Insurance Company Canceled Health Insurance Policy in Violation
of Ohio Law - Settles Bad Faith Case for $1,650,000

Pete Weinberger and Nick DiCello were privileged to represent a wonderful lady for whom this settlement was obtained. Because her Cobra benefits were running out, she contacted an independent insurance agent to help her find an individual health insurance policy. The agent filled out a standard health questionnaire for her. When he asked what her weight was, she told him that she did not know because she knew she had recently gained substantial weight and did not own a scale. Like a lot of women, she was embarrassed by her weight to the point that when she would see her family doctor, she looked away from the scale and preferred that her doctor not tell her how much she weighed. The agent asked to see her driver's license which listed her weight as 150 lbs. She told the agent that that was probably off by 30 lbs or more, and he responded that he would put 175 lb on the application and that it would not be a problem.

The defendant's insurance company issued her a policy and charged her a premium of $270 per month. Over the first 5 months of the policy period, the insurance company paid routine claims for doctor visits. However, our client suddenly began to experience hearing loss in one ear, and began to see a number of doctors who ran a number of different tests. Eventually, she was diagnosed with a brain aneurysm, and required urgent lifesaving surgery. The hospital where the surgery was going to be done submitted information to the insurance company to have the surgery pre-certified. Rather than certify the claim, the insurance company began a "pre-existing condition" investigation to determine whether this cerebral aneurysm existed prior to the effective date of the policy. Using an authorization which our client had signed at the time that she signed her application for insurance, the insurance company obtained her doctor's records, which had recorded her weight as 230 lbs. While the insurance company could not prove that her aneurysm was a known pre-existing exclusion, it nevertheless used the discrepancy in her weight to rescind and cancel her policy altogether. Our client went ahead with the surgery with no coverage. During the surgery she became blind in one eye. She was unable to obtain any health insurance after the surgery.

A lawsuit was brought against the insurance company alleging that the rescission of the policy was unlawful, in breach of contract, and done in bad faith. Ohio statutory law prohibits a pre-existing condition exclusion to be placed in a health insurance policy if the policyholder was covered by another insurance policy continuously for the 12 months prior to the issuance of the new policy. It also places a burden of proof on an insurance company seeking to rescind a policy that it demonstrate by clear and convincing evidence that a misrepresentation of fact on an application was made with fraudulent intent to deceive and that the true fact would have made a material difference in the decision to issue the policy.

Depositions of defendant's employees revealed that the company had a policy of liberally issuing policies so that it could collect the premiums because it knew full well that if a significant claim was submitted, it could rescind the policy on the basis of a misrepresentation on the application. Our client hopes that this case will result in a change in this defendant's procedures.

For more information, please call us at 216.696.3232 or email ssl@spanglaw.com.