Can HMOs be sued for "Bad Faith Insurance?" Yes. We are proud that two of our cases, Smith v. Pacificare and Kotler v. Pacificare, confirmed that regardless of the differences between HMOs and insurers, HMOs are “in the business of insurance,” and can be sued for bad faith.
HMO is the acronym for “health maintenance organization.” In California, HMOs are called “health care service plans.”
What makes an HMO an HMO is that the policyholder (usually called a subscriber or member) pays the HMO a premium in exchange for a promise of health coverage provided by the HMO. Some HMOs provide the coverage directly; others enter into contracts with doctors and hospitals to provide the care. The HMO does not own the facilities or employ the staff. Often, the medical group will not employ the doctors who belong to it either. Rather, the HMO will pay the hospitals and the groups a fixed amount each month based on the number of members enrolled in the plan.The hospital or group then agrees to provide care in exchange for this monthly payment.
In most cases, the providers decide what is covered and what is not covered, without any input from the HMO. (Although in most cases, the member can appeal the decision to the HMO.) The HMO is, in essence, nothing more than a middleman.
Yes. We are proud that two of our cases, Smith v. Pacificare and Kotler v. Pacificare, confirmed that regardless of the differences between HMOs and insurers, HMOs are “in the business of insurance,” and can be sued for bad faith. When an insurance company can be sued for bad faith, you may be able to sue for punitive damages in addition to economic damages.
While much of our practice involves work we do for other lawyers, we also handle cases for people and businesses involved in disputes with their insurance companies. If you, your business, or a member of your family is involved in an insurance-related dispute, we might be able to help.
Our analysis of insurance issues is so well respected that we are sometimes consulted by insurance companies themselves. We were recently asked by a major insurer to advise it on whether to make a $17 million claim to its own insurance company.
We do not handle litigation on a high-volume, assembly-line basis, and we are therefore very selective about the cases we take. But when we do take a case, we devote considerable thought, care, and attention to it, so that it moves as quickly through the courts as the judicial system permits.
To find out more about what we can do for you read “Our Litigation Practice for Policyholders.”
Southern California civil appeals attorney, Jeffrey I. Ehrlich, is an appellate specialist certified by the State Bar of California’s Committee on Legal Specialization.