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Nieto v. Blue Shield of California Life & Health Insurance Co.

January 19, 2010


APPEAL from a judgment of the Superior Court of Los Angeles County. Robert Leslie Hess, Judge. Affirmed. (Los Angeles County Super. Ct. No. BC355336).

The opinion of the court was delivered by: Doi Todd, J.


Plaintiff and appellant Julie Nieto failed to disclose information about her medical condition and treatment on a health insurance application she submitted to defendant and respondent Blue Shield of California Life & Health Insurance Company (Blue Shield). She filed an action against Blue Shield after it rescinded her insurance policy. The trial court granted Blue Shield's motion for summary judgment, ruling that it was entitled to rescission as a matter of law in view of the undisputed evidence that appellant made material misrepresentations and omissions regarding her medical history.

We affirm. The undisputed evidence established that the information appellant provided to Blue Shield was false and, contrary to appellant's assertions, Blue Shield had no statutory duty to show that appellant's application had been physically attached to the insurance policy nor to conduct further inquiries during the underwriting process to ascertain the truthfulness of appellant's representations before it issued the policy.


Appellant's Medical History

Appellant saw orthopedist Martin Nation, M.D., several times between January 2002 and May 2005 for her back pain. She received medical treatment for her back problems in February 2005 when she saw Dr. Nation three times. During her first visit, appellant stated she was suffering from a pain in her hip that went down the outside and back of her leg, and Dr. Nation directed his nurse to give her a steroid injection. Appellant received a second steroid injection during her next visit, after she told Dr. Nation that she was not significantly better and continued to have pain radiating from her back to the middle of her thigh. During her third visit, appellant told Dr. Nation that she was still experiencing pain in her lower back and down her right leg. Dr. Nation ordered an X-ray and prescribed an oral steroid and other medications. He wrote out a prescription stating that appellant was being treated for "severe leg and back pain" and asked that she be excused from work "when pain is severe."

Appellant also visited chiropractor Dr. Jeffrey Rockenmacher periodically between 1996 and 2002. Thereafter, she saw him at least 17 times between February and May 2005 when he treated her for lower back and hip pain. During a February 22, 2005 visit to Dr. Rockenmacher, appellant filled out a "case history update" form on which she indicated that her present complaint was "pain in lower back/hip-when walking," she had consulted with Dr. Nation who had treated her with a cortisone shot for a pinched nerve, and she was then taking three prescribed medications on a regular basis.

Between spring 2004 and spring 2005, appellant filled at least 10 prescriptions for four different medications, including Soma, Tylenol with codeine, Motrin and Xanax. These prescriptions were in addition to the two steroid injections and oral steroid she had received from Dr. Nation.

Appellant's Health Insurance with Blue Shield

In 2005, Blue Shield offered several health insurance plans to individuals. As part of the determination whether to issue coverage, Blue Shield would provide an application to an individual seeking coverage that requested detailed information of past and current health problems, treating physicians, prescribed medications and recommended treatment. Using proprietary written guidelines, Blue Shield evaluated the responses provided by each applicant to determine eligibility for health insurance and, if so, at what premium rate. In evaluating an application, Blue Shield relied on the information provided by the applicant; it did not assume the applicant was untruthful. Blue Shield would seek to review medical or pharmacy records when the applicant disclosed a condition or treatment that warranted further assessment; on the other hand, where no such condition or treatment was disclosed, Blue Shield would not review medical or pharmacy records for the purpose of ascertaining the truthfulness of the applicant's responses. If the application was incomplete, Blue Shield would contact the applicant to provide additional information. This overall review process is referred to as underwriting.

In February 2005, at the request of appellant and her domestic partner David Moore, Blue Shield mailed an individual and family health plan informational packet to appellant's residence. According to appellant, she "just thought it would be a good idea to have insurance" after being uninsured for the previous seven years. On May 5, 2005-the same day as one of appellant's appointments with Dr. Rockenmacher-Moore and appellant completed and signed the written application included in the packet. Appellant "looked over" the application before signing it.

In the "Medical History" portion of the application, Moore and appellant answered "no" to almost every question, except for indicating that appellant menstruates. Moore and appellant answered "yes" to question 11, asking whether Moore or "any applying family member" had in the past 20 years received treatment, including medications, for symptoms pertaining to the "Musculo-Skeletal system-such as: neck, spine/back sprain, pain, injury, sciatica, herniated or bulging disc(s), or problems . . . ." In the part of the application requesting details about any "yes" answer in the previous medical history section, Moore referenced question 11 and responded that his diagnosis was a bulging disc lasting from October 1995 to July 2000 and that the condition did not exist at the present time. Appellant later testified at her deposition that the additional information provided in the application about back problems related solely to Moore's condition and treatment.

