Opinion
D051368
4-16-2008
LARRY HULLETT, Petitioner, v. THE SUPERIOR COURT OF IMPERIAL COUNTY, Respondent; HARTFORD LIFE AND ACCIDENT INURANCE CO. et al., Real Parties in Interest.
NOT TO BE PUBLISHED
Petitioner Larry Hullett (Plaintiff), sued the real parties in interest Hartford Life and Accident Insurance Co., Hartford Life, The Hartford Group and The Hartford (collectively Insurer) for damages for breach of a disability insurance contract, breach of the implied covenant of good faith and fair dealing, fraud, and related theories. In this petition for writ of mandate, Plaintiff seeks a ruling overturning the trial courts order that sustained, without leave to amend, the demurrers of Insurer to his first amended complaint (FAC) on the grounds of (1) bar of the two-year statute of limitations regarding the bad faith theory, (2) insufficiently specific facts pled to state the causes of action for intentional misrepresentation and fraud, and (3) insufficient facts to state a cause of action for unfair business practices under Business and Professions Code section 17200 et seq. (Unfair Competition Law, hereinafter "UCL").
Plaintiff argues he has pled sufficient facts to justify the application of the doctrine of equitable tolling of the statute of limitations, regarding the claim of breach of the implied covenant of good faith and fair dealing. (Code Civ. Proc., § 339, subd. (1).) He likewise contends he has adequately set forth facts supporting estoppel and waiver against the Insurer to assert that statute of limitations on the same cause of action, all based on his compliance with the Insurers internal review and appeal process. He further contends there are no formal or substantive deficiencies in his pleading of the fraud, misrepresentation or unfair business practices claims. (Bus. & Prof. Code, §§ 17200, 17500; UCL.)
The subject demurrer rulings did not affect the two remaining causes of action in the first amended complaint (FAC), breach of insurance contract and declaratory relief. These writ proceedings are a challenge to the trial courts ruling as to the next four causes of action.
We agree with Plaintiff that the demurrer was erroneously sustained without leave to amend with respect to the cause of action for breach of the implied covenant, because the FAC adequately anticipates the statute of limitations defense by setting forth sufficient facts to support a theory of equitable tolling of the applicable limitations period, as well as estoppel and waiver. However, the current pleading of the remaining causes of action that were challenged by the demurrer is lacking in sufficient specificity, although apparently susceptible of amendment, such that under all the circumstances, the trial courts rulings denying leave to amend on those counts amounted to an abuse of discretion. We will grant the petition and require the trial court to vacate its order sustaining the demurrer without leave to amend and to enter a new order overruling the demurrer as to the third cause of action, and allowing leave to amend as to the balance of the challenged causes of action.
FACTUAL AND PROCEDURAL BACKGROUND
A. Policy; Claims
The background facts are alleged in the FAC, and we take them as true for purposes of analyzing the arguments on demurrer. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38-39 (Quelimane).) Beginning in February 1997, Plaintiff was insured under a group policy issued to his employer, the Imperial Irrigation District (employer), for short and long term disability benefits. The policy is attached as an exhibit to the complaint. In October 2001, Plaintiff became disabled and made a claim under the policy. Insurer paid short term disability benefits to him until February 13, 2002.
On April 8, 2002, Plaintiff returned to work until April 29, 2002, when he quit because his disability prevented him from performing the duties of his job. He again returned to work on August 12, 2002, but once again quit September 6, 2002 due to his disability. Plaintiff renewed his claim for disability benefits in September of 2002.
On December 18, 2002, Insurer denied Plaintiffs claim for benefits, and as alleged in the FAC, told him "that additional review and appeal procedures were available to Plaintiff internally through Defendants appeal unit, and through the California Department of Insurance. Plaintiff continued through the claim review process as set forth by defendants. On March 17, 2005, defendants denied all of Plaintiffs appeals, and refused to pay further benefits." This action followed.
B. Complaints
On December 16, 2005, Plaintiff sued the Insurer for damages on numerous theories, as outlined above. Rather than filing an answer, the Insurer demurred and obtained orders sustaining the demurrers with leave to amend.
On February 27, 2007, Plaintiff filed his FAC, adding a brief set of allegations regarding the statute of limitations that are common to all the substantive causes of action. He first alleged compliance with the limitations period within the policy, allowing an action to be brought within three years of written proof of loss, as required by the policy (attached as Exhibit A to the FAC). The key allegations regarding "appeal" are next: "Following the denial of Plaintiffs claim for benefits, Plaintiff was told by defendants that additional review and appeal procedures were available to Plaintiff internally through Defendants appeal unit, and through the California Department of Insurance. Plaintiff accepted defendants offer, and followed through with defendants review and appeal process. This review and appeal process continued until March 17, 2005, at which time defendants denied all of Plaintiffs appeals, and refused to pay further benefits. The statute of limitations has been equitably tolled during the claim and appeal process."
Plaintiff further alleged the alternate theories that Insurer had waived any right to raise the limitations defense, by requiring him to proceed through its claim review and appeal process. Next, he alleged Insurer should be estopped from raising that defense, for the same reasons.
Plaintiffs first two causes of action were not challenged by this set of demurrers. They seek damages for breach of contract under the policy and declaratory relief regarding Plaintiffs rights and duties under the policy, and they generally contend that the failure to pay short and long term disability benefits was a material breach of the policy. Plaintiff seeks damages of approximately $2,200 per month, minus any offsets for Social Security or other disability benefits provided, as well as other relief. At the time of the FAC filing, he estimated his damages amounted to approximately $36,000.
