Canadian Insurer Embroiled in California Bad Faith Lawsuit

Our San Francisco insurance attorneys noticed a recent bad faith case against an insurance company making headlines in our state. The city of Tulare, California, is potentially on the hook for $1 million for hospital bills accrued by a city employee’s daughter, who suffered from and eventually died of cancer.

The 19-year-old woman received a bone marrow transplant for a form of leukemia at Stanford Hospital in Palo Alto, for which the price tag was $1,041,711.98. The city self-insures employees up to $80,000 and then buys further outside insurance to cover expenses exceeding the initial coverage. The general practice is that the city pays the medical bills upfront, and then files a claim for reimbursement. So the city initially paid the hospital $439,500 before realizing that there was a problem with the outside insurance. The insurance company used by the city, which was supposed to cover the rest of the young woman’s medical bills, refused to pay.

That company, Sun Life Assurance Company of Canada, says that non-covered experimental drugs were used in the procedure. The experimental drugs in question were given to her after her 2010 bone marrow transplant. She agreed to be part of a clinical trial to test two combinations of medications to counter a “graft versus host” disease, when the body rejects the implanted foreign material, which often affects transplant patients. The city countered Sun Life’s claims by stating that the experimental drugs were a tiny part of the procedure to try to save the young woman’s life. The experimental drugs cost $23,000 of the total cost, and city advocates state that it is unusual for an insurance company to refuse to pay outright for everything only because of a small, non-covered part of the treatment. They also noted that the drug components themselves were standard medications- it was only the different combinations that were experimental, making Sun Life’s claims even more unfair.

As a result of these outstanding medical bills, Stanford Hospital sued Tulare to pay the hospital bill. To try to force the insurance company to pay, the city has sued Sun Life for bad faith insurance practices. Both cases are in the Santa Clara Superior Court. California insurance law requires companies to pay for treatments covered in a policy, which is treated as a contract, as long as the policyholder paid the premiums and kept up with the policy. So we will have to wait and see what the courts decide.

City manager, Don Dorman, says, “We pay a lot of money for insurance coverage on the reliance they will be there when we need them. The company is just trying to get out of its obligation.”

San Francisco Insurance Attorneys
When you pay for benefits and coverage, you deserve for that assistance to be there when you need it most. If you are having an insurance problem and feel like your insurance company is giving you the runaround, contact an insurance law attorney in your area today.