The thrust of the new blog is as follows:
Barger & Wolen’s Insurance Litigation and Regulatory Law Blog provides coverage on insurance industry related case law, regulation and legislation at both the national and state level, with an emphasis on California law and federal cases applying California law. We also report on those news events and other happenings that impact or are of interest to the insurance industry.
You might say that this statement sounds a whole like this blog's Mission Statement. Well, you might say that it says the same exact thing! Well, you would be right. So, what does that mean for this blog?
The answer is, "NOT A THING." There's a lot that needs to be covered in Insurance Litigation and Regulatory World and no one blog will do. (Besides, there's nothing like a little bit of competition to make sure you get the best information.) Also, as you may have notice over time, this blog has also had a special emphasis on(1) regulatory administrative proceedings (such as rate hearings and noncompliance or order to show cause proceedings) and (2) unfair business practice and class action defense law, which are a significant focus of our practice. Accordingly, there will not be a whole lot of overlap. Finally, to ensure you get the best of both worlds, to the extent that the new blog addresses issues that are not covered here, we'll make sure to post links to those posts on this blog.
So stay tuned. Also, to the extent you are interested, it should also be noted that Barger & Wolen has two other fantastic blogs, which are:
The Life Health and Disability Blog
www.lifehealthdisabilityinsurancelaw.com
The Litigation Management Blog
www.litigationmanagementblog.com
]]>One of the summarized recommendations in the attachment is as follows:
"H. Enhance Oversight of the Insurance Sector
Our legislation will propose the establishment of the Office of National within Treasury to gather information, develop expertise, negotiate international agreements, and coordinate policy in the insurance sector. Treasury will proposals to modernize and improve our system of insurance regulation accordance with six principles outlined in the body of the report."
In terms of providing guidance on what the Treasury will consider in improving insurance regulation, the plan sets forth the following six principles:
"1. Effective systemic risk regulation with respect to insurance. The steps proposed in this report, if enacted, will address systemic risks posed to the financial system by the insurance industry. However, if additional insurance regulation would to further reduce systemic risk or would increase integration into the new regulatory regime, we will consider those changes.
2. Strong capital standards and an appropriate match between capital allocation and liabilities for all insurance companies. Although the current crisis did not stem from widespread problems in the insurance industry, the crisis did make clear the importance of adequate capital standards and a strong capital position all financial firms. Any insurance regulatory regime should include strong capital standards and appropriate risk management, including the management of liquidity and duration risk.
3. Meaningful and consistent consumer protection for insurance products and practices. While many states have enacted strong consumer protections in the insurance marketplace, protections vary widely among states. Any new insurance regulatory regime should enhance consumer protections and address any gaps problems that exist under the current system, including the regulation of producers of insurance. Further, any changes to the insurance regulatory system that would weaken or undermine important consumer protections are unacceptable.
4. Increased national uniformity through either a federal charter or effective action by the states. Our current insurance regulatory system is highly fragmented, inconsistent, and inefficient. While some steps have been taken to increase uniformity, they have been insufficient. As a result there remain tremendous differences in regulatory adequacy and consumer protection among the states. Increased consistency in the regulatory treatment of insurance – including strong capital standards and consumer protections – should enhance financial stability, increase economic efficiency and result in real improvements for consumers.
5. Improve and broaden the regulation of insurance companies and affiliates on a consolidated basis, including those affiliates outside of the traditional insurance business. As we saw with respect to AIG, the problems of associated affiliates outside of a consolidated insurance company’s traditional insurance business can grow to threaten the solvency of the underlying insurance company and the economy. Any new regulatory regime must address the current gaps in insurance holding company regulation.
6. International coordination. Improvements to our system of insurance regulation should satisfy existing international frameworks, enhance the international competitiveness of the American insurance industry, and expand opportunities for the insurance industry to export its services."
]]>In other words, Safeco stands for the proposition that attorneys and their clients may maintain an action and use the litigation process to attempt to locate actual appropriate plaintiff clients to continue an action that was not properly maintained in the first instance.
The Petition for Review seeking review of this issue was filed on June 8th. [A copy of the PFR is here.]
