The American Association of Justice (AAJ) has released a report which looks at the insurance industry's rescission and cancellation practices. The report is entitled Tricks Of The Trade: How Insurance Companies Deny, Delay, Confuse and Refuse.

Rescission

The AAJ's report dedicated an entire section to the insurance industry's practice of abandoning the sick by rescinding policies - an issue which never ceases to be in the news. It highlighted the much publicized story of 51-year old Patsy Bates, a hairdresser from Gardena California. Bates was in the middle of chemotherapy for breast cancer when her insurer, HealthNet, rescinded her insurance policy. The company claimed that she had provided inaccurate information on her application. She sued the company, but an arbitration meeting revealed that HealthNet rewarded its employees for finding ways to rescind policies - a practice that is against the law. The insurer ended up paying Bates over $9 million for wrongful rescission and additional fines to the Department of Managed Health Care for lying to investigators about the existence of its "rewards" program.

California in particular has been cracking down on insurers' rescission practices, according to the report. In addition to multi-million fines imposed on insurers by the Department of Managed Health Care (DMHC) and California Insurance Commissioner Steven Poizner, Los Angeles City Attorney Rocky Delgadillo has filed lawsuits against HealthNet and Blue Cross over their illegal rescission policies. Although Blue Cross settled allegations with the DMHC and Poizner for $10 million this summer, Delgadillo's separate lawsuit against Blue Cross could potentially lead to damages of well over $1 billion. Delgadillo described Blue Cross's actions as an, "egregious scheme to not only delay or deny the payment of thousands of legitimate medical claims but also to jeopardize the health of more than 6,000 customers by retroactively canceling their health insurance when they needed it most."

Although California seems to be leading the way, it is not the only state cracking down on the alleged illegal activities of the insurance industry. Numerous other states have fined insurance companies millions of dollars over the past year and consumer advocates say that multi-million dollar fines will continue.

Cancellation

One of the most interesting sections of the AAJ's report was entitled "Canceling for a Call." It described the insurance industry's practice of canceling policies simply based on a policyholder's call to his insurance company about the possibility of filing a claim. Described as a "use it and lose it" policy, the report says that more and more policyholders who file or inquire about a claim are having their insurance cancelled or not renewed at the end of their policy's term.

To view the report, go to the AAJ's website at www.justice.org/ and click Newsroom and then Research.

If your insurance company has acted in bad faith, contact a bad faith insurance attorney about your situation. Consultations are free, without obligation and are strictly confidential.