In his third cause of action for breach of the implied covenant of good faith and fair dealing, Plaintiff incorporated his previous allegations, including the statute of limitations series, and he added contentions that Insurer had failed to act in good faith or deal fairly with Plaintiff when it refused to pay benefits owed under the policy. Plaintiff contends Insurer violated its contractual and fiduciary obligations in numerous respects, such as misrepresenting policy provisions and coverages, and conducting an unreasonable and improper investigation of his claims. He contends that Insurers ordinary business practices are "designed to keep from paying policy benefits which were and are legitimately owed to Plaintiff in order to increase defendants profits. The business practices involved the denial of Policy benefits to employees who attempted to return to work even though they remained disabled." Specifically, he alleges Insurer wrongfully required him to fulfill a second eligibility waiting period because he had temporarily returned to work, even though this was not required by the policy, and even though he had previously satisfied the eligibility waiting period requirement in 1997.
The policy provisions, attached to the FAC, include a heading in the "General Provisions" chapter, explaining what recourse the policyholder has if the claim is denied in writing, either wholly or partially. "On any claim," the insured "must appeal to Us [Insurer] for a full and fair review," within 180 days if the claim required a determination of disability, and the Insurer would then "respond . . . in writing with our final decision on your claim." The insured was allowed to request copies of documents or submit further materials relating to the claim. The policy includes the required notice to the insured of the address and phone number of the California Department of Insurance, Consumer Communications Bureau. It also includes material required by the Employment Retirement Income Security Act of 1974 (ERISA), including a statement of rights and a description of claims procedures, including a description of appeals of denials of claims for benefits. Under the policy, Insurer is granted the "full discretion and authority" to interpret the terms and provisions.
As explained in Croskey et al., California Practice Guide: Insurance Litigation (The Rutter Group 2007), chapter 14, paragraph 14:237, page 14-41 (hereafter Insurance Litigation): "The Claims Services Bureau of the Consumer Services Division of the Department of Insurance is authorized to receive, evaluate, and attempt to mediate complaints about claims settlement practices. [Citation.]"
Plaintiffs fourth cause of action, intentional misrepresentation, alleges that Insurer made false representations in the policy and at its inception that it would pay disability benefits, but the true facts were that Insurer did not intend to pay any such monies. Plaintiff alleges reasonable reliance on those representations and damage, and again alleged that his efforts between 2002 and 2005 to pursue the Insurers "additional review and appeal procedures," after the December 18, 2002 denial of benefits, were required under the policy. That same date is also alleged to be the date of discovery of the fraud.
Plaintiffs fifth cause of action, fraud, is similar to the intentional misrepresentation claim, and adds allegations that Insurer pursued a false and fraudulent scheme to limit its risk of paying claims while maximizing profits, through the issuance of disability insurance policies without any intent to pay benefits. The same allegations about the terms of the policy are made (that Insurer represented to its insureds that if they became disabled, it would pay short term and long term disability benefits). However, Plaintiff alleges that Insurers employees were trained to terminate benefits if an employee were released to return to work, or returned to work even though he remained disabled. Reasonable reliance and damage are again alleged, along with allegations of Plaintiffs efforts to pursue the appeal process. The December 18, 2002 date of denial of benefits under the policy is also alleged to be the date of discovery of the fraud.
In the sixth cause of action for unfair competition and false advertising under the UCL, Plaintiff relies on allegations that the insurance policy appears to offer rights and remedies that are not actually provided, which is unlawful under Civil Code section 1770, subdivision (a)(14), part of the Consumers Legal Remedies Act (CLRA, Civ. Code, § 1750 et. seq.). The same allegations are repeated from the earlier claims, that Insurers business practices unlawfully eliminate any actual liability or exposure under the policy, by denying benefits to disabled persons if they return to work, even though the insured remains disabled. (Bus & Prof. Code, §§ 17200, 17500.)
In the prayer, Plaintiff seeks general, special and punitive damages, and treble damages under Civil Code section 3345 (available for certain types of plaintiffs pursuing actions under the CLRA). There is no request for an injunction or restitution under the UCL. (Bus. & Prof. Code, §§ 17203, 17204.)
C
Demurrer; Ruling
Insurers demurrer to the FAC contended that Plaintiff had failed to remedy the defects in the pleading by adding the brief allegations regarding the statute of limitations, about equitable tolling, estoppel and waiver. Insurer argued that the date of denial of benefits controlled (December 18, 2002), such that the filing of the lawsuit December 16, 2005 was almost one year too late under Code of Civil Procedure section 339, subdivision (1), for purposes of the breach of implied covenant claim. Insurer also argued it did not somehow extend its appeals deadline by advising the insureds they could contact the California Department of Insurance about a claim. Instead, the policy required only that upon denial of a claim, the claimant "must appeal to Us" in writing "for a full and fair review," within 180 days of receipt of claim denial if the claim required a determination of disability. Insurer alleged its required response in writing, with a final decision on the claim, was made in 2002.
