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Health Net Hit With Class Action Alleging Unfair Business Practices Over Retroactive Cancellations of Health Insurance Policies
Date:11/16/2007

Claremont Lawyer Calls upon State Regulators to Impose Stiffer Penalties,

Suspend Insurer's License for Lying to State Investigators

CLAREMONT, Calif., Nov. 16 /PRNewswire/ -- Renowned insurance litigator William Shernoff yesterday filed a class action lawsuit against Health Net Life Insurance Company, alleging that the insurer's unlawful practice of retroactively canceling health insurance policies has needlessly placed the lives of hundreds of innocent policyholders in jeopardy.

The lawsuit comes one day after Health Net was hit by state officials with $1 million fine for lying to state investigators this fall about its practice of setting goals for cancellations and awarding bonuses to employees who rescind individual policies.

In light of the fine, Shernoff, who has represented hundreds of cancelled policyholders over the past 2 years, has called upon California Insurance Commissioner Steven Poizner to suspend Health Net license to sell insurance. Shernoff said he will also request that California state Attorney General Jerry Brown explore the possibility of criminal charges.

"Many people who have lied to investigators have faced criminal penalties," said Shernoff, the founding partner of Shernoff, Bidart & Darras. "Maybe it's time state prosecutors get involved in cleaning up this sordid practice of unlawful cancellations."

Health Net's efforts to mislead state investigators were exposed last week when Shernoff revealed internal Health Net documents showing that the company set annual goals for its employee handling rescissions investigations. In 2002, the employee was given the goal of rescinding 15 policies per month. If the employee reached the quota -- also identified in terms of overall money saved -- the employee was awarded bonuses.

Last week Shernoff submitted these documents to an arbitrator who is hearing the case of Patsy Bates, a Los Angeles hair dresser, whose health insurance was cancelled by Health Net shortly after she was diagnosed with breast cancer. Bates is suing Health Net for lost coverage plus punitive damages to deter future rescissions. The case is pending.

Shernoff, who represents Patsy Bates in a pending case against Health Net, said that concealing information from state investigators is tantamount to obstruction of justice.

"People from Martha Stewart to Barry Bonds have faced criminal charges for lying to government investigators," Shernoff said. "Fining Health Net $1,000,000.00 is like shooting a slingshot at an armored tank. The amount is too insignificant to address the serious nature of Health Net's actions."

Since 2001, Health Net has rescinded the individual policies of more than 1,600 people. These rescissions have resulted in more than $35.5 million in savings for the company. The insurer's parent company, Health Net of California, has assets of more than $1.8 billion, and is a subsidiary of Health Net, Inc, a publicly traded company on the New York Stock Exchange.

Shernoff plans to use the performance evaluations to in the new class action to prove that Health Net's corporate practice of rewarding employees for rescinding policies has threatened the lives of everyone whose coverage has been wrongfully terminated by the company. The lead plaintiff in the class action is a Corona couple with four young children, one of whom was born blind and with Cerebral Palsy. After accepting the family's policy application in 2003, Health Net rescinded coverage for the disabled infant following year. Health Net justified the rescission by saying the child's father, who filled out the application, incorrectly stated the last menstrual period of his wife.

Shernoff said that Health Net's activities are just the tip of the iceberg. He maintains that all insurers have been using unlawful rescission practices to deprive people of health insurance when they become very sick and need their coverage. In cases against Blue Cross and Blue Shield, Shernoff has uncovered thousands of rescissions that have put people's lives in jeopardy.

Shernoff applauded state agencies for their recent efforts to investigate the industry practice and said that these lawsuits and the state investigations may bring an end to this sordid chapter of canceling peoples' health insurance at a time when they need it.


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SOURCE Shernoff, Bidart & Darras
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