Class Action

New UCL public prosecutor decision: Blue Cross of California, Inc. v. Superior Court

By Kimberly A. Kralowec

Blue Cross of California, Inc. v. Superior Court, ___ Cal.App.4th ___ (Dec. 15, 2009), is a public prosecutor UCL action brought by the City of Los Angeles against a health insurer "concerning coverage rescission practices," also known as postclaims underwriting.  Slip op. at 2-6.  The Court of Appeal (Second Appellate District, Division One), held that the trial court (Judge Mohr) correctly overruled the defendant's demurrer to the complaint. 

The opinion includes an interesting discussion of the equitable abstension and primary jurisdiction doctrines.  Slip op. at 21-25.  The analysis should be relevant to cases involving public prosecutors and private litigants alike. 

If you happen to be handling a case against a defendant regulated by the Department of Managed Health Care ("DMHC") (such as a "health care service plan" as defined in the Knox-Keene Act), the opinion's holding that the DMHC does not enjoy exclusive regulatory authority over such defendants will also be of interest: 

[A]lthough the Knox-Keene Act expressly authorizes the DMHC to enforce the statute and does not include a parallel authorization for suits by private individuals, private individuals can bring suit under the UCL for violations of the Knox-Keene Act. (Bell v. Blue Cross of California (2005) 131 Cal.App.4th 211, 216-217 (hereafter Bell).)

As applied in this case, the foregoing authorities point unambiguously to the conclusion that the city attorney has authority to sue under the UCL for violation of Health and Safety Code section 1389.3 (i.e., the Knox-Keene Act?s prohibition of postclaims underwriting) unless there is a statute that expressly precludes the city attorney from doing so. Defendants do not cite any such statute. Indeed, the DMHC effectively concedes in its amicus brief that no such statute exists.  ....

Id. at 13. 

The defendant and the DMHC (which participated in the case an amicus curiae) contended that while private litigants could bring such UCL claims, public prosecutors could not, for a variety of reasons.  Id. at 20.  The Court of Appeal disagreed with each argument advanced in support of that contention.  See id. at 13-21.

Full post as published by The UCL Practitioner on December 17, 2009 (boomark / email).