Code of Civil Procedure section 339, subdivision (1) provides a two-year limitations period for: "An action upon a contract, obligation or liability not founded upon an instrument of writing. . . . " In Smyth v. USAA Property & Casualty Ins. (1992) 5 Cal.App.4th 1470, 1476-1477, the court relied on the rule that the nature of the right sued upon determines the applicable statute of limitations. A bad faith insurance action falls within the scope of this two-year limitations statute.
Regarding the misrepresentation and fraud claims, Insurer argued Plaintiff had failed to set forth facts about anything more than a denial of his claim, which did not constitute a misrepresentation of policy provisions. Further, in the unfair businesses practices cause of action, Insurer argued only general and conclusory allegations were made, and the relief sought was not alleged with sufficient specificity.
In his opposition to the demurrers, Plaintiff argued he was told about "additional review and appeal procedures," which were mandatory under the policy, and he accordingly pursued them, so that equitable tolling was justified. He also argues he adequately set forth misrepresentation claims, in that defendant said it would pay benefits in the event of disability, without intending to do so, such that his reliance was reasonable and damage resulted. With regard to the unfair competition claim, he contended he had met all requirements of generally alleging unfair, unlawful, or fraudulent business practices, by citing to the CLRA. Leave to amend was sought if necessary.
In reply, Insurer interpreted the FAC as contending that a complaint to the California Department of Insurance constituted an "appeal" under the policy. However, Insurer argued the policy did not provide any such remedy, which instead amounted to only a "reconsideration" of the claim. Although Insurer had responded to the state Department of Insurances inquiry generated from Plaintiffs complaint, Insurer did not "reopen" the claim, so in its view, the original denial of benefits in December 2002 served to start the limitations statute running. Insured continued to contend insufficient allegations of fraud or unfair businesses practices existed, because they were based on policy language or denial of coverage only.
After hearing, the trial court sustained the demurrers without leave to amend, by way of a "statement of decision." The court ruled that for purposes of demurrer, the date of discovery of fraud was pled to be the same date as the denial of the claim, so that the two-year statute began to run. With respect to the cause of action for breach of the implied covenant, the court ruled that no tolling of the statute of limitations can arise from a complaint to the Department of Insurance nor a request for reconsideration of denial of the claim. (Singh v. Allstate Insurance Co. (1998) 63 Cal.App.4th 135 (Singh).) Also, the court found not all of the required elements of estoppel had been pled.
There are four factors generally required to establish estoppel: "`"(1) The party to be estopped must know the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel had the right to believe that it was so intended; (3) the party asserting the estoppel must be ignorant of the true state of facts; and, (4) he must rely upon the conduct to his injury." [Citation.]" (Spray, Gould & Bowers v. Associated Internat. Ins. Co. (1999) 71 Cal.App.4th 1260, 1267-1268.) A party to be estopped typically will have engaged in affirmative conduct that misled the other party. (Ibid.)
With respect to misrepresentation and fraud, the court ruled that the allegations in the FAC about any fraudulent representations to Plaintiff were too general and conclusory, particularly because Insurer was a corporate defendant who could only act through its representatives. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) The unfair competition claim was also found defective for lack of particularity, such as what law the defendant had failed to obey or what unlawful conduct took place. (Khoury v. Malys of California, Inc. (1993) 14 Cal.App.4th 612.)
After Plaintiff filed his petition, this court issued an order to show cause why the relief should not be granted and held oral argument.
DISCUSSION
I
WRIT RELIEF; ISSUES PRESENTED
It is appropriate for this court to review the petition for a writ of mandate at this pleadings stage of the proceedings, to determine the correctness of the trial courts legal determinations about the sufficiency of the pleadings. (Peterson v. Superior Court (1982) 31 Cal.3d 147, 164.) Where, as here, the challenged ruling could effectively deprive the petitioner of the opportunity to present his claims, pretrial writ relief will be granted in appropriate cases to avert unnecessary or incorrect trial proceedings. (Ibid.) "Since in this original proceeding we are asked to find that the trial court erred in [sustaining] defendants demurrer to plaintiffs complaint . . . we will apply the standard of review appropriate to a demurrer. Thus, we will accept as true all properly pleaded facts in the complaint." (Sierra-Bay Fed. Land Bank Assn. v. Superior Court (1991) 227 Cal.App.3d 318, 327.) "If a complaint does not state a cause of action, but there is a reasonable possibility that the defect can be cured by amendment, leave to amend must be granted. [Citation.]" (Quelimane, supra, 19 Cal.4th 26, 39.)
We review the legal sufficiency of the order, not the reasoning of the trial court. (DAmico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 19.) Although this order is entitled a "statement of decision," which was an unnecessary formality in this motion proceeding, it fully addressed the demurrer issues and dismissed the subject causes of action, such that we may proceed to analyze its correctness as a matter of law in these writ proceedings. (Code Civ. Proc., § 632.)
We do not find it necessary to address the newly brought demurrer in the return, by which Insurer apparently contends the petition itself is poorly pleaded, although it has presented no meaningful argument to that effect. (Code Civ. Proc., § 1109; Rodriguez v. Municipal Court (1972) 25 Cal.App.3d 521, 526.) In any case, the petition for mandamus adequately alleges a right on Plaintiffs part and a corresponding duty on the part of the trial court to render a correct ruling on the demurrer, and we may reach the merits of the petition. (Code Civ. Proc., § 1085.) We need not take into account the allegations made by Insurer, outside the record, that Plaintiff has filed a second action against Insurer, alleging it engaged in Penal Code violations and fraudulent statements about the coverage to be provided. (Ins. Code, § 1871.7; Pen. Code, § 550.) We confine our review to the record before us.
