An investor in Health Net, Inc (NYSE: HNT) has filed a lawsuit against Health Net, Inc and the members of its board of directors and certain executive officers over alleges breaches of fiduciary duties.
According to the complaint the plaintiff alleges that the defendants caused Health Net, Inc to engage in the improper practice of post claims underwriting, which resulted in a civil law enforcement action by the Los Angeles City Attorney for possible violations of the Unfair Competition Law and the False Advertising Law. Post claims underwriting refers to the improper practice of rescinding, canceling or limiting health insurance coverage after submission of a substantial claim for benefits, upon which the medical underwriting is performed. The plaintiff accuses that Health Net, Inc issues health insurance coverage with little or no investigation of the medical history or current health of the persons to be covered prior to the issuance of the policy, and then waits until after a substantial claim has been submitted to conduct such an investigation for the purpose of uncovering purported errors or omissions in the application for coverage that can be used as a basis to rescind or cancel the coverage. By performing postclaims underwriting, Health Net, Inc improperly avoids the cost of providing health care to the person making the substantial claim and the plaintiff alleges that the Defendants knowingly and intentionally engaged in these illegal and deceptive practices.

On February 20, 2008, Health Net, Inc the Los Angeles City Attorney filed a civil law enforcement action against Health Net, Inc alleging that Health Net, Inc was engaging in postclaims underwriting, which is prohibited by California law. Health Net is also the subject of several lawsuits by consumers whose health care coverage was improperly rescinded and whose claims were denied.