Cal Insurance Regulation - Cal Insurance Regulation

Monday

22Feb2010

Obama Announces Proposal for Health Care System Overhaul

Monday, February 22, 2010 at 11:47AM

Obama revealed today his proposal for revamping the health care system. From a regulatory litigation standpoint, like Dave Jones' expected proposal for a bill in the California legislature, it calls for a review of premium rate increases, which could lead to more litigation and costs regarding rate increases. Obama's plan, however, calls for much more, such as providing subsidies to lower income people to buy insurance through state exchanges and restrict the ability of insures to deny coverage for pre-existing conditions. More details on the proposal can be found at the White House website (link here).

Spencer Y. Kook | Comments Off |

Health Insurance,

Prior Approval

Tuesday

16Feb2010

Dave Jones to Submit Health Insurance Rate Prior Approval Legislation

Tuesday, February 16, 2010 at 04:42PM

In 2007 and 2009, CA Assembly member Dave Jones (now running for the office of Insurance Commissioner) introduced proposed legislation to extend the prior approval rate requirements of Proposition 103 (which currently only applies to property and casualty insurance) to health insurance -- essentially meaning that health insurers would have to first obtain regulatory approval over new rates that they seek to charge.

Though these prior attempts were stalled in committee, Jones recently stated that he would re-introduce this proposed legislation later this month. The third time may be the charm as there is good reason to believe that this proposed legislation will have more legs this time around given the current climate and public ire over the cost of health insurance (not to mention the recent criticism of Anthem's proposed rate increase).

In a recent statement in sfgate.com (article here), Jones explains:

"Under my legislation, which I plan to reintroduce later this month, prior approval would have to be obtained before health insurance rates could be increased. HMOs and health insurers would need to receive approval from the Department of Managed Health Care or the Department of Insurance for proposed rate increases. Rates requiring approval would include premiums, co-payments, coinsurance obligations and deductibles. That also means that if the insurer changes the product - like increasing the deductible or changing the benefits provided - the insurer would need to seek approval for the change. Increases would be denied if deemed excessive or unfair."

The changes that Jones proposes appear to be in line with the latest iteration of his 2007 bill (AB 1554, found here) and 2009 bill (AB 1218, found here) which tracks much of the language created by Proposition 103. Not mentioned in his statement, but included in his last bill, are provisions to allow intervention by members of the general public and the awarding of advocacy fees to those acting in the interest of consumers who make a substantial contribution to any final order.

Spencer Y. Kook |

Insurance Caselaw Roundup (1/29/10)

Friday, January 29, 2010 at 04:03PM

[The following is a summary of recent insurance-related opinions issued in California.]

Independent subcontracting transportation company was not insured under general contractor’s trucker policy as subcontractor was not owner of “hired auto” covered under trucker policy. American Int’l Underwriters Ins. Co. v. American Gty. and Liability Ins. Co. (6^thCal. App. Dist., 1/28/10) (judgment for umbrella insurer for subcontractor company reversed based upon holding that subcontracting company was not insured under trucker policy and, therefore, umbrella insurer was not entitled to demand initial exhaustion of trucker policy’s limits). (This opinion is here.)

Liability from “fax blasting” claim not covered as “advertising injury” or “property damage.” State Farm Gen’l Ins. Co. v. JT’s Frames, Inc. (2^ndApp. Dist., Div. 4, 1/27/10) (claims arising from insured’s sending of tens of thousands of unsolicited fax advertisements in violation of consumer fraud law did not constitute “advertising injury” (because there was no invasion of privacy) or “property damage” (because the sending of tens of thousands of faxes over years was not damage caused by “accident”) under liability insurance policy.) (This opinion is here.)

Claim for building that was unintentionally built so as to encroach on adjoining property not covered under policy excluding coverage for nonaccidenal occurrences. Fire Ins. Exch. v. Sup. Ct. (4^thApp. Dist., 1/26/10) (“[b]uilding a structure that encroached onto another’s property is not an accident even if the owners acted in the good faith but mistaken belief that they were legally entitled to build where they did” and, therefore, not covered under homeowner’s policy that did not provide for coverage for non-accidental occurrences.) (This opinion is here.)