II
TIMELINESS OF THE CAUSE OF ACTION FOR BREACH OF
THE IMPLIED COVENANT; DOCTRINE OF EQUITABLE TOLLING
To challenge the trial courts dismissal of this portion of the action, alleging breach of the implied covenant of good faith and fair dealing arising out of the insurance contract, Plaintiff mainly argues the FAC supports a reading of the policy provisions that would justify equitable tolling of the two-year statute of limitations otherwise applicable. (Code Civ. Proc., § 339, subd. (1).) Plaintiff also relies on alternate theories of equitable estoppel and waiver, which we will discuss separately. First, however, we outline the limitations standards that have been developed in the factual context of insurance claims that result in litigation. We may then analyze the allegations of the FAC on a pleadings basis, but without resolving factual issues at this stage of the proceedings.
A. Applicable Standards: Equitable Tolling
"Equitable tolling is a judge-made doctrine `which operates independently of the literal wording of the Code of Civil Procedure to suspend or extend a statute of limitations as necessary to ensure fundamental practicality and fairness. [Citations.] [The California Supreme Court] has applied equitable tolling in carefully considered situations to prevent the unjust technical forfeiture of causes of action, where the defendant would suffer no prejudice. . . . [¶] [T]he effect of equitable tolling is that the limitations period stops running during the tolling event, and begins to run again only when the tolling event has concluded." (Lantzy v. Centex Homes (2003) 31 Cal.4th 363, 370.) A "tolling event" may in some cases include the plaintiffs actions in pursuing one of several available legal remedies, in an administrative or federal forum, if those actions were taken reasonably and in good faith. (Id. at pp. 370, 379-380.)
In Prudential-LMI Com. Insurance v. Superior Court (1990) 51 Cal.3d 674 (Prudential), our Supreme Court applied principles of equitable tolling in a situation in which an insured notified the carrier of a loss, and there was such a delay in the denial of the claim that a resulting legal action filed by the insured could be deemed untimely, if the original date of notification of loss were allowed to control for limitations purposes. Although an insurer has a legitimate interest in protection from stale claims under its policy, an insured is likewise entitled not to have a literal or strict application of limitations rules made while the claim remains pending and undecided. (Id. at p. 691.)
In Prudential, supra, 51 Cal.3d 674, 682, the Supreme Court was interpreting a one-year suit provision found within standard form fire insurance policies. (Ins. Code, § 2071.) Although our case involves a two-year statute applicable to claims for breach of the implied covenant of good faith and fair dealing (Code Civ. Proc., § 339, subd. (1)), the same equitable tolling principles apply. In Prudential, the situation that justified a finding of equitable tolling included these facts: The plaintiffs filed notice of their claim in December of 1985, approximately one month after they discovered it. Negotiations on the claim continued for over one year, until January of 1987. The carrier sent the insureds a letter "proposing that coverage would be denied based on [an] earth movement exclusion unless the insureds had any additional information that would favor coverage. At this point, [the] plaintiffs sought counsel who contacted Prudential. In February 1987, Prudential requested that [the] plaintiffs submit to an examination under oath pursuant to policy terms. It was not until September 1987, that [the] plaintiffs claim was denied unequivocally." (Prudential, supra, 51 Cal.3d 674, 692-693; italics added.) The court ruled the insureds action was not time-barred.
In Singh, supra, 63 Cal.App.4th 135, 139-140, the issue presented and reviewed de novo on appeal was "whether an additional period of equitable tolling applies to the insureds request for reconsideration of their insurance claim. This presents primarily a question of law. The key facts which would affect the application of equitable tolling are undisputed, also presenting an issue of law." In reaching its conclusions, the court compared the facts before it to those in Prudential, supra, 51 Cal.3d 674, 692, in order to evaluate whether equitable tolling was justified to extend the applicable limitations period. (Singh, supra, at pp. 141-142.) In Singh, the plaintiffs had received a denial letter from their insurer, Allstate, on November 9, 1994, informing them they had one year within which to file suit. The letter further stated that "if plaintiffs had any further information they would like Allstate to consider," plaintiffs could bring that information to its attention. (Id. at p. 143.) On February 21, 1995, plaintiffs asked for reconsideration of their claim, but without supplying further information. (Id. at pp. 138-139.) On March 22, 1995, Allstate denied the claim again. Plaintiffs sought a ruling that this 30-day period "should also be counted as equitable tolling time. Thus, plaintiffs argue, they should have had an additional 30 days, or until December 8, 1995, to file their complaint." (Id. at p. 140.)
In rejecting that contention, the appellate court noted that by the time the denial letter was originally issued in November 1994, the insurer had already conducted its investigation, in which plaintiff had participated. The court ruled that those plaintiffs must be deemed to know from the letter that the insurer had denied their claim and they therefore had a basis to file suit before the one-year period had begun to run. (Singh, supra, 63 Cal.App.4th 135, 145.)
