The lawsuit is the latest trouble for the Texas company, which conducts business in 41 states. In the last two years, regulators from California and more than 30 other states have fined HealthMarkets or its affiliates nearly $40 million over alleged deceptive business practices.
The city attorney's suit, based on state laws for unfair competition and false advertising, accuses the defendants of engaging in a "scheme to defraud California consumers … through the sale of junk insurance," which it defined as coverage that has "hidden or obscure" terms.