advise you of your options.