Court makes insurance harder to cancel

Santa Ana, Calif. -- A California appellate court has ruled the state's health insurers must ensure accuracy of coverage applications before policies are issued.

The 4th District Court of Appeal in Santa Ana ruled Monday that the companies cannot wait until patients amass medical costs to check the accuracy of applications for coverage, the Los Angeles Times reported Tuesday.

The court also told insurers they may not cancel a medical policy unless it is demonstrated that the policyholder willfully misrepresented health information or the company shows it investigated the application before coverage was issued.

The ruling came in the case of Steve Hailey, an Orange County entrepreneur who lost his Blue Shield of California coverage after being disabled in a car accident. The ruling, which favors Hailey, requires the insurance company to pay his appellate costs and sends the case to trial at a lower court.

Blue Shield spokesman Tom Epstein said the company believes it will win the trial and prove that "our underwriting was appropriate and that the Haileys misrepresented numerous important facts on their application."

Copyright 2007 by United Press International.