Plaintiff Held to Lack UCL Standing to Sue Company That Allegedly Sold Insurance Without License
Wednesday, June 25, 2008 at 12:58PM Last week, the California Court of Appeal (4th App. Dist.) held that a plaintiff consumer lacked standing to bring a claim under California’s Unfair Competition Law against a company that allegedly sold insurance without a license. [Medina v. Safe-Guard Products Int’l, Inc., ___ Cal. App. 4th __ (June 19, 2008). A copy of that opinion is here.]
In Medina, the plaintiff purchased a tire and wheel agreement from the defendant. Plaintiff contended that the tire and wheel agreement and other insurance products were allegedly sold in California without prior approval of the Insurance Commissioner and a license. Based upon this alleged conduct, Plaintiff brought a class action claim under California's Unfair Competition law (the "UCL").
The trial court sustained the company's demurrer against Plaintiff’s UCL claim. In so doing, the trial court held that, even assuming that a license was required and not obtained by the defendant, the Plaintiff had suffered no injury in fact or lost any money or property as a result of the alleged conduct. The Court of Appeal agreed and affirmed.
In the first portion of the opinion, the Medina court debunked the plaintiff’s contention that an insurance contract sold without a license would be unenforceable by a consumer. [The plaintiff took this position to show that he was in fact harmed.] The Medina court held that an insurance contract sold by an unlicensed insurer would still be enforceable and, therefore, there is no "harm" as alleged by the plaintiff.
The Medina court further noted that the plaintiff did not allege any other harm. Specifically, the plaintiff did not contend “that he didn’t want wheel and tire coverage in the first place, or that he was given unsatisfactory service or has had a claim denied, or that he paid more for the coverage than what it was worth because of the unlicensed status” of the defendant.
Finally, the Medina court rejected plaintiff’s contention that the company’s conduct was “per se” unlawful and should be actionable under the UCL. As the Medina court correctly noted, “The point of the Proposition 64 amendment was to impose additional requirements on plaintiffs beyond merely having suffered an ‘unlawful, unfair or fraudulent business act or practice,’ namely, having lost money or property as a result of the act or practice.”
In terms of its significance for the industry, this opinion confirms that a UCL class action claim cannot simply be brought based upon an alleged noncompliance with a regulatory statute or regulation. To have standing to bring a UCL claim, a plaintiff have suffered some type of harm as a result of the alleged noncompliance.
[It is uncertain if plaintiff/appellant will petition the California Supreme Court for review. This matter is handled by our office and no notice of a petition has been served/filed as of the date of this post. This opinion becomes final 30 days from its issuance.]
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