UCL Class Action Defense Cases-Ticconi v. Blue Shield: California Court Reverses Denial Of Class Action Motion Holding Trial Court Erred In Refusing Class Action Treatment Based on Equitable Defenses To Unfair Competition Law (UCL) Claims Against Insurer
Denial of Class Action Certification Motion Improper in Class Action Case Against Insurer Alleging Violations of State Unfair Competition Law (UCL) because Equitable Defenses of Fraud and Unclean Hands cannot be used to Defeat UCL Claims so Individual Issues Related to such Defenses will not Predominate over Common Issues California Appellate Court Holds
Plaintiff filed a putative class action complaint against his health insurer, Blue Shield of California, alleging inter alia that Blue Shield violated California’s unfair competition law (UCL) and state insurance code “by failing to attach his application to or endorse it on the insurance policy when issued, and later rescinding the policy on the ground he had made misrepresentations in that application.” Ticconi v. Blue Shield of Cal. Life & Health Ins. Co., 157 Cal.App.4th 707, 68 Cal.Rptr.3d 785, 788-89 (Cal.App. 2007). Plaintiff moved the trial court for class action treatment; defense attorneys opposed the class action certification motion on the ground the individual issues related to Blue Shield’s fraud and unclean hands defenses would predominate over common issues. Id., at 789. The trial court agreed with defense counsel and refused to grant class action status. Id. The Court of Appeal reversed, holding that the trial court abused its discretion in denying the class action certification motion because “[e]quitable defenses cannot be used to defeat a UCL cause of action and Blue Shield Life may not raise the defense of fraud based on statements that insureds made in an application for insurance where the application had been neither attached to nor endorsed on the policy when issued,” id. (citations omitted).
According to the class action complaint, plaintiff applied for a short-term health and accidental death insurance policy from Blue Shield. Ticconi, at 789. The application completed by plaintiff “was neither attached to the policy nor endorsed onto it when the policy was issued.” Id. Blue Shield issued the policy, and plaintiff paid the premiums as required, id. During the policy period, plaintiff’s health care bills exceeded $100,000, but upon receiving the bills Blue Shield refused payment and rescinded the policy on the ground that plaintiff “made material misrepresentations in his application for insurance about the condition of his health.” Id. Plaintiff denied this claim, insisting that he “answered truthfully all health questions posed on the policy application” and that “a reasonable investigation would have shown this.” Id. The class action further alleged that Blue Shield violated California law because it failed to attach or endorse a copy of his application to the policy, and Insurance Code section 10113 forbids incorporation of the application by reference, and that even if his statements were false, plaintiff “not bound by any statement made therein because that document had not been attached to or endorsed on the policy when issued.” Id., at 789-90. Plaintiff filed his lawsuit as a class action alleging that Blue Shield similarly “had rescinded a large number of policies that did not have the applications attached to or endorsed on the policies” in violation of Insurance Code sections 10113 and 10381.5, and that as such the rescissions represented an unlawful business practice under the UCL. Id., at 790.