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In the United States, is what the customer service tells a customer legally binding?

Example: A customer calls their health insurance company, they say X is covered, 1 month later the customer receive the bill where customer sees X was no covered. Can the customer claim coverage based on what customer service told the customer?

The communications between the customer and the customer service are either by phone or email. All calls are legally recorded, and emails are saved.

If the answer is State-dependent, I am mostly interested in cases where the customer lives in California or Massachusetts.

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  • Can they prove what the insurer said? – chirlu Apr 2 '16 at 11:42
  • @chirlu Yes. The communications between the customer and the customer service are either by phone or email. All calls are legally recorded, and emails are saved. – Franck Dernoncourt Apr 2 '16 at 13:18
  • Unsure. I don't have access to the full contract. Can a clause in a contract stipulates that what the customer service tells a customer is not legally binding? I.e. that the customer service can claim anything, without any consequence? – Franck Dernoncourt Apr 2 '16 at 14:25
  • Wouldn't the statutory consumer protections apply to health insurance's customers? – Franck Dernoncourt Apr 2 '16 at 14:40
  • @Dawn Thanks, sounds good, let's restrict the question to health insurance companies. I edited the question title to make it clear. – Franck Dernoncourt Apr 2 '16 at 14:51
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If I may paraphrase the scenario:

  1. The customer has a contract with the insurer
  2. The customer is contemplating undergoing a certain procedure and is unsure if it is covered under the contract
  3. The customer calls the insurer to ask this specific question
  4. The insurer says "yes"
  5. The customer undergoes the procedure
  6. The insurer refuses to pay on the ground that it is not covered under the contract.

Let's put aside issues of evidence and what can be proved and assume these facts are not in dispute.

There is no question that the contract has been renegotiated; it hasn't. This avoids the necessity of considering if the insurer's employee has the authority to do this or it the customer can rely that they do even if they don't.

There are two possibilities:

  1. The procedure is covered and the insurer must pay under contract
  2. The procedure isn't covered and the insurer must pay under the tort of negligent misstatement. The insurer is vicariously liable for the actions of its employee. The insurer owes a duty of care to a customer who asks such a question to answer it correctly. It is foreseeable that the customer would act on the insurer's advice and incur costs that they may have avoided if the correct advice had been given. Nothing is ever certain in the law but this is as close as you can get.
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I'm going to go out on a limb somewhat and say that claims made by a customer service representative are not binding, and are only advisory. The reason is that the company is only bound by the terms of your agreement with them. It is possible to change the terms of a contract, but especially with an oral change there would be a substantial challenge in establishing that they had changed the terms of the contract (which is to say, there is no way that a CS rep has the authority to rewrite the contract). Not every person who you talk to / is employed at an insurance company is a legal agent of the company, in fact probably nobody that you get to talk to on the phone for a health care company is a legal agent of the company. Only an agent with actual authority could modify the terms of the agreement (if you agreed to the modification), and what you got was at most an interpretation of the meaning of the agreement. There may well be a provision in the contract that says that they are not bound by mistaken advice by their employees. Even if there isn't such a clause, for them to be bound by the phone statement, you would have to argue that the phone statement constitutes a valid modification of the contract, and I don't see how it could be.

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  • I was thinking the same thing. If the rep says something wrong (against the real agreement already made) then it doesn't change the contract in any valid way since there'd be no consideration for the change. No consideration means no (modifications to an existing) contract. Now, if you said you'd cancel otherwise, and the rep accepted... – Patrick87 Apr 3 '16 at 3:52
  • And you're familiar enough with CA and MA law to be able to say there are no consumer protection statutes concerning statements by insurance agency reps? – user3851 Apr 3 '16 at 4:04
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    No, I am not. I did my due diligence in looking through CA statutes looking for such things, but failure to find is obviously not proof of nonexistence. If you know of the existence of such statutes or regulations, please give us a more authoritative response, presumably bearing in mind the distinction between "employee" and "agent". – user6726 Apr 3 '16 at 5:17

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