In Singh, it did not make any difference for purposes of limitations analysis that the further events, involving reconsideration, had taken place: "Approximately three months after the denial, plaintiffs asked Allstate to reconsider their claim. Plaintiffs indicated they did `not wish to litigate this matter; clearly, they were aware of the potential basis for a lawsuit. They also asked for an answer within 30 days. Allstate honored plaintiffs request for a 30-day response and, by letter of March 22, 1995, informed plaintiffs that Allstates position remained unchanged." (Singh, supra, 63.App.4th at p. 142.) The court reasoned: "The `reconsideration period was not required to enable the insurer to receive notice of the claim and to investigate the claim so as to preserve its rights to defend, if it ultimately denied the claim. The `reconsideration period did not come before plaintiffs had reason to know of their right to sue, or the expiration of the limitation in which to do so. Plaintiffs were aware of the right to sue, and of potential grounds, before any request for reconsideration. The justifications for equitable tolling are absent, once the carrier has initially denied the claim. The policies supporting the shortened limitation period are then fully applicable, and no reason for further tolling exists." (Ibid.)
In another comparable case, Ashou v. Liberty Mutual Fire Ins. Co. (2006) 138 Cal.App.4th 748, 758 (Ashou ), the court addressed the issue of whether an insurers reconsideration of the insureds claim "operated to toll the new one-year period to bring suit provided by section 340.9," an extension of the filing period for certain earthquake claims. In that case, the reconsideration took the form of the insurers grant of the insureds request for reconsideration, seven years after a settlement had been reached, and the insurer agreed to "reopen the claim." (Ashou, supra, at pp. 763-764, italics added.) It is unclear from the opinion in Ashou what exactly was communicated between the parties that served to "reopen" the claim. (Id. at pp. 765-766.) In any case, the court in that special factual setting held that although equitable tolling will not occur if an insured merely asks for reconsideration, it may be justified where the insurer has agreed to reopen the claim. The court rejected the argument by the insured that her settlement did not constitute a "denial" of the claim, such that a tolling period could continue. Rather, "when a claim is settled, the tolling period stops when the payment is made." (Id. at p. 758, fn. 4.) Likewise, "the tolling period stops when the insurer unequivocally denies the claim." (Ibid.; Singh, supra, 63 Cal.App.4th at pp. 142-143.) However, since the basic facts were unclear and might have justified tolling, the court in Ashou, supra, 138 Cal.App.4th 748, reversed the dismissal on demurrer and remanded the matter with directions to the trial court to permit the insured "to amend her complaint to allege, if she truthfully can do so, a precise date that [insurer] agreed to reconsider her claim that would render her complaint timely under the doctrine of equitable tolling." (Id. at p. 768.)
Code of Civil Procedure section 340.9 established a new one-year period (from January 1, 2001 through December 31, 2001) for insureds to file complaints against insurers that had denied claims for property loss caused by the 1994 Northridge earthquake. (Ashou, supra, 138 Cal.App.4th at p. 754.)
In light of these principles, we next compare the facts pleaded in our case to those analyzed in Prudential, supra, 51 Cal.3d 674,Singh, supra, 63 Cal.App.4th 135, and Ashou, supra, 138 Cal.App.4th 748, to determine the proper application of equitable tolling under these circumstances. We then address the estoppel and waiver arguments.
B. Analysis: Equitable Tolling Factors
Plaintiffs allegations about the notice he received of the denial of the claim and the type of recourse available to him under the policy are somewhat confusing. He appears to be alleging both that contractual duties imposed by the policy created his rights to "additional review and appeal procedures, " and that he was "told" somehow by representatives of defendants about these additional procedures. He appears to allege that these procedures apparently involved both internal review, through defendants appeal unit, and additional review through the California Department of Insurance. Plaintiff contends that he "accepted defendants offer, and followed through with defendants review and appeal process," until March 17, 2005, "at which time defendants denied all of Plaintiffs appeals, and refused to pay further benefits. The statute of limitations has been equitably tolled during the claim and appeal process." The thrust of the allegations is that these two-plus years of "additional review and appeal procedures" were required under the policy.
In response, Insurer argues in its return that Plaintiff has not actually alleged that he submitted any internal appeal, but rather he is relying on the date when the Insurer responded to his complaint to the Department of Insurance, but without stating the date upon which Plaintiff submitted any such complaint to the Department. Insurer thus argues that it merely notified Plaintiff of his right to contact the Department of Insurance, and "an insurers response to a complaint to the Department of Insurance does not constitute a voluntary reconsideration of a claim." In reply, Plaintiff argues this matter was never raised in the trial court, and if it had been, Plaintiff would have sought leave to amend to allege that the statute of limitations had not run at the time Plaintiff commenced the internal appeal process.
The FAC itself does not actually include facts about any such Insurer response to an administrative complaint filed by Plaintiff. The exact nature of the review and appeal process, as promulgated or required by Insurer and as understood by Plaintiff, appears to be a factual matter outside the scope of the existing record. These conflicting versions raise questions about when the effective "denial" of the claim occurred, for limitations purposes. We must accordingly take into account both the policy terms and the statutory scheme for Department of Insurance review, even though neither party has cited to the Insurance Code to support its arguments about the policys review and appeal process.
