California Rescission Battle Now in Court

By Allison Bell

August 23, 2010 at 08:00 PM

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The Association of California Life & Health Insurance Companies (ACLHIC) has filed a lawsuit in an effort to keep California from enforcing new anti-rescission regulations.

ACLHIC, Sacramento, Calif., says in a petition filed in a state court in Sacramento that the regulations are too expensive and too difficult to implement, and that California Insurance Commissioner Steve Poizner exceeded his authority when he developed the regulations.

Poizner has put out a statement calling the suit "unconscionable."

"Illegal rescissions are a repugnant industry practice," Poizner says. "In this current environment, this lawsuit is simply short-sighted and morally wrong."

A health insurer uses a rescission to rescind, or take back, a health insurance policy that it says was issued because an applicant concealed relevant information when applying for coverage.

Poizner has accused health insurers of using rescissions to rescind policies issued to individuals who had made innocent mistakes on applications or left out information that was not relevant to their current health status.

In regulations that were set to take effect Aug. 18, Poizner has required insurers to start investigations of possible omissions of material information from health insurance applications within 15 days of learning of the omissions; to complete investigations within 90 days; to send an investigation target a notice about the investigation every 30 days; and to send the target a written notice about the final determination within 7 days of concluding the investigation.

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