"He believes that additional bureaucracy envisioned in the bill doesn’t deal with the fundamental problem of health care — rising medical costs. Steve is committed to lowering healthcare costs, but President Obama demonstrated with his healthcare bill that he is not the least bit interested in lowering healthcare costs for consumers,” Agen said in an e-mailed reply to my query."

“Steve wants greater choice and competition in the healthcare marketplace through measures like reducing the number of mandates, increasing the use of electronic medical records, and giving consumers the freedom to purchase health insurance across state lines. He believes measures such as these, rather than more government incursion into our healthcare system, will make healthcare more affordable for California’s citizens.”

[Link to article/post here.]

This position is not in line with the Consumer Watchdog organization, which strongly supports prior approval of health insurance rates, but certainly consistent with Poizner's gubernatorial campaign platform.

[By Richard G. De la Mora: For original post, please go here.]

Having unsuccessfully urged Congress to impose a national freeze on health insurance rates, Harvey Rosenfield has refocused his efforts on the California legislature and AB 2578.

Who is Harvey Rosenfield? He is, in his own words, the “author of California’s landmark property-casualty insurance rate regulation Proposition 103 – recognized as the most successful rate regulation in the country.” In fact, AB 2578, which cleared Assembly Health Committee earlier this week, includes the following provisions modeled closely on Proposition 103:

• A requirement that all rates and rate changes be filed with and approved by the Department of Insurance or Department of Managed Health Care before they go into effect;

• A prohibition on the use or approval of rates that are “excessive, inadequate, or unfairly discriminatory”;

• A right for consumer advocates to request a hearing on a rate application, and a requirement that a hearing be granted whenever the rate increase sought exceeds 7%.

Finally, Mr. Rosenfield has made sure that he and his friends in the consumer advocacy industry are taken care of by advocating a provision requiring health plans to pay the consumer advocacy fees associated with fighting the health plan’s rate application.    

We have seen this played out before, as our firm has represented property-casualty insurers in administrative and judicial matters involving insurance rates regulated under Proposition 103 since 1989.

While property-casualty insurers have had plenty of time to adjust to the dictates of rate regulation, health plans will face a steep learning curve if AB 2578 becomes law. 

We are hopeful that this legislation will not become law. Even if it does, AB 2578 will likely face legal challenges and hurdles as did Proposition 103.

From our experience, we learned some of those challenges will be more successful than others. Nevertheless, if rate regulation comes to pass, a company’s goals can still be achieved provided that it has a complete understanding of the proposed regulatory system, plans ahead, has input into the development of regulations, and prepares itself for life after the system is implemented.

Barger & Wolenwill continue to keep our clients and friends apprised on new issues pertaining to AB 2578 via the firm’s Insurance Litigation & Regulatory Law Blog and the Life, Health & Disability Law Blog (as well as this blog). If you would like to be notified about upcoming events and seminars pertaining to AB 2578 and other issues, please subscribe to our firm blog via the RSS feed or send us your email so we can sign you up for alerts.

For instance, who first came up with the continuous coverage discount? 

Well, if you ask a former Division Chief of Rate Regulation and Deputy Commissioner of Rate Regulation of the California Department of Insurance ("CDI"), the CDI did. 

In a declaration filed in connection with the Proposition 17 ballot litigation, the former chief and deputy commissioner stated:

"In early 1994, during the course of a Field Rating and Underwriting Bureau examination of a large market share insurer, I was contacted by the Bureau Chief for the Field Rating and Underwriting Bureau who indicated that the rate analyst conducting the examination determined that the insurer's persistency discount rule may be unfairly discriminatory and in violation of Insurance Code section 1861.05(a).  The rate analyst claimed that there should be no difference between an existing policyholder who receives a persistency discount and a new policyholder with verifiable existing insurance experience with a different insurer.  In other words, the existing insurance experience should be 'portable' and considered by a different insurer ('portable persistency').  I concurred with this analysis."

"A review of the automobile rating factors reflected that persistency is the only rating factor that makes a distinction between existing and new policyholders which we felt was unfairly discriminatory.  In addition there was a public policy component to our decision as well.  If other companies were to adopt a portable persistency interpretation, it potentially could help reduce insurance premiums for the vast majority of drivers in [] California since roughly three out of four drivers in the State have existing automobile insurance.  Consumers would be more inclined to shop for insurance if they knew that they would not lose their persistency discount by moving to another insurer."

"Following a number of discussions with this larger market share insurer, at our instruction it added portable persistency to its class plan.  Its class plan was then approved in 1995."

"As the foregoing reflects, the concept of a portable persistency discount was initially the Department's idea.  The Department subsequently approved the adopting of such a persistency discount in 1995."

[Emphases added.]

While the CDI's currently stated position on Proposition 17 might be characterized as equanimous, the CDI apparently had a much stronger opinion on this discount and even considered the existence of this discount to be good for California consumers. 

[A copy of the court filed declaration can be found here.]

It appears that the process toward adopting this bill may move quickly as it was announced today in the LA Times that the bill "sailed through" the Assembly's Health Committee (link here).  Of course, the Consumer Watchdog organization has a blurb on this issue as well (link here). 

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.

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. ]

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. ]

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.

[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. ]