Judge: Blue Shield Acted Properly Canceling Health Insurance Policy

A judge ruled Thursday that Blue Shield of California had acted properly in canceling the health insurance policy of a former Cypress resident after he was seriously injured in a car accident. According to the LA Times:

The judge made the ruling in response to a motion by Blue Shield that included an agreement it had reached with plaintiffs Steve Hailey and his wife, Cindy. The Haileys stipulated they had lied about his preexisting conditions to obtain coverage.

An attorney for Blue Shield said Cindy Hailey tried to deceive the company by not being frank about her husband Steve's medical history on the application.

"It means we acted properly every step of the way," Blue Shield's top lawyer, Seth Jacobs, said in a statement. "It means that our underwriting procedures were fair and complete, our application was clear, and we acted in good faith. This decision proves that Blue Shield of California had every right to rescind the Haileys' coverage."

The company rescinded coverage on June 1, 2001 -- not just canceling the coverage, but rolling it back entirely, plaintiff attorney Michael Nutter said. That left the couple with bills from a nearly fatal automobile accident Steve Hailey suffered on March 19, 2001 -- which occurred after Blue Shield had already launched an investigation.

The bills for the accident would reach more than $500,000, Nutter said. Later, Blue Shield sued the couple to recoup $104,000 it paid out before the coverage was rescinded.

Blue Shield attorney John LeBlanc told jurors that the case was about something else.

"The evidence of deceit is overwhelming," LeBlanc said. "The Haileys concealed and misrepresented critical information from Blue Shield. The evidence shows the Haileys had motivation long before the auto accident."

LeBlanc said that Steve Hailey, who was a machinist with his own business -- and reliant on his wife's employment coverage -- suffered health problems stemming from his youth.

In the 1990s, Steve Hailey had heart problems, shortness of breath and acid reflux problems, LeBlanc said. Hailey also was diagnosed as obese and took numerous prescription drugs, and none of those problems was noted on the application, he said.

One question Cindy Hailey answered about her husband was his weight, LeBlanc said, putting it at 240 when he weighed at least 290 at the time.

His acid reflux caused him to sleep propped up on four pillows, LeBlanc said. He sought emergency care at a Los Alamitos hospital for swallowing difficulties about two weeks before Cindy Hailey filled out the application, LeBlanc said.

LeBlanc insisted that Patrick, a broker for 20 years, asks "in every single situation" about the applicant's medical conditions and the medical conditions of anyone else to be covered under the same policy.

Displaying the application on a screen, LeBlanc pointed out questions that address "you and any applying family members."

LeBlanc said the investigation into the Hailey's case began in February 2001, a month before the accident, and the investigator concluded that, if Blue Shield was aware of Hailey's medical history, coverage would not have been approved.

After the coverage was rescinded, LeBlanc said, Blue Shield offered an alternative policy with a different premium, but, if accepted, would have "paid expenses back to the beginning."

LeBlanc said the company "meets and exceeds industry standards in every way."