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Blue Cross 'Bait And Switch' Class Actions Move Forward

LAW360.COM

Law360, Los Angeles -- A California judge on Wednesday tentatively trimmed two putative class actions accusing Blue Cross of California of using “bait and switch” strategies to unilaterally increase annual deductibles and premiums midyear, ruling in part that the Consumer Legal Remedies Act doesn't apply to buying health insurance.

Judge Jane L. Johnson of Los Angeles County Superior Court tentatively ruled that Janet Kassouf and two other plaintiffs in their putative class action could not sue Blue Cross of California, which does business as Anthem Blue Cross, under California's Consumer Legal Remedies Act because health insurance plans are neither goods nor services covered by that law.

Judge Johnson also indicated in her tentative rulings that she will not allow plaintiff Eric Taub to seek attorneys' fees and punitive damages from the health insurer in his separate putative class action.

In indicating she would rule for the defense, the judge noted that punitive damages don't apply to Taub's putative class action because it “fails to allege that any putative class member was actually required to pay more premiums or incur greater expenses because of increased deductibles at the time the action was filed.”

At a Wednesday hearing, Jerry Flanagan, one of the Kassouf plaintiffs' lawyers, argued that Blue Cross' alleged “bait and switch” tactics were precisely the type of behavior that the Consumer Legal Remedies Act was designed to crack down on.

“The service is the contract,” Flanagan said.

Michael J. Bidart, a lawyer representing Taub, said at the hearing that punitive damages applied because his clients were harmed when Blue Cross jacked up its rates.

“You pay for a certain product and now you have a product that is different than and less than what you paid for,” Bidart said.

At one point in Wednesday's hearing, the judge asked whether bad faith — one of Taub's causes of action — permitted him to recoup punitive damages.

“At its core, this case is nothing more than a breach of contract,” replied Amir Shlesinger, one of Blue Cross' lawyers. “That alone does not entitle them to punitive damages.”

Johnson took both matters under submission.

Taub, originally filed suit in March 2011 after the insurer notified him — two months into the policy year — that it was increasing his deductible from $1,500 to $1,750, raising his premium by 21.1 percent and increasing the prescription drug deductible from $250 to $275. He was enrolled in the PPO Share 1500 plan.

According to the complaint, Blue Cross breached the duty of good and faith and breached its health insurance contract by “unilaterally changing annual deductibles and other benefits before the end of the calendar year.”

Taub's case was later consolidated with that of three other Blue Cross members — Kassouf, Alison Heath and David Jacobson — two of whom were enrolled in different plans for which the insurer had also raised deductibles in midyear.

The Kassouf complaint, filed in November 2011, alleges that Blue Cross’ strategies involved roping policyholders into plans and then increasing deductibles and premiums by roughly 20 percent, in addition to hiking up other annual out-of-pocket costs in May — the middle of the deductible year.

Taub is represented by Michael J. Bidart, Steven Messner and Ricardo Echeverria of Shernoff Bidart Echeverria Bentley LLP.

The Kassouf plaintiffs are represented by Harvey J. Rosenfield, Pamela M. Pressley and Gerald S. Flanagan of Consumer Watchdog.

Blue Cross of California is represented by Amir Shlesinger, Kurt C. Peterson, Kenneth N. Smersfelt and Brett B. Goodman of Reed Smith LLP.

The cases are Eric Taub v. Blue Cross of California, case number BC457809; and Janet Kassouf et al. v. Blue Cross of California, case number BC473408, in the Superior Court for the State of California, County of Los Angeles.

--Additional reporting by Matthew Heller and Sindhu Sundar. Editing by John Quinn.