Opinion
A129699
10-31-2011
GORDON P. ERSPAMER, Plaintiff and Appellant, v. FARMERS INSURANCE EXCHANGE, et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Contra Costa County Super. Ct. No. C09-02851)
The trial court sustained Farmers Insurance Exchange (Farmers) and Mercury Insurance Company's (Mercury) demurrers to Gordon P. Erspamer's (appellant) first amended complaint on the ground that his claims against the insurance companies were based on alleged violations of the Unfair Insurance Practices Act, whose provisions are enforced exclusively by the Insurance Commissioner and for which no private right of action exists. On appeal, appellant contends the trial court erred in sustaining Farmers' demurrer without leave to amend because "a Business and Professions Code section 17200 action may be filed against an insurance company just like any other business so long as the challenged practices are not [based] . . . solely on . . . the Unfair Insurance Practices Act . . . ." We reject the contention and affirm the order.
Appellant settled his claims against Mercury after filing his notice of appeal and challenges the trial court's ruling only as to Farmers. We will therefore set forth detailed facts relating to Farmers only.
FACTUAL AND PROCEDURAL BACKGROUND
The facts are taken from appellant's first amended complaint, the operative complaint. On October 6, 2008, appellant sustained injuries that caused him to miss some work when his car was struck from behind by a car driven by an individual insured by Mercury.
On December 29, 2008, appellant sustained injuries that caused him to miss some work when his car was struck from behind by a car driven by an individual insured by Farmers. The damage to his car was "minor." He promptly reported the accident to Farmers, which "took a long time to get back to [him]." Farmers "adopted a strategy to ignore its obligation to offer [appellant] a reasonable settlement" and dealt with him "in bad faith." It "repeatedly sent form letters" stating it was still investigating the accident, despite the fact that it "had all the necessary information concerning [appellant's] medical situation and damages for approximately six months" on a "case of clear liability." Farmers had a policy of making unreasonable settlement offers and had received some of the "worst" ratings in Consumer Reports for "overall satisfaction" and "paying off claims in 30 days or less," and in a JD Powers 2007 Collision Repair Satisfaction Study for "Overall Experience, Claim Settlement, Claim Representative, and Claim Process and Procedures."
Farmers had "a series of other business practices that [were] unfair, illegal or fraudulent," including: (1) "implement[ing] a mass mailing system whereby claimants receive periodic form notices falsely stating that Farmers needs more time or documentation to process their claims"; (2) "implement[ing] programs that tie employee salaries and bonuses to adherence to policies that encourage the delay, denial, underpayment, and forced litigation of claims"; (3) "refus[ing] to recognize, process or pay third party claims for wage loss covered by the collateral source rule"; (4) "utiliz[ing] a computer claims assessment program called Colossus, which is designed systematically to underpay claims, and to tie individual performance plans and compensation of its claims representatives to use of and compliance with Colossus calculated payments, or achievement of better results (lower settlement averages) than the payments calculated by Colossus"; (5) "contest[ing] liability in cases where liability is clear or previously admitted"; (6) "plac[ing] arbitrary caps on settlement payouts based upon property damage calculations or other data"; and (7) "commit[ting] various other acts and practices intended to mislead, defraud, or take advantage of claimants, including the practices described above . . . ."
On March 13, 2009, appellant sustained serious injuries that caused him to miss some work when his car was struck from the right by a car driven by an individual insured by American International, 21st Century Insurance, which is an affiliate of Farmers, or another insurance company.
On March 5, 2010, appellant filed his first amended complaint against the three drivers of the cars that struck appellant's car as well as Mercury, Farmers, and a third insurance company, as a Doe defendant. His first and second causes of action were against the three drivers—negligence and negligence per se. His third and fourth causes of action were against the insurance companies—"Violations of Unfair Business Practices Statute" and "Injunctive Relief." On his third and fourth causes of action, he requested "statutory penalties for each violation, disgorgement of lost profits, restitution," attorney's fees and costs, and "a preliminary and permanent injunction enjoining [the three insurance companies] from continuing to commit the unlawful acts and business practices as alleged above."
