AI class action knocks on California court’s door 


California; CA; California state flag; flag

By: Danielle A. Ocampo

The first Artificial Intelligence (AI) class action litigation in California courts was filed in Alameda Superior Court on March 28, 2024. The class filed a complaint against Blue Shield of California, one of the largest medical insurance companies nationwide with roughly five million California members.  

Plaintiffs allege that Blue Shield operates an “illegal scheme” of implementing AI software known as Claims Data Activator to instantly reject claims “on the lack of medical necessity grounds, despite a patient’s doctor providing documentation as to why medial treatment is medically necessary, and without ever opening patient files.” Per Plaintiffs, the Claims Data Activator was intended to streamline the prior authorization process of its insureds’ claims and enable doctors to automatically deny coverage en masse for treatments, medications and testing that do not match the preset criteria the AI was given.  

As a result, Plaintiffs claimed Blue Shield saved money by denying claims it would have been required to pay and eliminating labor costs for doctors and claims reviewers, while thousands of patients are effectively left “without coverage and with unexpected bills.” Plaintiffs assert that under CA law, Blue Shield failed to fulfill its legal obligations to diligently conduct thorough, fair, and objective reviews of each claim because of the AI software. Once denied, Blue Shield doctors are presumed to sign off the denials. Blue Shield rejected all claims of using Claims Data Activator. 

Now deep into the reality of AI use in our world, this suit raises fundamental questions about human analysis. Should AI be prohibited from performing certain tasks? Is the Blue Shield of California problem one that can be corrected? If so, could AI in healthcare eliminate bias?  

FMG’s Data Security, Privacy & Technology practice group focuses on privacy litigation and will be tracking the progress of this first-of-its-kind litigation, especially whether the California court will let this litigation through its doors and the case is within its jurisdiction. As professionals in both privacy and healthcare, we look forward to seeing whether this case will afford guidance for healthcare and insurance industries in their new uses of AI to improve operational efficiency. Follow FMG’s BlogLine for privacy litigation and health care industry updates on whether this case will lead to a new wave of class action litigation trend against AI and Automatic Decision-Making Technology (ADMT) users in healthcare and insurance.  

For more information, contact Danielle A. Ocampo at or your local FMG attorney.