Health Net 2011 Annual Report Download - page 54

on the government’s actions and the responsiveness of public health agencies and insurance companies, a large-
scale public health epidemic or future acts of bio-terrorism could lead to, among other things, increased use of
health care services, disruption of information and payment systems, increased health care costs due to increased
in-patient and out-patient hospital costs and the cost of any anti-viral medication used to treat affected people.
Disasters, including earthquakes, fires and floods, could severely damage or interrupt our systems and
operations and result in an adverse effect on our business, financial condition or results of operations.
Disasters such as fires, floods, earthquakes, tornados, power losses, virus outbreaks, telecommunications
failures, break-ins or similar events could severely damage or interrupt our systems and operations, result in loss
of data, and/or delay or impair our ability to service our members and providers. We have in place a disaster
recovery plan which is intended to provide us with the ability to recover our critical information technology
systems in the event of a natural disaster utilizing various alternate sites provided by a national disaster recovery
vendor. However, there can be no assurance that such adverse effects will not occur in the event of a disaster.
Any such disaster or similar event could have a material adverse effect on our business, financial condition and
results of operations.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
We lease office space for our principal executive offices in Woodland Hills, California. Our executive
offices, comprising approximately 125,315 square feet, are occupied under a lease that will expire on
December 31, 2014. A significant portion of our Western Region Operations segment is also housed in
Woodland Hills, in a separate 333,954 square foot leased facility. The lease for this two-building facility expires
December 31, 2021.
We also lease an aggregate of approximately 548,807 square feet of office space in Rancho Cordova,
California which is used in our Western Region Operations and Government Contracts segments. The related
leases expire at various dates ranging from 2012 to 2018. We also lease a total of approximately 67,293 square
feet of office space in San Rafael, California for certain specialty services operations in our Western Region
Operations and Government Contracts segments.
In addition to the office space referenced above, we lease approximately 61 sites in 15 states, totaling
approximately 1,183,698 square feet of space, which is used in all of our segments. We also own a facility in
Rancho Cordova, California comprising approximately 82,000 square feet of space, which is used to support all
of our segments.
We believe that our ownership and rental costs are consistent with those associated with similar space in the
applicable local areas. Our properties are well maintained, adequately meet our needs and are being utilized for
their intended purposes.
Item 3. Legal Proceedings.
Litigation and Investigations Related to Unaccounted-for Server Drives
We are a defendant in three related litigation matters pending in California state and federal courts relating
to information security issues. On January 21, 2011, International Business Machines Corp. (“IBM”), which
handles our data center operations, notified us that it could not locate several hard disk drives that had been used
in our data center located in Rancho Cordova, California. We have since determined that personal information of
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