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Nazaretyan v. California Physicians' Service

March 23, 2010


APPEAL from a judgment of the Superior Court of Los Angeles County. Robert L. Hess, Judge. Reversed with directions. (Los Angeles County Super. Ct. No. BC355335).

The opinion of the court was delivered by: Rothschild, Acting P. J.


In 2004, plaintiffs Gevork Nazaretyan and Narine Ghazaryan applied for and obtained health coverage from defendant California Physicians' Service, doing business as Blue Shield of California (Blue Shield), a health care service plan. In 2006, Blue Shield rescinded plaintiffs' coverage on the ground that their application contained several material misrepresentations concerning their medical history. Plaintiffs then filed suit against Blue Shield but lost on summary judgment. We reverse.


Nazaretyan emigrated to the United States from Armenia when he was 11 years old, and he never finished high school. Ghazaryan is Nazaretyan's wife; she came to the United States from Armenia in 1999. When she arrived she spoke no English, having studied only Armenian and Russian. She now understands English "[u]p to [a] certain point," which she estimates to be "[p]erhaps 40 percent."

In August 2004, plaintiffs had health insurance through a Blue Cross HMO plan. Because their coverage was restricted to the HMO's "in- plan" doctors, they sought a plan that offered broader coverage.

Ahmad Yusop was an insurance broker selling products offered by various insurance companies and health care service companies, including Blue Shield. In the past he had assisted plaintiffs in obtaining other insurance (health, life, and disability) from companies other than Blue Shield, and he had completed other insurance applications for them.

On August 31, 2004, Yusop met with plaintiffs at their home to assist them in obtaining new health coverage and to fill out an application for Blue Shield coverage. When Yusop had sold them their prior health coverage, he had also come to their home and completed the applications.

At the meeting on August 31, 2004, Yusop sat across from Nazaretyan, who did not see what Yusop was writing. Yusop completed the application, and, except for the signatures, all of the handwriting on the application (including the dates next to the signatures) is his. Yusop did not show the application to plaintiffs; he simply handed them the signature pages to sign. He did not show them the completed application or give them an opportunity to review it for accuracy. Nazaretyan testified that Yusop did not read to them the health-related questions on the application but instead asked only the date of Ghazaryan's last menstruation, whether Ghazaryan drinks or smokes, and whether there had been a "significant change" in their lives.*fn1 Nazaretyan also testified that Yusop told them he would copy certain necessary information from a previous application that Yusop had submitted to Blue Cross on plaintiffs' behalf.

On September 10, 2004, Blue Shield sent Yusop a form requesting certain missing information, indicating that plaintiffs' August 31 application failed to state the type of plan for which they were applying and the nature and date of Nazaretyan's last physician visit. (The application stated that Ghazaryan's last physician visit was for a "regular physical check-up" with Dr. Chang on April 20, 2004.) Blue Shield also returned plaintiffs' application to Yusop without having submitted it to the underwriting department.

On September 21, 2004, the missing information form was returned to Blue Shield with the questions answered, stating the name of the plan for which plaintiffs were applying and indicating that Nazaretyan's last physician visit was an emergency room visit concerning an ear infection. Blue Shield contends it is undisputed that plaintiffs "responded directly," rather than through Yusop, to the request for missing information, but plaintiffs dispute the contention and state that, "beyond the document itself," there is no evidence that plaintiffs "responded directly." The completed form bears what appears to be Nazaretyan's signature, and the handwritten response concerning the physician visit contains the following: "Date? I can't find my bills.

This year some time."

On October 12, 2004, plaintiffs resubmitted their application to Blue Shield. Ghazaryan's menstruation date was updated, the application stated the plan for which plaintiffs were applying and also the date and nature of Nazaretyan's last physician visit (described as an "ears check-up" in 2003), and there were new signature pages, but otherwise the application appears to be the same one that was submitted in August (e.g., it shows Ghazaryan's previous menstruation date struck out and replaced by the new date).

On the basis of the information in plaintiffs' applications, Blue Shield approved plaintiffs for coverage at the most favorable rate on November 1, 2004. On May 17, 2005, Ghazaryan gave birth prematurely to twin girls. The notes of Blue Shield's "medical management unit" dated May 19, 2005, state that the twins were the "product of IVF," i.e., in vitro fertilization.

On or about November 11, 2005, plaintiffs' case was referred to the Blue Shield department that investigates potential material misrepresentation or nondisclosure of medical history by Blue Shield subscribers. The department was formerly known as the "underwriting investigations unit" but is now called the "eligibility review unit" (ERU).

In the course of its investigation, the ERU requested and obtained medical records from Ghazaryan's obstetrician, Dr. Arslanian. The records revealed that Ghazaryan was being treated for infertility and was beginning IVF treatments in 2004 and also had undergone a "D&C procedure" for a spontaneous abortion in October 2002 and October 2004. The ERU also learned from Ghazaryan (through counsel) that she had undergone IVF treatment at the Pacific Fertility Center. The ERU then obtained records from the Pacific Fertility Center, which showed that on October 12, 2004, Ghazaryan was seen there for an infertility evaluation and was scheduled for the various steps of the IVF procedure, stretching from October 18 into November. In discovery during this litigation Blue Shield learned from a number of sources, including additional medical records and Nazaretyan's deposition testimony, that in 2002 plaintiffs had undergone fertility treatment including IVF and that their second round of IVF treatment began on August 17, 2004, before they first applied to Blue Shield.

There were several places on the application where plaintiffs should have disclosed their previous and ongoing infertility treatment, but they did not do so. For example, question 8.A in part 4 of the application asked whether they had "EVER received any professional advice or treatment" pertaining to "in-vitro fertilization" and whether "the applicant or spouse" is "currently being treated for infertility." Plaintiffs answered "No" both times they submitted their application, but Nazaretyan admitted at his deposition that the answer should ...

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