Unlike California, Hawai`i law does not statutorily impose strict disclosure requirements when an insurance enrollment application mandates that disputes be resolved solely by arbitration.  California courts, on the other hand, narrowly construe an insurer’s attempt to limit disputes to arbitration, as evidenced by the recent decision in Rodriguez v. Blue Cross of California, B 194066 (Cal. Ct. App. April 23, 2008), found here.PDF

     Under California law, if binding arbitration is required to settle disputes and a right to a jury trial is eliminated, the health care service plan must, in clear and understandable language, make a detailed disclosure.  In Rodriquez, the insured completed Blue Cross’ application, which stated in part, "Blue Cross requires binding arbitration to settle all disputes against Blue Cross, including claims of medical malpractice. . . . It is understood that any dispute as to medical malpractice . . . will be determined by submission to arbitration . . . ."  When he was hospitalized and submitted his claim, Blue Cross rescinded the coverage because the insured had omitted material facts from the application. 

     The insured sued and Blue Cross petitioned to compel arbitration.  The trial court denied the petition, finding the arbitration provision as written was limited to issues of medical malpractice. 

      On appeal, the Court noted several prior California appellate court decisions in which the disclosure regarding mandatory arbitration of disputes had been deficient.   Although Blue Cross’ disclosure generally met the requirements of the statute, the disclosure only addressed disputes regarding medical malpractice.  While Blue Cross argued the language, "Blue Cross requires binding arbitration to settle all disputes against Blue Cross, including claims of medical malpractice" was sufficiently broad, the majority of the disclosure was expressly limited to disputes involving medical malpractice. The discrepancy between the first sentence, which was expansive, and the remainder of the disclosure, which was limited to medical malpractice, created confusion.  Therefore, the arbitration provision failed to comply with the statute and was unenforceable.

     The Guide to Benefits utilized by Hawaii Medical Service Association ("HMSA"), a licensee of the Blue Cross and Blue Shield Association, provides for an internal review and, if coverage is denied, then allows an insured to choose between arbitration and litigation.