Apparently, these allegations about administrative review are intended to refer the power of the Department of Insurance, whose commissioner is authorized by statute to conduct claims mediation procedures. (Insurance Litigation, supra, ch. 14, ¶ 14:236, p. 14-41.) "The Department is not empowered to adjudicate claims; it can only mediate them." (Id. at ¶ 14:237, p. 14-41.) Under Insurance Code section 12921.3, the commissioners office "(a) . . . shall receive complaints and inquiries, investigate complaints . . . and respond to complaints and inquiries by members of the public concerning the handling of insurance claims, including, but not limited to . . . ., alleged misconduct by insurers or production agencies. . . . [¶]. . . [¶] (c) The commissioner may defer the investigation until the finality of a dispute, mediation, arbitration, or civil action involving the claim is known." Insurance Code section 12921.4 provides for the Department to give certain notice to the complainant of the receipt of the complaint and the final action taken.
In California Code of Regulations, title 10, section 2695.7, subdivision (b), procedures are set forth for allowing an insured to seek mediation from the Department of Insurance if a claim is denied: "Upon receiving proof of claim, every insurer, except as specified in subsection 2695.7(b)(4) below, shall immediately, but in no event more than forty (40) calendar days later, accept or deny the claim, in whole or in part. The amounts accepted or denied shall be clearly documented in the claim file unless the claim has been denied in its entirety. . . . [¶] . . . [¶] (3) Written notification pursuant to this subsection shall include a statement that, if the claimant believes all or part of the claim has been wrongfully denied or rejected, he or she may have the matter reviewed by the California Department of Insurance, and shall include the address and telephone number of the unit of the Department which reviews claims practices."
In Prudential, supra, 51 Cal.3d 674, 682, 692-693, the Supreme Court found applicable the equitable tolling doctrine. The plaintiffs in Prudential had filed a notice of claim in December 1985, and after negotiations continuing through January 1987, received a letter from the insurer that "proposed" denial of coverage on the facts then known, while also allowing the insureds to submit any additional information they might have that would favor coverage. Further investigation was conducted, and there was no unequivocal denial of the claim until September 1987, such that this delay in denial of the claim justified a finding that the limitations period was interrupted and the insureds legal action on the claim was not barred by limitations rules. (Ibid.)
In Singh, the court was considering the effect of an insureds "request for reconsideration" of an insurance claim, and concluded it did not create an additional period of equitable tolling, since the unequivocal denial had already clearly occurred and was never abandoned in any way by the insurer. (Singh, supra, 63 Cal.App.4th at pp. 142-143.)
In Ashou, supra, 138 Cal.App.4th 748, 758, the court referred to the contractual obligations of the insurer "to conduct a timely investigation of an initial claim" (id. at p. 762), but noted that "an insurer has no such obligation with respect to a request for reconsideration of a denied claim." (Ibid.) This is consistent with purpose of equitable tolling, to allow the insurer time to conduct full investigations into claims made; "equitable tolling should only apply—in the context of a previously denied claim—when the insurer has agreed to reopen the claim." (Ibid.) The court allowed leave to amend in case the insured could truthfully allege that the insurer had specifically, at a certain time, agreed to reopen and reconsider the claim. (Id. at p. 765.)
Here, as in Ashou, supra, 138 Cal.App.4th 748, we are reviewing the dismissal at the pleadings stage, and applying the equitable tolling doctrine as a matter of law to a given set of facts. We are not currently concerned with "the question of plaintiffs ability to prove these allegations, or the possible difficulty in making such proof . . . . [Citation.]" (Quelimane, supra, 19 Cal.4th 26, 47.) It is unclear whether plaintiffs contention is that the policys internal appeals procedure is the same as the administrative Department of Insurance process, and how he was told or learned of such related requirements, and when he attempted to comply with policy requirements. Plaintiff apparently relies on the policy terms and provisions as interpreted to him by insurance representatives, regarding his recourse or appeal rights on the denial of any claim.
We are mindful that the purposes of the equitable tolling doctrine are to allow the suspension or extension of a statute of limitations "as necessary to ensure fundamental practicality and fairness." (Lantzy v. Centex Homes, supra, 31 Cal.4th 363, 370.) Equitable tolling has been applied in comparable cases where the plaintiff first pursued a claim in an administrative or federal forum, but then filed a second action in a state forum after the limitations period nominally would have expired. (See Lantzy, supra, 31 Cal.4th at p. 370.) We think that this policy language dealing with the recourse to which plaintiff is entitled, in the event of a denial of his claim, supports an application of the equitable tolling doctrine to these allegations. The policy provides that if his claim was wholly or partly denied, he as the insured "must appeal to Us for a full and fair review," and the insurer would "respond . . . in writing with our final decision on your claim." That language supports an interpretation that Plaintiff was performing a contractual duty under the policy, and until the internal appeal was conducted and concluded, there was no "final decision" or "unequivocal denial" of the claim. (Prudential, supra, 51 Cal.3d 674, 689-690.) The claim was not being reconsidered or reopened, because the denial had never become final or unequivocal under the policy terms.
Moreover, the policy language also supports an interpretation, at least for purposes of analyzing these pleadings, that the "full and fair review" could take the form of what action the Insurer told the insured to take next, which theoretically could have included pursuing administrative review through the Department of Insurance. This claim arguably remained "open" during the appeal process. (Ashou, supra, 138 Cal.App.4th at pp. 765-766.) The policy includes notification to the insured of the address and phone number of the departments Consumer Communications Bureau, and ERISA claims procedures, and the Insurers internal claims process may be interpreted with those facts in mind, depending on the facts ultimately proven.