As argued in the Petition, the Safeco decision is at odds with California law and class action principles. This holding conflicts with basic jurisdictional issues that require standing at all times during a case. This holding also conflicts with federal class action principles that require the flat dismissal of class actions where the plaintiff lacks original standing. Finally, and most importantly, this holding conflicts with Proposition 64 that the California electorate strongly approved, which expressly imposed "injury-in-fact" standing requirements under the UCL that were intended to put an end to UCL lawsuits brought by uninjured plaintiffs.
Critically, as the California Supreme Court recognized:
“[T]he intent of California voters in enacting Proposition 64 was to limit [] abuses by ‘prohibit[ing] private attorneys from filing lawsuits for unfair competition where they have no client who has been injured in fact.’”
Californians for Disability Rights v. Mervyn’s, LLC, 39 Cal. 4th 223, 228 (2006).
As also argued in the Petition for Review, "[t]o permit a plaintiff with no standing to use the discovery process to continue an action that should not have proceeded in the first instance under Proposition 64 is to give no effect to the voters’ intent at all. Under the Opinion, attorneys and consumer organizations have little reason not to use “placeholder” plaintiffs to initiate a UCL action to “shakedown” businesses. Attorneys can proceed with the knowledge that the discovery process will be available to them to find an actual injured client or, at a minimum, that the threat of such discovery can be used as leverage for settlement and that the costs of such discovery can be levied on a defendant for months before a summary judgment motion disposing of standing can even be heard. This is precisely the type of abuse that the California electorate expressly intended to stop in adopting Proposition 64."
[For updates on this Petition, please refer back to this post as I will be updating it with amicus letters and briefs that are filed.]
]]>Holding particular insured that leased commercial trailers was "engaged in the business of renting or leasing motor vehicles without operators" under former version of Insurance Code section 11580.9(b): Sentry Select Ins. Co. v. Fidelity Gty. ins. Co., __ Cal. 4th ___ (Cal. 5/4/09). [Note: Limited precedential value in light of 2006 amendment of Section 11580.9(b).] (This opinion is here.)
Homeowner claim correctly denied based upon corrosion and water seepage exclusions: Freedman v. State Farm ins. Co., ___ Cal. App. 4th ___ (2nd App. Dist. 5/5/09): Court of Appeal affirmed grant of summary judgment in favor of insurer based upon efficient proximate causation analysis employed in Julian v. Hartford Underwriters Ins. Co., 35 Cal. 4th 747 (2005). (This opinion is here.)
Affirming grant of motion to quash service of summons and complaint: Elkman v. National States Ins. Co., __ Cal. App. __ (3rd App. Dist. 5/14/09): Held that long term care insurance provider, which was a Missouri corporation, which sold policy to insured in Florida, and receives premiums from California and process and pays claims submitted by insureds in California, did not subject itself either to general or specific jurisdiction in California. (This opinion is here.)
Holding that contractor was entitled to payments owed under subcontractor's bond and that existence of contractor's own bond with same surety irrelevant to determining amount owed under subcontractor's bond: First Nat'l Ins. Co. v. Cam Painting, Inc., __ Cal. App. 4th __ (2nd App. Dist. 5/15/09). (This Opinion is here.)
Enhanced remedies under Civil Code Section 3345 held available in connection with private action under California's Unfair Competition Law (Cal. Bus. & Prof. Code 17200): Clark v. Superior Ct., __ Cal. App. __ (2nd App. Dist. 5/21/09). (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. ]
]]>In this matter, the California Supreme Court answered two questions:
"First, who in a UCL class action must comply with Proposition 64's standing requirements, the class representatives or all unnamed class members, in order for the class action to proceed?"
"Second, what is the causation requirement for purposes of establishing standing under the UCL, and in particular what is the meaning of the phrase 'as a result of' in section 17204?"
In response to the first question, the California Supreme Court held that the standing requirements of Proposition 64 only to class representatives and not absent class members.