Insurer required “to notify its insured claimant of contractual limitations provisions and other policy provisions that may apply to the claim, regardless of whether the insured is represented by counsel.” Superior Dispatch, Inc. v. Ins. Corp. of New York (2^ndApp. Dist., Div. 3, 1/21/10) (This opinion is here.)

Claim by competitor against insured pre-paid phone card company for use of point-of-sale advertising that allegedly falsely marketed value provided by insured’s pre-paid cards not covered as “advertising injury” under CGL policy. Total Call Int’l, Inc. v. Peerless Ins. Co. (2^ndApp. Dist., Div. 4, 1/21/10). (This opinion is here.)

Claim for liability arising from negligent repair and service of bus seat restraint system resulting in death of driver of bus excluded under “products-completed operations hazard” exclusion. Baker v. Nat’l Interstate Ins. Co. (2^ndApp. Dist., Div. 8, 12/3/09). (This opinion is here.)

[Disclaimer: Please note that this post does not constitute legal advice and provides only the author's own snapshot view of the cited opinion. No warranties are made as to the accuracy of the author's view of the opinion or as to its legal effect (including, but not limited to, whether it may be subsequently modified, depublished, and/or overruled). The import and applicability of a cited opinion to an actual matter or case depends upon the specific facts presented and should be reviewed by an attorney. ]

Spencer Y. Kook | Comments Off |

Insurance Related Caselaw

Thursday

29Oct2009

Court of Appeal Issue Two Favorable Post-Tobacco II Opinions Affirming Denial of Class Certification Motions of Fraud-Based UCL Claims

Thursday, October 29, 2009 at 03:15PM

Kaldenbach v. Mutual of Omaha Life Ins. Co.

In Kaldenbach v. Mutual of Omaha Life Ins. Co., ___ Cal. App. 4^th ___ (4th Cal. App. Div. 3, Sep. 30, 2009) (order modified for publication on October 26, 2009), the Fourth Appellate District (Div. 3, Orange County) affirmed the trial court's denial of a motion for class certification of a UCL class action based upon the plaintiff's failure to submit evidence demonstrating predominating common questions.

The plaintiff sued under California's Unfair Competition Law ("UCL") on the ground that the defendant misled people into purchasing “vanishing-premium” life policies based on the “assertion [that the defendant] utilized uniform sales materials, training, and illustrations in marketing” these life policies. Despite the submission of multiple declarations in support of the motion by those who purchased these policies, the trial court found that “there was no evidence linking those common tools to what was actually said or demonstrated in any individual sales transaction.”

The Fourth Appellate District affirmed denial of certification under the UCL and distinguished the individualized nature of statements made in a face-to-face sales setting from those made in cases, such as In re Tobacco II Cases, 46 Cal. 4^th 298 (2009), where there is no dispute over what was and was not presented to the class. [Exh. A, pp. 20-23.] Further, the Kaldenbach court noted that:

“[S]eparate from whether any individual purchaser relied on alleged misrepresentations, or suffered injury as a result, here the determination of what business practices were allegedly unfair turns on individual issues. The trial court could properly conclude there was no showing of uniform conduct likely to mislead the entire class, and the viability of a UCL claim would turn on inquiry into the practices employed by any given independent agent – such as whether the agent involved in any given transaction took Mutual’s training and read Mutual’s manuals, used the training and materials in sales presentations, and what materials, disclosures, representations and explanations were given to any given purchaser. The trial court did not abuse its discretion in concluding those issues predominated and could not be proven on a class-wide basis.” [Opinion, p. 23.]

A copy of the opinion can be found here.

Cohen v. DirecTV Inc.

The Second Appellate District (Div. 8, Los Angeles) also recently affirmed the denial of another motion for class certification. In the Cohen case, a DirecTV subscriber sued the company for allegedly disseminating false advertisement to induce him and the putative class to purchase more expensive "high definition" or "HD" services, which were not allegedly provided.

