As Eli Wallach memorably said in The Good, the Bad, and the Ugly: "When you have to shoot, shoot. Don't talk."
The Court of Appeal reiterated that message in a slightly different context today. Telling Blue Shield: "When you want to rescind, rescind. Don't cancel prospectively."
Plaintiff has a lump on her breast and sees a doctor, who conducts a needle aspiration. Five days later, plaintiff submits an application for health insurance to Blue Shield. Blue Shield asks tons of health questions (as might be expected), but plaintiff omits anything about her recent visit to the doctor, the lump, etc. Saying "no" to tons of questions where she should have said "Yes".
Blue Shield issues the policy. One week after the policy issues, plaintiff has breast cancer surgery. There's lots of subsequent medical treatment as well.
Blue Shield eventually finds out about the omissions. When it does, it cancels the policy. But does so only prospectively; it says its going to pay for the existing stuff, but nothing in the future.
Eventually, plaintiff becomes unhappy with some stuff that Blue Shield's not paying for (Blue Shield says some of this stuff is from a preexisting condition), and files suit. Blue Shield in turn moves for summary judgment, saying that the lawsuit should be dismissed because it could validly rescind the policy based on plaintiff's clearly material omissions in her application. The trial court agrees.
The Court of Appeal reverses.
Maybe Blue Shield could have rescinded, it says. But it didn't. It just cancelled the policy prospectively. That's a waiver, the Court of Appeal says. One that was clear, knowing, and voluntary. So maybe you could have rescinded, but you didn't. So if you were obligated to pay, you've got to pay. Summary judgment reversed.
There's one additional fact that's perhaps only tangentially relevant legally, but I bet plays more than a little role in the Court of Appeal's conclusion. Blue Cross only moved to rescind the policy after the plaintiff sued. Why didn't it rescind earlier? Maybe it had something to do with the fact that Blue Shield had collected and retained almost $20,000 in premiums from the plaintiff but had paid out less than $15,000 to her doctors under the policy. Leading one to suspect that Blue Cross was happy to keep collecting premiums once things were working out well for it, but only moved to rescind after things went south.
Can't do that. If you want to rescind, rescind. Can't wait to see what happens.