We are aware that Plaintiffs reply brief asserts that he could and would amend the pleading to successfully allege the limitations period had not run at the time he commenced the internal appeal process. We leave it up to the discretion of the trial court to entertain any such further application to amend. However, at this stage of the proceedings, we conclude Plaintiff has adequately set forth the facts and circumstances supporting his claim that equitable tolling applies, so that the cause of action for breach of the implied covenant of good faith and fair dealing is not, as a matter of law, subject to dismissal at this time on limitations grounds.
C. Further Analysis: Equitable Estoppel; Waiver
In Ashou, supra, 138 Cal.App.4th 748, 757-758, the appellate court distinguished between equitable tolling, a legal doctrine which comes into play "as a matter of law, by the simple fact of the insureds timely notice of claim to the insurer," and the closely related doctrines of waiver and estoppel. (Ibid.) Thus, if an insurer engages in conduct during the claims process that induces its policyholder not to file an action within the appropriate limitations period, such conduct can result in an estoppel: "[A]n insurer that leads its insured to believe that an amicable adjustment of the claim will be made, thus delaying the insureds suit, will be estopped from asserting a limitation defense. [Citations.]" (Prudential, supra, 51 Cal.3d 674, 690.)
Likewise, "[i]t is settled law that a waiver exists whenever an insurer intentionally relinquishes its right to rely on the limitations provision. [Citation.]" (Prudential, supra, 51 Cal.3d 674, 689.) Exceptions to the waiver and estoppel doctrines are made if the insurers conduct relied upon was carried out after the contractual limitations period had already run. (Id. at p. 690, fn. 5.)
Either of these alternative theories, waiver or estoppel, may become available to protect the insured in cases where fairness requires relief from the limitations bar, even if equitable tolling is not justified. (Singh, supra, 63 Cal.App.4th at p. 145.) However, both of those theories are fact-intensive, because they depend on proving the conduct of the party to be estopped or whose waiver might be found. Such factual issues are not resolved at the pleadings stage of the proceedings. However, those allegations have been adequately set out and are assumed to be true at this time, such that Plaintiff has made a sufficient showing to obtain writ relief in these respects. The trial court will be directed to overrule the demurrer to the claim for breach of the implied covenant, without prejudice to entertaining any further application to amend by the Plaintiff.
III
CAUSES OF ACTION FOR FRAUD AND MISREPRESENTATION
Causes of action for fraud and intentional misrepresentation are subject to particularly strict requirements of pleading. "`Every element of the cause of action for fraud must be alleged in the proper manner and the facts constituting the fraud must be alleged with sufficient specificity to allow defendant to understand fully the nature of the charge made. [Citation.]" (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.) A defendant is entitled to notice of the claims made, "`"and fairness to the defendant demands that he should receive the fullest possible details of the charge in order to prepare his defense. [Citation.] " (Ibid.) "This particularity requirement necessitates pleading facts which `show how, when, where, to whom, and by what means the representations were tendered. [Citation.]" (Ibid.) As referenced by the trial court in its ruling: "A plaintiffs burden in asserting a fraud claim against a corporate employer is even greater. In such a case, the plaintiff must `allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. [Citation.]" (Lazar, supra, 12 Cal.4th 631, 645.)
In Plaintiffs fourth cause of action for intentional misrepresentation, he alleges that through the policy "and at its inception," the Insurer made false representations that it would pay disability benefits, but the true facts were that Insurer did not intend to pay any such monies. Earlier in the complaint, and incorporated into the fraud claims, Plaintiff made admissions that he applied for and received benefits for disability between October 2001 and February 2002. In April and again in August, Plaintiff returned to work, but he then renewed his claim for disability benefits in September 2002. When the claim was denied in December of 2002, Insurer told Plaintiff about the additional review and appeal procedures available internally through the appeal unit, and through the state Department of Insurance, and Plaintiff complied, as required under the policy. The December 18, 2002 denial of benefits event is also alleged to be the date of discovery of the fraud. Plaintiff alleges he reasonably relied on representations that he would be paid benefits if he became disabled, and has sustained damage.
In his fifth cause of action for fraud, Plaintiff repeats those allegations and adds a theory that Insurer pursued a false and fraudulent scheme to limit its risk to paying claims while maximizing profits, through the issuance of disability insurance policies without any intent to pay benefits. He therefore alleges that Insurers employees were trained to terminate disability benefits if an employee were released to return to work, or if he returned to work even though he remained disabled. The December 18, 2002 date of denial of benefits under the policy is again alleged to be the date of discovery of the fraud. Reasonable reliance and damage are claimed, along with allegations of Plaintiffs efforts to pursue the appeal processes.
It is difficult to interpret these causes of action in light of the admissions they include that some benefits were paid for disability, such that at least some of the representations about coverage were not false. Plaintiff generally contends that he has provided the necessary specificity for the pleading of fraud, in terms of the policy language that promised to pay benefits, while claiming there was no intent to perform. (Civ. Code, § 1572.) He also relies on some kind of alleged representations, by someone, "at the inception of the policy," that payment would be made in the event of disability. He contends this satisfies the requirements of case law, that no circumstantial evidence need be alleged to justify an inference that a particular promise was made without an intent to perform, since those are evidentiary matters about what events gave rise to the alleged misrepresentations. (Universal Byproducts, Inc. v. City of Modesto (1974) 43 Cal.App.3d 145, 151.)
