In the Matter of the Certificate of Authority of Health Net Life Insurance Company
Published: Nov. 29, 2008 | Result Date: Sep. 4, 2008 | Filing Date: Jan. 1, 1900 |Case number: OSC-2008-00005 Settlement – $3,650,000 - $25 million (disputed)
Court
Insurance Commissioner of the State of California
Attorneys
Plaintiff
Defendant
Kenneth B. Schnoll
(CA Dept. of Insurance)
Facts
The California Department of Insurance (CDI) claimed that Health Net Life Insurance Company erred by improperly rescinding heal insurance coverage and unfairly handling claims. CDI made these claims based on consumer complaints and an examination of the company's files of policyholders rescinded between 2004 and 2008. CDI alleged violations of the California Insurance Code and Fair Claims Settlement Practices Regulations. Among the violations, CDI claimed that Health Net did not complete medical underwriting prior to issuing a policy and did not adopt or implement proper standards to promptly investigate and settle claims.
Damages
The CDI sought a cease and desist order, penalties for the unfair claims practices, and suspension of Health Net's Certificate of Authority to transact insurance.
Result
The parties entered into a settlement agreement. Health Net agreed to provide new coverage and reimburse medical expenses to rescinded policyholders between 2004 and 2008, pay a $3.6 million penalty and legal costs, and institute corrective actions to improve the insurance company's underwriting and rescission process. Health Net agreed to pay a penalty of $3.6 million. The value of the settlement to the former insureds could be up to $25 million.
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