In affirming the trial court's order, the Second Appellate District stated:

"The record supports the trial court's finding that common issue of fact do not predominate over the proposed class because the class would include subscribers who never saw DIRECTV advertisements or representations of any kind before deciding to purchase the company's HD services, and subscribers who only saw and/or relied upon advertisements that contained no mention of technical terms regarding bandwidth or pixels, and subscribers who purchased DIRECTV HD primarily based on word of mouth or because they saw DIRECTV's HD in a store or at a friend's or family member's home. In short, common issues of fact do not predominate over Cohen's proposed class because the members of the class stand in a myriad of different positions insofar as the essential allegation in the complaint is concerned, namely, that DIRECTV violated the CLRA and the UCL by inducing subscribers to purchase HD services with false advertising. [Opinion, pp. 13-14.]

In distinguishing its holding from In re Tobacco II Cases (which has been relied upon by the plaintiff's bar to contend that issues of "reliance" and "damages" are not relevant considerations for determining whether a UCL class should be certified), the Cohen court stated:

"The trial court correctly ruled that actual reliance must be established for an award of damages under the CLRA. [] Although the rules under the UCL may or may not be different following our Supreme Court‟s recent decision in In re Tobacco II Cases (2009) 46 Cal.4th 298 (Tobacco II), an issue which we address below, we do not understand the UCL to authorize an award for injunctive relief and/or restitution on behalf of a consumer who was never exposed in any way to an allegedly wrongful business practice. In other words, we find the trial court expressed a 'valid reason' for denying class certification when it examined the nature of the claims in Cohen's case, and juxtaposed those claims against the respective positions of the class members." [Opinion, p. 14.]
The Supreme Court‟s recent decision in Tobacco II, supra, 46 Cal.4th 298 does

Further, the Cohen court noted that:

"In the contextual setting presented by Cohen's present case, we find Tobacco II to be irrelevant because the issue of 'standing' simply is not the same thing as the issue of 'commonality.' Standing, generally speaking, is a matter addressed to the trial court's jurisdiction because a plaintiff who lacks standing cannot state a valid cause of action. [] Commonality, on the other hand, and in the context of the class certification issue, is a matter addressed to the practicalities and utilities of litigating a class action in the trial court. We see no language in Tobacco II which suggests to us that the Supreme Court intended our state's trial courts to dispatch with an examination of commonality when addressing a motion for class certification. On the contrary, the Supreme Court reiterated the requirements for maintenance of a class action, including (1) an ascertainable class and (2) a 'community of interests' shared by the class members. (Tobacco II, supra, 46 Cal.4th at pp. 312-313.) In short, the trial court's concerns that the UCL and the CLRA claims alleged by Cohen and the other class members would involve factual questions associated with their reliance on DIRECTV's alleged false representations was a proper criterion for the court's consideration when examining 'commonality' in the context of the subscribers' motion for class certification, even after Tobacco II." [Opinion, pp. 15-16.]

A copy of the Cohen decision can be found here.

[Disclaimer: Please note that this post does not constitute legal advice and provides only the author's own snapshot view of the cited opinion. No warranties are made as to the accuracy of the author's view of the opinion or as to its legal effect (including, but not limited to, whether it may be subsequently modified, depublished, and/or overruled). The import and applicability of a cited opinion to an actual matter or case depends upon the specific facts presented and should be reviewed by an attorney. ]

Spencer Y. Kook | Comments Off |

Class Action,

Unfair Business Practice Caselaw

Monday

24Aug2009

California Supreme Court Holds that Liability for Attorney Fees is NOT Included under the Made Whole Rule

Monday, August 24, 2009 at 06:07PM

In a decision issued today, the California Supreme Court put to rest the question of whether, in the automobile med-pay insurance context, attorney fees incurred by an insured to obtain a third-party recovery is taken into consideration in determining whether that insured has been "made-whole." The California Supreme Court held in the negative. Instead, those fees are subject to a separate equitable apportionment rule (the "common fund" doctrine).

In its conclusion, the California Supreme Court held:

"In light of the policy justifications underlying the made-whole rule and reimbursement principles generally, we conclude that 21st Century states the better case. The automobile liability insurance company has not been paid to bear responsibility for the entire amount of attorney fees and costs the insured needed to spend in order to recover damages. Instead, a pro rata apportionment rule for attorney fees here better allocates responsibility for attorney fees between the insured and the insurer. Quintana does not claim that 21st Century’s $1,000 payment was insufficient to discharge its obligations under the med-pay policy limit. Nor has she claimed that $400 was less than 21st Century’s pro rata share of the litigation costs, or asked for leave to amend should we affirm the Court of Appeal’s judgment. Therefore, by accepting the $600 as full reimbursement (and thus contributing $400 to Quintana’s attorney fees), 21st Century has properly discharged its obligation to pay its pro rata share of attorney fees and has ensured that Quintana has been made whole. In light of this conclusion, we affirm the Court of Appeal’s judgment."