In response to the second question, the California Supreme Court held that "a class representative proceeding on a claim of misrepresentation as the basis of her or her UCL action must demonstrate actual reliance on the allegedly deceptive or misleading statements, in accordance with well-settled principles regarding the element of reliance in ordinary fraud actions." The court also held that "[t]hose same principles .. do not require the class representative to plead or prove an unrealistic degree of specificity that the plaintiff relied on particular advertisements or statements when the unfair practice is a fraudulent advertising campaign."
The upshot of this decision? Arguably, individuals who would not have standing to obtain restitution as a named plaintiff under the UCL, can now obtain that recovery as an unnamed class member.
While the California Supreme Court notes that the voters' intent behind Proposition 64 would not be served by requiring putative UCL class members to show that they have suffered the same injury-in-fact requirements as a named plaintiff, it remains the case that an enterprising lawyer and plaintiff can nevertheless bring "shakedown" lawsuits on behalf of uninjured plaintiffs that that clog the courts, cost taxpayers and threaten the survival of small businesses, which were meant to be curbed by Proposition 64.
The following are some of the more salient excepts from the majority and dissent (with some of my preliminary editorial comment).
"Section 17204 now provides in pertinent part: “Actions for relief pursuant to this chapter shall be prosecuted exclusively in a court of competent jurisdiction by the Attorney General or a district attorney or by a county counsel . . . [or] city attorney . . . [or] city prosecutor . . . or upon the complaint of a board, officer, person, corporation, or association, or by a person who has suffered injury in fact and has lost money or property as a result of the unfair competition.” Section 17203 — the statute authorizing representative actions — states in part:“Any person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of Section 17204 and complies with Section 382 of the Code of Civil Procedure, but these limitations do not apply to claims brought under this chapter by the Attorney General, or any district attorney, county counsel, city attorney, or city prosecutor in this state.”
"Notably, the references in section 17203 to one who wishes to pursue UCL claims on behalf of others are in the singular; that is, the “person” and the “claimant” who pursues such claims must meet the standing requirements of section 17204 and comply with Code of Civil Procedure section 382. The conclusion that must be drawn from these words is that only this individual — the representative plaintiff — is required to meet the standing requirements."
Comment: This statement is interesting. While it is true that the individual must meet the standing requirements, he is also expressly required to comply with section 382 under Proposition 64, which has traditionally been determined to require the satisfaction of class certification requirements, including demonstrating "typicality" of an individual's claim to the class as well as predominating common questions.
"Notably absent from the ballot materials is any indication that the purpose of the initiative was to alter the way in which class actions operate in the context of the UCL. Indeed, other than the requirement that the representative plaintiff comply with Code of Civil Procedure section 382, the ballot materials contain no reference whatsoever to class actions nor is there any indication that Proposition 64 was intended in any way to alter the rules surrounding class action certification. Those rules do not require that unnamed class members establish standing but, insofar as standing is concerned, focus on the class representative."
Comment: By making this comment, the high court would appear to indicate that class actions operate differently in the UCL context and that the named UCL class representative need not demonstrate that existence of class certification requirements (such as typicality and predominating common questions). This comment is curious in light of Chief Justice George's (who, albeit, recused himself from this decision) and associate Justices Kennard's and Werdergar's questions in the recent Amalgamated argument highlighting the fact that Proposition 64's voter information guide expressly advised voters that Prop 64 would require compliance with procedural requirements of class action.
"To conclude: (1) there is nothing in the express language of Proposition 64 that purports to alter accepted principles of class action procedure that treat the issue of standing as referring only to the class representative and not the absent class members; (2) nor is there any indication in the ballot pamphlet materials that would have alerted the voters that such alteration in class action procedure was an intended result of passage of the initiative; (3) imposing such a novel requirement is not necessary to remedy the specific abuse of the UCL at which Proposition 64 was directed; (4) but, on the other hand, imposing this unprecedented requirement would undermine the guarantee made by Proposition 64’s proponents that the initiative would not undermine the efficacy of the UCL as a means of protecting consumer rights, because requiring all unnamed members of a class action to individually establish standing would effectively eliminate the class action lawsuit as a vehicle for the vindication of such rights; and (5) the remedies provision of UCL, left unchanged by Proposition 64, offers additional support for the conclusion that the initiative was not intended to have any effect at all on unnamed members of UCL class actions."
