MANELLA, J. —
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.
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 when she ran 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.
Certain aspects pertaining to appellant's application for medical insurance also are undisputed. Appellant submitted the signed application to Blue
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: "I alone am responsible for the accuracy and completeness of the information provided on this application. I understand that neither I, nor any family members, will be eligible for coverage if any information is false or incomplete. I also understand that if coverage is issued, it may be canceled or rescinded upon such a finding."
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
Under the policy, preexisting 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.'" (Capitalization omitted.)
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
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 preexisting 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 of the policy, the waiting period for coverage of preexisting conditions should have expired six months after Blue Shield received appellant's application on February 18, 2005, rather than six months after the date the policy issued. The SAC asserted claims for breach of contract, violation of the covenant of good faith and fair dealing, and intentional infliction of emotional distress.
On December 1, 2008, Blue Shield answered, asserting as an affirmative defense that the policy was subject to rescission, because appellant had willfully misrepresented or concealed material facts in her application, rendering the policy void ab initio.
In 2011, Blue Shield moved for summary judgment, seeking a judicial ruling of its absolute right to rescind based on material misrepresentations in the application, and contending that such rescission would provide a complete defense to all of the causes of action asserted by appellant.
In its statement of undisputed facts (SOF), Blue Shield established that appellant physically injured her breast and noticed a lump developing in late 2004, and that she visited the Breast Center on February 11, 2005, where she was examined by Goldman, had a fine needle aspiration performed on the lump, and scheduled a mammogram, ultrasound, and consultation with Dr. Chang. Blue Shield also presented evidence tending to establish the following additional facts: When appellant visited the Breast Center on February 11, 2005, she filled out a health questionnaire indicating that she had had a lump and pain in her breast since November 2004. On February 17, 2005, when appellant appeared for the appointment and procedures scheduled February 11, she filled out a second questionnaire answering "Yes" to the question whether she was "experiencing any breast problems," describing the problem as "[a] new lump that can be felt."
With respect to its own actions, Blue Shield presented evidence that it received appellant's application on or about February 18, 2005. Karen Hester, Blue Shield's underwriting training and auditing supervisor, reviewed the application and made the decision to issue appellant's policy. Hester explained that as part of its regular underwriting process for issuance of individual health care coverage, Blue Shield "reviews and evaluates the information disclosed by the applicants in their applications to determine whether Blue Shield will extend coverage, and if so, at what rate" using "proprietary written medical underwriting guidelines ... to determine whether an applicant is eligible for coverage." In addition, Blue Shield underwriters review Blue Shield's records to determine whether the applicant had submitted a prior application or had a membership history with Blue Shield. "Under certain defined circumstances," Blue Shield's underwriters request medical information from the providers listed on the application and review those records. For example, Blue Shield requests medical records from the provider if the visit was within 30 days of the date of application, or if the application reveals any unresolved tests or procedures.
According to the SOF and Hester's declaration, in March 2005, after Blue Shield received and reviewed appellant's application, it obtained appellant's
Blue Shield further presented evidence that in July 2006, it received a request to cover services from out-of-network providers, prompting a referral for investigation to its eligibility review unit. In August 2006, its investigator, Paula Wells, requested appellant's medical records from the providers who had rendered services to her since her coverage began in April 2005. In September 2006, Wells received records disclosing the Breast Center's February 11, 2005 breast examination and fine needle aspiration. On September 8, 2006, Blue Shield sent the letter canceling appellant's insurance policy.
In her opposition, appellant presented evidence that she had undergone breast cancer surgery on April 6, 2005, less than a week after her policy issued, and that claims for bills connected to her treatment were thereafter sent to Blue Shield. The following month, a claim was submitted by the anesthesiologist. On June 7, Blue Shield sent appellant an explanation of benefits stating: "This claim involved conditions which may have existed prior to the patient's enrollment. Processing has been suspended pending receipt of additional information requested. As soon as we receive this information, we will resume processing."
In opposing the motion, appellant contended, among other things, that Blue Shield had waived its right to rescind by delaying for an unreasonable period of time — over two years — after admittedly learning that appellant's application omitted information about the examination and fine needle aspiration she had undergone on February 11, 2005.
The trial court granted summary judgment, finding that appellant's application for insurance contained material misrepresentations, and that such misrepresentations were willful. The court further found that Blue Shield undertook reasonable efforts to ensure that her application was accurate and complete at the time it issued the policy. The court concluded that Blue Shield was entitled to rescind, and that the policy was extinguished by such rescission.
Appellant contends that Blue Shield waived its right to rescind by waiting well over a year after learning of circumstances supporting rescission, and thereafter electing to cancel, rather than rescind, her policy. As explained below, we conclude that as a matter of law, Blue Shield's actions were wholly inconsistent with the assertion of a right to rescind.
Summary judgment is granted when a moving party establishes the right to the entry of judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c);
Waiver is ordinarily a question for the trier of fact; "[h]owever, where there are no disputed facts and only one reasonable inference may be drawn, the issue can be determined as a matter of law." (Gill v. Rich (2005) 128 Cal.App.4th 1254, 1264, fn. 10 [28 Cal.Rptr.3d 52].)
Blue Shield acknowledges that by September 2006, it had obtained all the information needed to conclude appellant had misrepresented and/or omitted important information which, in its view, justified a decision to reject her application. Consistent with its corporate policy regarding discovery of misrepresentations in an application more than a year after the application was submitted, Blue Shield canceled appellant's coverage prospectively. In notifying appellant of its decision, Blue Shield stated unequivocally that "rather than rescind [appellant's] coverage completely," it had elected to "terminate[]" her coverage "prospectively," so that such coverage "ended effective today, September 8, 2006." Having elected to terminate coverage, Blue Shield reaffirmed the existence of the policy from April 2005, assuring appellant that "[a]ny claims for covered services incurred before [September 8, 2006,] will be covered," and issuing her a separate Certificate of Creditable
Blue Shield maintained that position for over two years, neither disavowing its own affirmation of appellant's policy coverage nor offering to return her premiums. Not until appellant filed suit challenging the decision to cancel and the coverage decisions made during the policy period did Blue Shield assert a right to rescind. It offered no evidence of new information obtained postcancellation, no explanation for the reversal of its earlier election to cancel, "rather than rescind," and no justification for the disavowal of its earlier confirmation of coverage or for the retraction of its assurance that covered services incurred during the pendency of appellant's policy would be paid for.
Appellant underwent breast cancer surgery five days after the effective date of the policy, and her medical providers began submitting bills for her treatment to Blue Shield shortly thereafter. In its June 2005 explanation of benefits, Blue Shield stated that the breast cancer "may have existed prior to the patient's enrollment" and that processing of the claim was suspended "pending receipt of additional information requested." Yet by its own admission Blue Shield neither commenced an investigation nor obtained records confirming the date of appellant's first breast cancer-related procedure for another year.
The judgment is reversed. The matter is remanded for further proceedings consistent with this opinion. Appellant is awarded her costs on appeal.
Willhite, Acting P. J., and Collins, J., concurred.