In the application, appellant also answered that her last doctor's visit had occurred three years earlier when she saw Abelardo Pita, M.D., for the flu. She wrote that the visit had resulted in "no finding" and her present health status was "good." She did not inform Blue Shield in the application or otherwise about her visits to Dr. Nation or Dr. Rockenmacher. Appellant answered "no" to the question asking if she had "[t]aken or been ordered to take prescription medication(s)" within the past 12 months.

Appellant signed and dated the application directly below the following attestation: "I have read the summary of benefits and the terms and conditions of coverage and authorizations set forth above. I understand and agree to each of them. I alone am responsible for the accuracy and completeness of the information provided on this application. I understand that neither I, nor any family members, will be eligible for coverage if any information is false or incomplete. I also understand that if coverage is issued, it may be cancelled or rescinded upon such a finding." Appellant confirmed in her deposition that she took responsibility for the accuracy and completeness of the information provided in the application.

Blue Shield sales agent Susan Corrington received appellant's and Moore's application via facsimile. Corrington contacted appellant and Moore several times throughout May 2005, seeking information that was missing from the application. Once Corrington received the missing information, she forwarded the application to Jennifer Krebs, a Blue Shield underwriter, who reviewed the application for accuracy and completeness. Upon determining the application was incomplete, Krebs instructed the processing department to send appellant an addendum to the application requesting information about her last doctor's visit. After receiving the completed application in June 2005, Krebs underwrote the application. She confirmed that appellant had no prior claims history with Blue Shield. She reviewed appellant's responses and determined there were "no concerns." On the basis of Moore's responses, she requested additional information about his chiropractic visits. He responded that he must have filled out the application incorrectly, writing that he had not seen a chiropractor in over six years and was not having any current back problems. After receiving this information, Blue Shield approved the application and issued a health insurance policy (policy) to appellant and Moore effective July 1, 2005.

Consistent with the admonition on the application, the policy provided in pertinent part: "Blue Shield Life may terminate this Policy for cause immediately upon written notice for the following: [¶] a. Material information that is false or misrepresented information provided on the enrollment application or given to the Plan."

On September 30, 2005, Blue Shield's underwriting investigation unit (UIU) opened a file on appellant after it received a referral from the medical management department indicating that appellant had received a diagnosis of necrosis of the hip and was scheduled for hip replacement surgery on November 10, 2005. As part of the investigation the UIU sought and obtained appellant's medical and pharmacy records. At that point, Blue Shield learned that immediately preceding her application appellant had received extensive treatment for back and hip pain and had been prescribed multiple medications. If Blue Shield had been aware of the undisclosed information it either would have declined to issue the policy or, at a minimum, would not have issued the policy until receiving additional information from appellant.

Via a November 16, 2005 letter to appellant, Blue Shield rescinded appellant's policy. Blue Shield conducted an internal investigation following appellant's reporting the rescission to the California Department of Insurance Consumer Affairs Division, which confirmed the rescission decision on the same bases set forth in the letter to appellant.

Pleadings and Summary Judgment

Appellant filed a complaint against Blue Shield in July 2006, asserting claims for breach of contract, breach of the implied covenant of good faith and fair dealing, declaratory relief and violation of Business and Professions Code section 17200. She alleged that Blue Shield's rescission of her policy constituted unlawful postclaims underwriting in violation of Insurance Code section 10384 and was an unreasonable use of her insurance application in violation of Insurance Code section 10381.5.*fn1 She sought general, special and punitive damages, as well as declaratory and injunctive relief.

Blue Shield answered and cross-complained against appellant. It alleged that appellant "made material false representations and omitted material facts in her Application concerning her medical condition and history" and that it would not have issued the policy had appellant provided complete and accurate information. It sought a declaratory judgment that it rightfully rescinded the insurance contract, thereby precluding appellant from maintaining her action.

Blue Shield initially moved for summary judgment in September 2007, and the trial court granted the motion on December 4, 2007 on the ground that Blue Shield had no duty to further investigate appellant's medical history because her application did not provide notice of any concerns. The same day, the Second Appellate District of the Court of Appeal issued an opinion in Ticconi v. Blue Shield of California Life & Health Ins. Co. (2008) 160 Cal.App.4th 528 (Ticconi); the decision addressed two statutes-sections 10113 and 10381.5-which appellant had argued barred summary judgment. On its own motion, the trial court vacated its order granting summary judgment and directed the parties to submit supplemental briefs addressing the new authority. The briefs also addressed a Fourth Appellate District of the Court of Appeal decision ...

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