In April 2010, Mercury and Farmers filed separate demurrers to appellant's third and fourth causes of action. The trial court sustained both demurrers without leave to amend, stating, "The Unfair Insurance Practices Act . . . (UIPA) prohibits unfair or deceptive acts or practices in the business of insurance, and specifically prohibits 'unfair claims settlement practices' by insurers . . . However, no private right of action exists for violation of [UIPA]; enforcement powers are vested exclusively in the Insurance Commissioner. [Citation.] Because there is no private right of action for violation of the UIPA, Plaintiff may not 'plead around' that limitation by casting a cause of action based on a violation of UIPA as one brought under Bus. & Prof. Code, section 17200. [Citation.]" The court stated as to the fourth cause of action, "An injunction is a remedy, not a cause of action. [Citation.]"
DISCUSSION
Standard
"On review of an order sustaining a demurrer without leave to amend, our standard of review is de novo, 'i.e., we exercise our independent judgment about whether the complaint states a cause of action as a matter of law.' [Citation.]" (Santa Teresa Citizen Action Group v. State Energy Resources Conservation & Development Com. (2003) 105 Cal.App.4th 1441, 1445.) " ' "We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.]" ' " (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.)
Contention
Appellant's sole contention is that the trial court erred in sustaining Farmers' demurrer without leave to amend because his third cause of action was not based "solely upon . . . the Unfair Insurance Practices Act . . . ." We reject the contention.
Appellant does not appear to contest the trial court's order sustaining the demurrer without leave to amend as to the fourth cause of action for injunctive relief.
The Unfair Insurance Practices Act (Ins. Code, § 790 et seq. ; UIPA) prohibits various unfair claims settlement practices, including: "(1) Misrepresenting to claimants pertinent facts or insurance policy provisions relating to any coverages at issue"; "(2) Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies"; "(3) Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies"; "(4) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss requirements have been completed and submitted by the insured"; "(5) Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear"; and "(11) Delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either, to submit a preliminary claim report, and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information." (§ 790.03, subds. (h)(1)-(5), (11).)
All further statutory references are to the Business and Professions Code unless otherwise stated.
UIPA is enforced by the Department of Insurance and does not create a private cause of action against insurers that violate its provisions. (Moradi-Shalal v. Fireman's Fund Ins. Companies (1988) 46 Cal.3d 287, 303-304 (Moradi-Shalal).)Moreover, while insurance companies are subject to California laws generally applicable to other businesses, including laws governing unfair business practices (§ 1861.03, subd. (a)), parties cannot plead around Moradi-Shalal's holding by recasting their cause of action as one for unfair competition. (Manufacturers Life Ins. Co. v. Superior Court (1995) 10 Cal.4th 257, 284 (Manufacturers Life); Safeco Ins. Co. v. Superior Court (1990) 216 Cal.App.3d 1491, 1494 ["we have no difficulty in deciding the Business and Professions Code provides no toehold for scaling the barrier of Moradi-Shalal. . . . To permit plaintiff to maintain this action would render Moradi-Shalal meaningless"].)
In Moradi-Shalal, the plaintiff was not permitted to maintain her action against the defendant insurer because her allegations were rooted in violations of UIPA, e.g., that the insurer failed to promptly and reasonably respond, investigate, and process her claim, and " 'did not attempt in good faith to effectuate a prompt, fair, and equitable settlement of the claim, in which liability was reasonably clear.' " (46 Cal.3d at pp. 293, 304.) Similarly, here, the allegations of wrongful conduct contained in appellant's third cause of action, e.g., not timely investigating his claim, failing to respond within a reasonable time in a case in which liability is clear, "adopt[ing] a strategy to ignore its obligation to offer . . . a reasonable settlement," and dealing with him in bad faith, are squarely the types of activities covered by UIPA. (§ 790.03, subds. (h)(2), (3), (11).) Because the alleged misconduct involves what appellant perceives are unfair claims settlement practices under UIPA, he cannot state a cause of action against Farmers based on these allegations.