From the dissent, here are some choice selections:
"[] I respectfully disagree with the majority insofar as it concludes that unnamed class members in a private UCL class action need not meet the injury-in-fact and causation requirements of Proposition 64. In this UCL suit alleging that tobacco companies engaged in false advertising about the health risks of their products, the majority applies its mistaken holding to conclude, in effect, that so long as the named plaintiffs actually relied on the allegedly deceptive advertising claims when buying and smoking cigarettes, they may seek injunctive and restitutionary relief on behalf of all California smokers who simply saw or heard such ads during the period at issue, regardless of whether false claims contained in those ads had anything to do with any class member’s decision to buy and smoke cigarettes."
* * *
"Ascertainability and typicality both require that members of a certified class themselves have causes of action against the defendant. Courts, state and federal, repeatedly have stressed that the definition of a class cannot be so broad as to include persons who would lack standing to bring suit in their own names."
* * *
"The majority’s reasoning contains an even more fundamental flaw. As explained above, under the majority’s construction of Proposition 64, a person may be a party to a UCL private representative action as a class member even though he or she could not sue in his or her own name. Thus, an individual whose personal effort to bring a UCL action failed because he or she could not demonstrate any personal injury or loss caused by the unfair practice may simply join, as an uninjured class member, in an identical class action brought by another named plaintiff who does meet the minimal injury-in-fact and causation requirements. Again, this cannot be what the electorate intended to achieve by enacting Proposition 64."
A copy of the decision can be found here.
]]>In coming to this conclusion, the California Supreme Court held that the salient provisions of the CLRA were unambiguous and that "insurance" was neither a "good" (which is defined as "tangible chattel[] bought or leased for use primarily for personal, family, or household purposes...") nor a "service" (which is defined as "work, labor, and services for other than a commercial or business use, including services furnished in connection with the sale or repair of goods").
Though it remarked that there was no need to look at the legislative history, the California Supreme Court held that the history confirmed its conclusion. Specifically, the model law from which the California legislature largely adapted for drafting the CLRA, expressly defined "service" to include "insurance." The fact that "insurance" was expressly excluded from the definition of "service" under the CLRA reflected a strong legislative intent to exclude "insurance" from the reach of the CLRA.
[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 guarantees 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. ]
The California Supreme Court also rejected the argument that "services" are provided in connection with the sale of insurance and processing claims and that these "services" can be regulated under the CLRA. In rejecting this argument, the court stated the following:
"As Farmers points out, ancillary services are provided by the sellers of virtually all intangible goods — investment securities, bank deposit accounts and loans, and so forth. The sellers of virtually all these intangible items assist prospective customers in selecting products that suit their needs, and they often provide additional customer services related to the maintenance, value, use, redemption, resale, or repayment of the intangible item. Using the existence of these ancillary services to bring intangible goods within the coverage of the Consumers Legal Remedies Act would defeat the apparent legislative intent in limiting the definition of “goods” to include only “tangible chattels.” (Civ. Code, §1761, subd. (a).) We conclude, accordingly, that the ancillary services that insurers provide to actual and prospective purchasers of life insurance do not bring the policies within the coverage of the Consumers Legal Remedies Act."
The case should be of some assistance to those in the industry who are presently dealing with CLRA's class claims, although it is unlikely that it will be completely dispositive of most cases as most actions brought under the CLRA, would have been coupled with other claims, including one brought under California's Unfair Competition Law. Nevertheless, this decision should finally serve as a robust obstacle to the plaintiff's bar continuous reliance upon the CLRA to regulate insurer conduct.
[A copy of the opinion is here.]
