Insurer Has No Duty to Tell You How to Save Yourself Money
I never cease to be amazed by people who believe that other people owe them a duty to save them money. I've defeated a class action premised on this theory before, and so I was gratified to come across the recent decision in Levine v. Blue Shield of California, 2010 WL 4369797 (Cal. App. -- 4th Dist. Nov. 5, 2010).
In Levine, the plaintiff brought a putative class action against a health plan. Literally. He was both the named plaintiff AND the counsel for the putative class. Here's his beef: Blue Shield didn't tell him that if he had bought a different policy, he could have saved quite a bit of money in premiums.
You see, when 40-year-old Michael Levine first bought his policy, he was single. He bought a policy for himself, and one for each of his two dependents. A few years later, when he married his 25-year-old wife, she submitted an application to be added to his plan. But if they instead had bought a new policy with the young wife as the primary insured and the dependents as part of a single family plan, they could have obtained the same benefits for significantly less premiums. Michael alleged that Blue Shield had a legal duty to tell him this, and brought causes of action for fraudulent concealment, negligent misrepresentation, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and violation of the Unfair Competition Law.
Both the trial court and the Fourth District Court of Appeal disagreed. The appellate court noted:
[T]he Levines fail to cite any case in which a court has concluded that the covenant of good faith and fair dealing requires an insurer to disclose to the purchaser of insurance the lowest price that the insurer is willing to accept for insurance coverage.
Id. at *5. The court relied on California Service Station etc. Ass'n v. American Home Assurance Co. (1998) 62 Cal. App. 4th 1166 to hold that the insurer has no duty to disclose pricing information to potential customers in an arm's length transaction. In doing so, the court noted, "[W]e can conceive of no principled basis for concluding that Blue Shield owed the Levines a duty to disclose how the Levines could obtain the same health care coverage for a lower price, in view of the California Service Station court's holding that the insurer did not owe a duty to disclose the 'final negotiated price' itself." Id. at *7. It explained that although an insurer may have a duty to explain details about the coverage terms of a policy or how claims under it are processed, it has no duty regarding the price:
The amount of money that an insurer is willing to accept in exchange for coverage is not information that implicates the special relationship between an insurer and its insured, because it does not relate to coverage or the processing of claims. We therefore reject the Levines' contention that the purported 'special relationship' between the Levines and Blue Shield gives rise to a duty of disclosure in this case.
Id. at 9 (citation omitted).
Because the plaintiffs could not plead a legal duty that the defendant violated, the court in Levine affirmed the trial court's dismissal of the entire case with prejudice.
Levine is an excellent reminder that parties negotiating a contract stand at arm's length and are not fiduciaries.
Interesting case study on a consumer class action that was completely unfounded. That's like when you go to McDonald's and having the cashier offering the value meal as opposed to ringing up a soda, burger, and fry all separately. They don't have to offer you the value meal to save you money. They do because that's good customer service.