A copy of the opinion can be found here.

Spencer Y. Kook | Comments Off |

Insurance Related Caselaw

Wednesday

19Aug2009

Second Appellate District Confirms that "Safe Harbor" Defense May Be Based upon Administrative Regulation

Wednesday, August 19, 2009 at 04:10PM

On August 19, 2009, the Second Appellate District (Div. 7) issued its decision (again, but in slightly augmented form) in Yabsley v. Cingular Wireless, LLC. This decision was originally issued in August 2008, but the court of appeal, on its own motion, ordered a rehearing to allow the Attorney General of California and District Attorney of Santa Barbara County (who had not received notice of the appeal) to weigh in.

While most of the decision is largely irrelevant to insurers, one portion is relevant as it relates to the scope of the "safe harbor" defense to actions brought against insurers under California's Unfair Competition Law.

Though there had been dicta in caselaw indicating that "safe harbor" could only be based upon statutes, the court in Yabsley held that the basis of such a defense was not so limited. Specifically, it held:

Relying on Krumme v. Mercury Ins. Co. (2004) 123 Cal.App.4th 924, Yabsley contends that statutes can provide a safe harbor, but administrative regulations cannot. In Krumme, the appellate court rejected an insurance company's argument that regulations adopted by the Insurance Commissioner provided a safe harbor. Citing Cel Tech as authority, the i court said in a footnote: "These materials are not germane to our analysis because our Supreme Court has held that only statutes can create a safe harbor." (Id. at p. 940, fn. 5.) Cel-Tech, however, dealt with statutes enacted by the Legislature and the safe harbor they created. There was no reference to regulations. Like the trial court here, we conclude that there is nothing in the Cel-Tech decision purporting to limit the safe harbor doctrine to statutes enacted by the Legislature.

...

The status of regulations promulgated by the Board was described by our Supreme Court[] "[R]egulations adopted by an agency to which the Legislature has confided the power to 'make law,' and which, if authorized by the enabling legislation, bind this and other courts as firmly as statutes themselves . . . ." The rule that valid administrative regulations have the force and effect of law has been reiterated in dozens of California cases. [].

As the Yabsley court noted, "[b]ecause agencies granted such substantive rulemaking power are truly 'making law,' their quasi-legislative rules have the dignity of statutes..." They have the "'force and effect' and the 'dignity' of a statute" and, therefore, may provide a basis for safe harbor.

Why is this important for insurance litigation? Well, insurers are one of the most heavily regulated industries in the State of California. Many of the actions taken by insurers are pursuant to command or permission by way of regulation. To the extent that the industry can now rely upon regulations, as well as statutes, to demonstrate that they have been engaged in lawfully permitted conduct, the industry has a greater base upon which it can set forth a "safe-harbor" doctrine defense.

A copy of the opinion can be found here.

[Disclaimer: Please note that this post does not constitute legal advice and provides only the author's own snapshot view of the cited opinion. No warranties are made as to the accuracy of the author's view of the opinion or as to its legal effect (including, but not limited to, whether it may be subsequently modified, depublished, and/or overruled). The import and applicability of a cited opinion to an actual matter or casedepends upon the specific facts presented and should be reviewed by an attorney. ]

Spencer Y. Kook | Comments Off |

Unfair Business Practice Caselaw

Tuesday

04Aug2009

ACIC Annual General Counsel Conference this Week

Tuesday, August 4, 2009 at 01:31PM

The Association of California Insurance Companies' Annual General Counsel Conference will be in Las Vegas this Wednesday through Friday (Aug 5-7) at the Encore Hotel. We will be there and our office is hosting one of the receptions.

I, along with Kent Keller and Rick De La Mora of my office, will be speaking on one of the panels dealing with "The Impact of Proposition 64 on Class Actions against Insurance Companies." Hope to see some of you there.

Spencer Y. Kook | Comments Off |