California court curbs insurers’ ability to rescind medical policies

Los Angeles Times, December 27, 2007

California health insurers have a duty to check the accuracy of applications for coverage before issuing policies and should not wait until patients run up big medical bills, a state appeals court ruled recently. The court also said insurers could not cancel a medical policy unless they showed that the policyholder willfully misrepresented his health or that the company had investigated the application before it issued coverage. The unanimous decision by a panel of the 4th District Court of Appeal in Santa Ana is the latest blow to California insurance companies and the way they handle policy cancellations after patients get sick and amass major medical claims.