Follow GJEL on Twitter Join GJEL on Facebook Read the GJEL Blog

The California Insurance Equality Act: Real Change or Window Dressing?

Under California law, registered domestic partners are “two adults who have chosen to share one another’s lives in an intimate and committed relationship.” Family Code Section 207(a).  The California Domestic Partner Rights and Responsibilities Act of 2003 required that registered domestic partners be provided the same rights, protections, and benefits as spouses; and that they also be subject to the same responsibilities, obligations, and duties under law.  Family Code Section 207.5.

Just a year later, the California Insurance Equality Act (Ins. Code, § 381.5, etc. hereafter referred to as “The Equality Act”) was enacted, effective in 2005, stating: “(a) Every policy issued, amended, delivered, or renewed in this state shall provide coverage for the registered domestic partner of an insured or policyholder that is equal to, and subject to the same terms and conditions as, the coverage provided to a spouse of an insured or policyholder. A policy may not offer or provide coverage for a registered domestic partner if it is not equal to the coverage provided for the spouse of an insured or policyholder. This subdivision applies to all forms of insurance regulated by this code.

(b) A policy subject to this section that is issued, amended, delivered, or renewed in this state on or after January 1, 2005, shall be deemed to provide coverage for registered domestic partners that is equal to the coverage provided to a spouse of an insured or policyholder.

(c) It is the intent of the Legislature that, for purposes of this section, “terms,” “conditions,” and “coverage” do not include instances of differential treatment of domestic partners and spouses under federal law.”

The Equality Act also amended Ins. Code, § 10121.7 to read:

“A policy of group health insurance that provides hospital, medical, or surgical expense benefits shall provide equal coverage to employers or guaranteed associations, as defined in Section 10700, for the registered domestic partner of an employee, insured, or policyholder to the same extent, and subject to the same terms and conditions, as provided to a spouse of the employee, insured, or policyholder, and shall inform employers and guaranteed associations of this coverage. A policy may not offer or provide coverage for a registered domestic partner that is not equal to the coverage provided to the spouse of an employee, insured, or policyholder.”

Prior law had required group health care insurance plans and policies of group disability insurance to offer coverage for the domestic partner of an employee or insured to the same extent as coverage provided to a dependent.  Cal. Health & Safety Code § 1374.58(a): that statute was amended by The Equality Act as well.  This prior definition seemed to be at odds with the statutory definition of “dependent,” which was: “Dependent” means the spouse or child of an eligible employee, subject to applicable terms of the health benefit plan covering the employee, and includes dependents of guaranteed association members if the association elects to include dependents under its health coverage at the same time it determines its membership composition pursuant to subdivision (z).”  Ins. Code, § 10700(e).  On its face, this definition did not even seem to encompass the domestic partner.[1]

According to at least one commentator citing legislative history, this ambiguity caused “real world” problems for domestic partners: “Without a uniform definition, confusion often resulted in the area of health insurance and domestic partners were routinely denied benefits and coverage, or were forced to pay higher premiums.”  Meredith A. Felde, California Insurance Equality Act: Providing Equal Insurance Coverage to Domestic Partners (2005) 36 McGeorge L. Rev. 917, 920.

Did The Equality Act bring about real change, or was it mere window dressing? While only time and reported data will give us the true answer, these statutory changes do seem to remove significant factual ambiguity surrounding dependent status that has been present in existing law.

An insurer (like any other party to a contract) owes a general duty of good faith and fair dealing. Seaman’s Direct Buying Service, Inc. v. Standard Oil Co. (1984) 36 Cal.3d 752, 768–769. Moreover, because of the “special relationship” inherent in the unique nature of an insurance contract, the insurer’s obligations attendant to its duty of good faith are heightened. Such obligations have been characterized as akin to fiduciary-type responsibilities. Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136.

But that has not removed “gray areas” as to the contractual standard of what constitutes a “dependent” in a health insurance contract.  Most revealing in that regard is Prudential Ins. Co. of America, Inc. v. Superior Court (2002) 98 Cal.App.4th 585, 600, which concerned whether or not a college student daughter of an insured was, or was not, a “qualified dependent” under her parents’ health insurance policy at the time she suffered catastrophic injuries.  Under the policy, “qualified dependent” status was defined to include children of the insured over the age of eighteen who were full-time students.

In this case, the insured’s daughter had chosen not to enroll in school for the quarter following her freshman year due to personal problems, but she had retained the right to seek re-admission.  Evidence from the school indicated that this was not an unusual circumstance; and the parents and student asserted that she should be deemed a “qualified dependent” in light of her continuing relationship with her school at the time of the accident.  But the appellate Court, citing out of state cases on the same subject, held that: “…the plain meaning of “full-time student” is “attending classes on a substantial basis.”  Since the daughter had not met this requirement for the quarter in question, the Court granted summary judgment in favor of the insurance company, and denied the daughter’s claim, finding that she was not a “qualified dependent.”

Fortunately, prior to The Equality Act, there were no appellate cases which had to construe the factual permutations of a partner’s status that might arise during a domestic partnership (part-time residency, lack of financial dependency on the other partner, etc.), in conjunction with this sort of murky notion of “dependent” status.  The outcome would have been less than predictable, had such cases arisen.  Under The Equality Act, there is now a “bright line” test: the domestic partner is indeed entitled equal coverage as the named insured, without condition or the need for interpretation of dependency status.  For this reason, if nothing else, The Equality Act has served its purpose: premiums can be calculated based upon the known status of a domestic partner; and domestic partners can be assured of the right to insurance contract health benefits purchased by them, or by their employer on their behalf.

[1] Even more confusing, as pointed out in the Felde article cited below, was that the same term is defined differently (and more inclusively) elsewhere in California statutory law: see Lab. Code § 3503 (defining dependent as “a member of the family or household of the employee” including spouses, children, step-children, parents, and mothers and fathers in-law).