Dubeck v. Cal. Physicians' Serv.
| Decision Date | 05 March 2015 |
| Docket Number | B250129 |
| Citation | 234 Cal.App.4th 1254,184 Cal.Rptr.3d 743 |
| Parties | Bonnie DUBECK, Plaintiff and Appellant, v. CALIFORNIA PHYSICIANS' SERVICE, Defendant and Respondent. |
| Court | California Court of Appeals Court of Appeals |
See 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 945.
APPEAL from a judgment of the Superior Court of Los Angeles County, Mel Red Recana, Judge. Reversed and remanded. (Super. Ct. No. BC397704)
Michael G. Nutter, Santa Ana, for Plaintiff and Appellant.
Manatt, Phelps & Phillips, Los Angeles, John M. LeBlanc and Joanna S. McCallum for Defendant and Respondent.
In September 2006, respondent California Physicians' Service, doing business as Blue Shield of California (Blue Shield), canceled appellant Bonnie DuBeck's medical insurance policy, claiming DuBeck had made material misrepresentations in her application and concealed that she had undergone a fine needle aspiration for a lump in her breast several days before submitting the application.1 At the time of cancellation, the policy had been in effect 17 months, and Blue Shield had paid medical claims unrelated to the breast cancer, deemed a pre-existing condition. The cancellation letter expressly stated that Blue Shield was electing to cancel coverage prospectively, rather than rescind the policy, and that any claims for covered services incurred prior to the cancellation would be covered.
In September 2008, appellant filed the underlying lawsuit, alleging among other things that Blue Shield had failed to pay covered claims while the policy was in force. Blue Shield asserted as an affirmative defense its right to rescind the policy, voiding it ab initio. The trial court granted summary judgment in favor of Blue Shield on this defense. We hold that Blue Shield's September 2006 decision to cancel, rather than rescind her policy, its affirmation of policy coverage up to that date and assurance that it would pay for services covered prior to the cancellation, its retention of appellant's premiums, and its failure to assert a right to rescind until more than two years after it concededly had all the pertinent facts, constituted a waiver of its right to rescind as a matter of law. Accordingly, we reverse the grant of summary judgment.
Certain background facts are not in dispute. In October 2004, appellant physically injured her left breast running into a cabinet. She developed a lump in the area where the injury occurred. On February 11, 2005, appellant visited the Revlon UCLA Breast Center (Breast Center). She was examined by Sherry Goldman, a nurse practitioner, and the lump in her breast was subjected to a fine needle aspiration. That same day, appellant was given appointments in late February for a mammogram, ultrasound, and a consultation with Helena Chang, M.D., a breast surgeon.2 The lump proved to be cancerous, and in the months that followed, appellant underwent surgery and other medical procedures. In the course of her treatment for breast cancer, her doctors discovered she was also suffering from leukemia.
Certain aspects pertaining to appellant's application for medical insurance also are undisputed. Appellant submitted the signed application to Blue Shield on February 16, 2005, five days after her visit to the Breast Center.3 The section of the application seeking medical information asked whether the applicant had “received any professional advice or treatment ... from a licensed health practitioner” or “had any symptoms” pertaining to “breast problems, breast implants, adhesion, abnormal bleeding, amenorrhea, endometriosis, fibroid tumors”; “[b]een an inpatient or outpatient in a hospital, surgical center, ... or other medical facility”; had any “[a]bnormal laboratory results”; or had any “[d]iagnoses, symptoms and/or health problems not mentioned elsewhere on this application, or that have not been evaluated by a physician, or have any complications or residuals remaining following any treatment, or been advised to have a physician exam, further testing, treatment or surgery which has not yet been performed by a physician, dentist, or other health care provider?” Appellant checked “No” in answer to all these questions.4
On another page, the applicant was asked to “provide details regarding the last physician visit you ... had, regardless of the date....” Appellant responded that her last such visit had been with Dr. Hasson Hassouri in September 2004 for an annual checkup, that he found nothing, and that her “present status” was “great.”
