Elliott Greenleaf Defeats Class Certification in Health Care Putative Class Action

In a widely followed issue in class actions and health care coverage law, Elliott Greenleaf defeated a motion for class certification after persuading the Court of Common Pleas that the plaintiff failed to satisfy any of the required elements of class certification and that insurer Aetna’s affirmative defenses presented “immovable impediments” to establishing common questions of law or fact or that the plaintiff was typical of the proposed class.

Repeating theories raised in national class actions from other jurisdictions including California state and federal courts, plaintiff sought to certify a class of individuals in Pennsylvania whose HMO certificates of coverage had been rescinded after an insurer determined the members had engaged in fraudulent misrepresentation to obtain coverage including by failing to disclose material information regarding pre-existing conditions on their coverage applications. Rather than challenge the decision to rescind coverage itself, plaintiff challenged the method of rescission, asserting, on behalf of a putative class, that a practice of rescinding a policy without filing suit against the policy holder was unlawful. Plaintiff sought a ruling that all HMO and insurance carriers are obligated under Pennsylvania law to initiate a civil action to effect rescission.

Elliott Greenleaf immediately and strategically raised the affirmative defenses of fraud and breach of contract asserting that plaintiff knowingly omitted material pre-existing conditions from her application for coverage and knowingly provided inaccurate information on her application. After a class certification hearing which featured extensive cross examination, the Court found that the plaintiff’s fraud and misrepresentation were “clearly established” by the evidence and testimony. The judge held that the establishment of fraud in the procurement both rendered the plaintiff inadequate as a class representative and raised unique factual issues as to the named plaintiff and all putative plaintiffs because of the intrinsically fact-specific nature of the fraud defenses.

The decision represents not only a victory for HMO and insurance providers – by defeating an applicant’s class wide demand that a provider initiate civil action before her admittedly fraudulently-procured policy can be rescinded – but also for health care providers across the Commonwealth who often bear the cost of unpaid bills after a member or insured’s coverage is terminated for intentional concealment or misrepresentation. Without the delays attendant to a civil action for rescission, a fraudulently-procured policy can be identified and rescinded before health care providers engage in extensive services which may never be recovered.

The decision represents not only a victory for HMO and insurance providers – by defeating an applicant’s class wide demand that a provider initiate civil action before her admittedly fraudulently-procured policy can be rescinded – but also for health care providers across the Commonwealth who often bear the cost of unpaid bills after a member or insured’s coverage is terminated for intentional concealment or misrepresentation. Without the delays attendant to a civil action for rescission, a fraudulently-procured policy can be identified and rescinded before health care providers engage in extensive services which may never be recovered.

Elliott Greenleaf’s James C. Crumlish, III, Raymond J. Santarelli, and Aimee L. Kumer represented the insurer in defeating this attempt at class certification.