DuBeck v. California Physicians' Service
234 Cal. App. 4th 1254
| Cal. Ct. App. | 2015Background
- Blue Shield canceled appellant Bonnie DuBeck’s health policy in Sept. 2006, asserting she gave false information and concealed a February 2005 breast lump assessment.
- The policy issued April 1, 2005, with a six-month pre-existing condition waiting period, and coverage could be canceled for misrepresentation or concealed facts.
- Blue Shield opted for prospective cancellation rather than rescission, assuring coverage for claims incurred before Sept. 8, 2006 and retaining premiums.
- DuBeck sued in 2008; Blue Shield asserted rescission as an affirmative defense, claiming the policy was void ab initio.
- The trial court granted summary judgment to Blue Shield on rescission; appellate court held waiver/estoppel applied to defeat rescission as a matter of law.
- The appellate court reversed and remanded for proceedings consistent with its opinion, recognizing a two-year window for rescission and waivers under governing law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Waiver of right to rescind grounded in timing | DuBeck argues Blue Shield waived rescission by delaying and canceling. | Blue Shield contends rescission remains a valid option despite delay. | Waiver found; right to rescind lost due to inconsistent conduct and delay. |
| Effect of cancellation vs rescission on coverage | Cancellation preserved coverage for period insured; rescission would void retroactively. | Rescission should nullify policy ab initio, not preserve prior coverage. | Cancellation inconsistent with rescission right; waiver applied to bar rescission. |
| Timeliness under statute and regulatory framework | Two-year window for rescission supported by statutory/regs; delay prejudicial. | Policy allowed longer evaluation; no prejudice shown. | Two-year window recognized; insurer delayed beyond reasonable period. |
| Insurer’s diligence in discovering misrepresentation | Blue Shield failed to diligently investigate after learning of misrepresentation. | Underwriting process did not require immediate rescission. | Insurer failed to act with reasonable diligence, supporting waiver. |
Key Cases Cited
- Dalzell v. Northwestern Mutual Ins. Co., 218 Cal.App.2d 96 (Cal. Ct. App. 1963) (knowledge may be imputed for waiver when facts could be discovered with diligence)
- Barrera v. State Farm Mut. Auto. Ins. Co., 71 Cal.2d 659 (Cal. 1969) (insurer cannot rely on misrepresentation where facts were known to insurer earlier)
- Rutherford v. Prudential Ins. Co. of America, 234 Cal.App.2d 719 (Cal. Ct. App. 1965) (insurer waived misrepresentation by not requesting information; facts known to insurer implied knowledge)
- Hailey v. California Physicians’ Service, 158 Cal.App.4th 452 (Cal. Ct. App. 2007) (insurer cannot wait to rescind after substantial premium collection; no post hoc entitlement)
- Pacific Business Connections, Inc. v. St. Paul Surplus Lines Ins. Co., 150 Cal.App.4th 517 (Cal. Ct. App. 2007) (waiver requires conduct inconsistent with enforcing the right; knowledge alone not required)
- Allied Grape Growers v. Bronco Wine Co., 203 Cal.App.3d 432 (Cal. Ct. App. 1988) (notice to principal through agent is notice to principal; agency concepts apply to insurer communications)