]]>Claims administrator determined to owe duty to excess carrier for negligent mishandling of workers' compensation claim: Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Cambridge Intergrated Serv. Grp, Inc., 171 Cal. App. 4th 35 (2009): The claims administrator for insured bank settled a workers’ compensation claim and authorized surgery that was not recommended by its own expert. As a result of complications from surgery, the bank employee became a paraplegic. In a lawsuit initiated by the excess carrier against the claims administrator, the excess carrier sued on theories of negligence, equitable subrogation, and breach of contract. The court found that the claims administrator owed a duty of care to the bank’s excess carrier that was derivative of its duty to reasonably handle claims owed to the bank. The court rejected the argument that because the bank owed no duty to its excess carrier, the bank’s claims administrator owes no duty to the excess carrier. (Opinion here.)
Intervening Factors Held to Preclude Application of Motor Vehicle Exclusion: Safeco Ins. Co. of America v. Parks, 170 Cal. App. 4th 992 (2009): Insured’s renter’s policy contained the following exclusion for damages “arising out of the ownership, maintenance, use, loading or unloading of:...[¶] motor vehicles...owned or operated by or rented or loaned to an insured.” Insured’s negligent driving of vehicle caused insured and claimant to get a ride in another vehicle, wherein claimant was subsequently abandoned on the roadside. Thereafter, claimant was struck by a passing car after walking over a mile on the roadside. Insured’s negligent driving was not casually connected to claimant’s eventual injuries which were too far attenuated from insured’s negligence. Thus, the motor vehicle exclusion did not bar coverage. (Opinion here.)
Disclaimers for Vanishing Premium Life Insurance Policies Determined Insufficient: Broberg v. The Guardian Life Ins. Co. of America, 171 Cal. App. 4th 912 (2009): Insurer’s sales brochure for insured stated that premiums would “vanish” for the 12th year of the policy’s life. The brochure contained disclaimers that the figures were only neither estimated or guaranteed, and that actual future dividends depend on the company’s actual future experience. The trial court found that this disclaimer was sufficient. The appellate court held that it was a question of fact of whether or not the insured, in light of the disclaimers, could justifiably rely on the vanishing premium representation. The court noted that at the very least, the disclaimer language was not conspicuous and thus the issue could not be decided as a matter of law. (Opinion here.)
[Submitted by Guest Contributor: Peter Sindhuphak of Barger & Wolen LLP.]
[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 guarantees 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. ]
]]>Reversal of Judgment in Favor of Insurer Based upon Pollution Exclusion: State of California v. Allstate Insurance Company, ___ Cal. ___ (Supreme Court, 3/9/09): Affirmed in part, reversed in part, judgment of Court of Appeal which reversed trial court’s grant of insurers’ motions for summary judgment based upon policy pollution exclusions. Action dealing with liability of State for remediation costs arising from chemical pollution overflow from State –designed and –operated hazardous waste disposal facility. (The opinion is here.)
Insurer Held Liable for Underlying Judgment Even Though Insurer Had No Contractual Duty to Defend: Executive Risk Indemnity Inc. v. Jones, ___ Cal. App. 4th ___ (1st App. Dist, 2/20/09): Reversing trial court’s judgment in favor of insurer. Held that “when an insurer (1) is duly notified of the underlying claim against its insured; and (2) is given a full opportunity to protect its interests, the resulting judgment – if obtained without fraud or collusion – is binding against the insurer in any later coverage litigation on the claim involving its insured” – even though the insurer issued an indemnity-only policy and had no contractual duty to defend the underlying action. (The opinion is here.)
Members of LLC Were Not "Insureds," By Operation of Law, Since Property Held by Insured LLC Was Transferred by Grant Deed, Not Dissolution of LLC: Kwok v. Transnation Title Insurance Company, ___ Cal. App. 4th ___ (2nd App. Dist., 2/10/09): Affirming insurer’s motion for summary judgment on ground that plaintiffs (who were the only members of the LLC who was designated as “insured” under CLTA Standard Coverage policy of Title Insurance) were not insureds and they did not become “insureds” “by operation of law” since insured house was given to member plaintiffs by grant deed prior to dissolution of the LLC. (“[C]overage did not continue because title to the property did not devolve to appellants as members of the LLC on dissolution of the LLC, but rather was transferred by deed from the named insured to appellants as trustees of their family trust, a totally separate legally entity.”)(The 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. ]
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