In its return, Insurer relies on Paulson v. State Farm Mut. Auto. Ins. Co. (1994) 867 F.Supp. 911, 920, as authority that facts about an insurers "mere denial of coverage will not suffice" for the pleading and proving of fraud. (Ibid.) Instead, "[t]he insured must show that the insurer did not intend to fulfill its obligations at the time the contract was entered into . . . . Proof indicative of fraud may come by inference from the circumstances surrounding the transaction, the relationship, and interest of the parties. [Citation.]" (Ibid.) The Insurer contends that it is entitled to specific pleading of what representations were made at the inception of the policy, apparently by its own representatives, that such benefits would be paid in the event of the applicable circumstances of Plaintiffs disability.
We agree. These fraud causes of action do not merely lack detailed evidentiary facts about what gave rise to the alleged misrepresentations. Plaintiff not only relies on the policy language, but also apparently seeks to hold Insurer responsible for fraudulent statements made by its representatives at the inception of the policy, and the Insurer is entitled to notice of those particular representations on which Plaintiff is relying. (Lazar, supra, 12 Cal.4th 631, 645 ["A plaintiffs burden in asserting a fraud claim against a corporate employer is even greater," requiring details such as authority to speak, what was said and when].) The current pleading of both the fourth and fifth causes of action fails to meet the specificity requirements for pleading intentional fraud. However, we believe from all the papers filed on appeal that Plaintiff may be able to add to the pleading the necessary specificity of facts, and therefore the trial court should have exercised its discretion to allow another opportunity to amend, as requested in the opposition to the demurrer.
IV
CAUSE OF ACTION FOR UNFAIR BUSINESS PRACTICES
To successfully plead a UCL cause of action, the plaintiff must allege facts justifying relief in the form of protecting the public from unfair business practices or deceptive advertising. (Day v. AT&T Corp. (1998) 63 Cal.App.4th 325, 331-332.) "`To state a cause of action under these statutes for injunctive relief, it is necessary only to show that "members of the public are likely to be deceived." [Citations.] [Citation.] Actual deception or confusion caused by misleading statements is not required. [Citation.] . . . Section 17200 has been interpreted broadly to bar all ongoing wrongful business activity, including misleading advertising, in whatever context it presents itself. [Citation.]" (Day, supra, at p. 332.)
In his sixth cause of action, for unfair competition and false advertising, Plaintiff contends that Insurer engaged in unfair business practices, by making representations that its disability policy offers rights and remedies that are not actually provided (citing to Civ. Code, § 1770, subd. (a)(14), in the CLRA). The same allegations are repeated from the earlier claims, that Insurers business practices unlawfully eliminate any actual liability or exposure under the policy, by denying benefits to disabled persons if they returned to work, even though the insured remained disabled. (Bus. & Prof. Code, §§ 17200, 17500.) Plaintiff is challenging Insurers requirement of a second eligibility waiting period as a condition of continued or renewed disability benefits. As relief, Plaintiff seeks damages, but makes no request for an injunction or restitution under the UCL. (Bus. & Prof. Code, §§ 17203, 17204.)
The type of protection of the public allowed in a successful UCL action may include "restitutionary and/or injunctive relief ([Bus. & Prof. Code,] § 17203) against a person or business entity who has engaged in `any unlawful, unfair or fraudulent business act or practice [or] unfair, deceptive, untrue or misleading advertising . . . . [Citation.]" (Quelimane, supra, 19 Cal.4th 26, 42.) Private rights of action for UCL damages are not allowed, as set forth in Feitelberg v. Credit Suisse First Boston, LLC (2005) 134 Cal.App.4th 997, 1012: "[O]nly two remedies are available to redress violations of the UCL: injunctive relief and restitution. [Citation.] Plaintiffs may `combat unfair competition by seeking an injunction against unfair business practices. Actual direct victims of unfair competition may obtain restitution as well. [Citation.] . . . [T]he statute provides, the remedies and penalties available under the UCL `are cumulative to each other and to the remedies or penalties available under all other laws of this state. [Citation.]"
Even though Plaintiff is not required to satisfy the stringent pleading requirements for common law fraud with respect to the UCL claim, and even though the prayer of a complaint is not controlling, his claim for relief under the UCL should encompass a basis for an award of remedies that are recognized under the UCL, and should also include appropriate allegations of standing to seek those remedies. (See Quelimane, supra, 19 Cal.4th 26, 42; Californians for Disability Rights v. Mervyns, LLC (2006) 39 Cal.4th 223.) Such remedies might include injunctive relief or restitution, but not individualized damages. Even if we assume these sparse factual allegations are true, we cannot say as a matter of law that all the requirements of pleading a UCL claim were met here, since there is no factual basis set forth to justify any relief in the form of the appropriate remedies.
Accordingly, although the ruling sustaining the demurrer was justified in part regarding these latter three causes of action, it represented an abuse of discretion by denying leave to amend regarding fraud, intentional misrepresentation, and the UCL. Plaintiff should be allowed an opportunity to amend to address the above concerns.
DISPOSITION
Let a writ of mandate issue ordering the superior court to: (1) vacate its orders sustaining the demurrers to all causes of action without leave to amend, and (2) enter new orders overruling the demurrer as to the third cause of action, and allowing leave to amend as to the fourth, fifth and sixth causes of action, and to allow such further proceedings as may be appropriate. Each party shall pay its own costs in this writ proceeding.
We concur:
NARES, J.
IRION, J.