Appellant's reliance on Progressive West Ins. Co. v. Superior Court (2005) 135 Cal.App.4th 263 is misplaced. There, the insured had a valid cause of action under Business and Professions Code section 17200 where the insurer had "a pattern and practice of demanding 100 percent of any moneys it pays out to its policyholders under the med-pay coverage without regard to the company's obligations under the made-whole rule or the common-fund doctrine." (Id. at p. 286.) There was no assertion that the insurer had violated UIPA and the Court did not discuss whether Moradi-Shalal applied. The case is therefore not authority supporting appellant's position that he should be allowed to proceed on his third cause of action. (See Ginns v. Savage (1964) 61 Cal.2d 520, 524, fn. 2 ["Language used in any opinion is of course to be understood in the light of the facts and the issue then before the court, and an opinion is not authority for a proposition not therein considered"].)
Appellant asserts he nevertheless should be allowed to proceed on his third cause of action because it also contains an allegation that Farmers unlawfully provides financial incentives to its employees to deny or underpay claims, in violation of section 816, which prohibits such acts and is not part of UIPA. Manufacturers Life, on which appellant relies, does not support his position. There, the Supreme Court allowed the plaintiff insurance agency to proceed on its claim against several insurance companies for engaging in anticompetitive conduct in violation of the Cartwright Act (Bus. & Prof. Code, §§ 16720 & 16721.5), even though the conduct also violated UIPA. (10 Cal.4th at p. 284.) In doing so, however, the Supreme Court stated it was not "compromis[ing] the rule of Moradi-Shalal in any way" because "a cause of action for unfair competition based on conduct made unlawful by the Cartwright Act is not an 'implied' cause of action which Moradi-Shalal held could not be found in the UIPA. There is no attempt to use the [Business and Professions Code section 17200] to confer private standing to enforce a provision of the UIPA." (Ibid.)
Section 816 provides in pertinent part: "No insurer shall pay any person given discretion as to settlement of claims . . . a compensation which in any way is contingent upon the amount of settlement of such claims . . . ."
Here, appellant's invocation of section 816 concerns his allegation that as part of Farmers' strategy of making unreasonable settlement offers, it "devised and implemented programs that tie employee salaries and bonuses to adherence to policies that encourage the delay, denial, underpayment, and forced litigation of claims." At the heart of this allegation is appellant's displeasure with how Farmers' claims representatives handled the settlement of his claim. In contrast to Manufacturers Life in which the plaintiff suffered harm as a result of the insurance companies' violation of the Cartwright Act, here, the only harm suffered by appellant as a result of the alleged violation of section 816 is that Farmers denied, underpaid, or delayed the settlement of his claims, i.e., conduct prohibited by UIPA. Because appellant is "attempt[ing] to use the [Business and Professions Code section 17200] to confer private standing to enforce a provision of . . . UIPA," (Manufacturers Life, supra, 10 Cal.4th at p. 284), his third cause of action is barred by Moradi-Shalal.
We also reject appellant's contention, raised in his reply brief, that he should be allowed to amend his complaint "if the court deems that there are any failings in . . . allegations" relating to whether he suffered "injury in fact" or "lost money or property" as required by Business and Professions Code section 17204. We conclude that because any injury appellant can allege he suffered was the result of conduct prohibited by UIPA, there is no reasonable probability he would be able to amend his complaint to state a valid cause of action. The trial court did not abuse its discretion in denying leave to amend.
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DISPOSITION
The trial court's order is affirmed. Respondent Farmers Insurance Exchange shall recover its costs on appeal.
McGuiness, P.J. We concur: Pollak, J. Siggins, J.