Page seven of the application form asked for the applicant's signature and stated:
Blue Shield issued a policy dated April 1, 2005. The policy contained cancellation and termination provisions stating: “This Agreement may be canceled by [Blue Shield] for false representations to, or concealment of material facts from, [Blue Shield] in any health statement, application, or any written instruction furnished to [Blue Shield] by the Member at any time before or after issuance of this Agreement, or fraud or deception in enrollment” and Blue Shield “may terminate this Agreement for cause immediately upon written notice for the following: [ ] Material information that is false or misrepresented information provided on the enrollment application or given to the Plan....”
Under the policy, pre-existing conditions were covered only after the insured had been “continuously covered for six (6) consecutive months, including [the] waiting period,” which began “on the date [Blue Shield] receive[d] your application.” The policy defined “pre-existing condition” as “ ‘an illness, injury, or condition ... which existed during the six (6) months prior to the Effective Date with [Blue Shield] if, during that time, any medical advice, diagnosis, care or treatment was recommended or received from [a] licensed health practitioner.’ ” (Caps deleted.)
On September 8, 2006, approximately 17 months after issuing the policy, Blue Shield sent appellant a letter canceling it. The letter stated that Blue Shield had “reviewed medical information received after [appellant] submitted [her] application” and “determined that [she] did not provide complete and accurate information on [her] application for individual health coverage.” Specifically, it referred to appellant's negative answers to [the] question ... regarding her reproductive system and breasts, [the] question ... regarding her having been an inpatient or outpatient at a hospital or other medical facility, [the] question ... regarding abnormal laboratory results, and [the] question ... regarding diagnoses, symptoms and health problems not mentioned elsewhere. The letter further pointed out that appellant's application stated that her last visit with a physician had been with Dr. Hassouri on September 20, 2004, that he had made no findings, and that her present status was “great.” The letter explained that Blue Shield had recently discovered that on February 11, 2005, appellant had been seen at the Breast Center and undergone a fine needle aspiration procedure on a mass in her breast, and that on that same date, she had scheduled a mammogram, an ultrasound and a consultation with a surgeon. The letter stated that had Blue Shield been aware of these facts, it would not have approved her application.
The letter went on to state: “ [A]t this time[,] Blue Shield has determined that, rather than rescind the coverage completely, your coverage was terminated prospectively and ended effective today, September 8, 2006.” It advised appellant that “ [a]ny claims for covered services incurred before this date will be covered,” and that “ at this time Blue Shield will not seek refund of any claims payments made on your behalf.” (Italics added.) It further stated that Blue Shield was “not waiving any right it may have under the Health Services Agreement or the terms of the application.” On the same date it sent the cancellation letter, Blue Shield sent appellant a “Certificate of Creditable Coverage” confirming that her coverage “began: 04/01/2005” and “ended: 09/08/2006.” The Certificate stated that it was “evidence of your coverage under this plan.”
Two years later, in September 2008, appellant initiated a lawsuit against Blue Shield. The operative second amended complaint, filed in September 2010 (SAC), alleged that commencing in April and May 2005, Blue Shield began receiving claims for the medical services being provided to appellant, which Blue Shield rejected as falling under the pre-existing condition exclusion of the policy. According to the SAC, by no later than August 2005, when appellant began to be monitored by Blue Shield's medical management department, Blue Shield knew or should have known that appellant had been seen for the breast condition on February 11, 2005. However, it was not until August 27, 2006, that Blue Shield commenced the formal investigation culminating in the September 8, 2006 letter of cancellation. By this time, appellant had been diagnosed with leukemia. The SAC contended that by delaying and canceling the policy, Blue Shield was able to collect and retain $19,600 in premiums, $5,450 more than it had paid to medical providers on appellant's behalf.
Appellant asserted, among other things, that Blue Shield had no right to cancel because the cancellation/termination provisions in the policy were in smaller type than permitted by California regulations. The SAC further alleged that with respect to expenses incurred during the term...
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