Indianapolis-based WellPoint Inc.’s subsidiary in California—facing a state fine for retroactively canceling health insurance policies—agreed Friday to a class-action settlement with 6,000 policyholders, according to USA Today.

Blue Cross of California pledged not to retroactively cancel coverage unless policyholders "intentionally misrepresented" information on their applications—a sharp change in its practices.

In March, the California Department of Managed Health Care announced a $1 million fine against Blue Cross. The company is contesting the fine.

For decades, insurers have canceled a small percentage of policies when they found mistakes or omissions on application forms completed by policyholders. Insurers defend the practice, called “rescission,” as a check against fraud.

Critics say insurers invoke when a policyholder files a large medical bill. The practice affects people who buy their own insurance, not those covered by employer-sponsored plans.