TABLE OF CONTENTS
TABLE OF AUTHORITIES iii
AMICUS CURIAE BRIEF 1
INTRODUCTION & SUMMARY OF DISCUSSION 1
DISCUSSION 4
I. THE COURT OF APPEAL’S POLICY CONCERNS ARE UNFOUNDED. 4
A. Prior to Proposition 103, the Insurance Commissioner Had “Exclusive Jurisdiction” Over Challenges to Insurance Company Acts and Practices. 6
B. Proposition 103 Established a Dual Enforcement System and Eliminated the Commissioner’s Exclusive Jurisdiction over Violations of the Insurance Code. 7
C. The Insurance Commissioner Has Continuously Embraced Private Enforcement of the Insurance Code As Essential to Fulfilling Its Statutory Responsibilities under Proposition 103. 9
II. MORADI-SHALAL AND RELATED CASES REJECTING AN IMPLIED PRIVATE RIGHT OF ACTION UNDER THE UIPA HAVE NO BEARING ON THIS CASE. 17
A. In Moradi-Shalal, This Court Applied Statutory Construction Principles to Determine Whether A Private Right of Action Can Be Implied From A Statute. 18
B. Manufacturers Life Rejected the Construction of Moradi-Shalal and the UIPA Adopted by the Court
Below. 19
C. Moradi-Shalal Did Not Establish a Special Presumption Against Private Rights of Action………..…26
III. POLICY CONSIDERATIONS WEIGH IN FAVOR OF THE APPLICATION OF THE CLRA TO INSURANCE. 29
CONCLUSION 31
TABLE OF AUTHORITIES
Cases
20th Century Ins. Co. v. Garamendi (1994)
8 Cal.4th 216 6, 16
AICCO, Inc. v. Insurance Company of North America (2001)
90 Cal.App.4th 579 25
Amador Valley Joint Union High School Dist. v. State Bd. of Education (1978)
22 Cal.3d 208 31
Amwest Surety Ins. Co. v. Wilson (1995)
11 Cal.4th 1243 6, 16
Burlington Northern and Santa Fe Railway Co v. Public Utilities Commission (2003)
112 Cal.App.4th 881 24
Calfarm Ins. Co. v. Deukmejian (1989)
48 Cal.3d 805 7, 16, 30
Cel-Tech Communications, Inc. v. Los Angeles Cellular Tel. Co. (1999)
20 Cal.4th 163 26, 27
Crusader Insurance Co. v. Scottsdale Insurance Co. (1997)
54 Cal.App.4th 121 19
Day v. City of Fontana (2001)
25 Cal.4th 268 4
Delaney v. Superior Court (1990)
50 Cal.3d 785 4
Donabedian v. Mercury Ins. Co. (2004)
116 Cal.App.4th 968 7, 8, 12, 13, 14, 15, 28, 30
Fairbanks v. Superior Court (2007)
154 Cal.App.4th 435 4, 17, 22, 23, 26
Farmers Ins. Exchange v. Superior Court (1992)
2Cal.4th 377 8, 10, 16, 17, 26, 30
Farmers Insurance Exchange v. Superior Court (2006)
137 Cal.App.4th 842 13, 14, 15, 17, 29, 28
Fireman’s Fund Ins. Co. v. Garamendi (1992)
790 F.Supp. 938 16
Karlin v. Zalta (1984)
154 Cal.App.3d 953 7
King v. Meese (1987)
43 Cal.3d 1217 6, 7, 32
Legislature of the State of California v. Eu (1991)
54 Cal.3d 492 31
Lockard v. City of Los Angeles (1949)
33 Cal.2d 453 32
Maricela C. v. Superior Court (1998)
66 Cal.App.4th 1138 4
Maler v. Superior Court (1990)
220 Cal.App.3d 1592 19
Manufacturers Life Ins. Co. v. Superior Court (1995)
10 Cal.4th 257 passim
Mehdizadeh (2004)
105 Cal.App.4th 995 27
Moradi-Shalal v. Fireman’s Fund Insurance Cos. (1988)
46 Cal.3d 287 passim
People v. Bustamante (1997)
57 Cal.App.4th 693 24
Quelimane Company, Inc. v. Stewart Title Guaranty Company (1998)
19 Cal.4th 26 24, 26
Santa Monica Beach v. Superior Court (1999)
19 Cal.4th 952 32
State Compensation Insurance Fund v. Superior Court (2001)
24 Cal.4th 930 6
State Farm Mutual Automobile Ins. Co. v. Garamendi (2004)
32 Cal.4th 1029 16
Textron Financial Corp. v. National Union Fire Ins. Co. (2004)
118 Cal.App.4th 1061 25, 26
Vikco Insurance Services, Inc. v. Ohio Indemnity Co. (1999)
70 Cal.App.4th 55 18
Zephyr Park v. Superior Court (1989)
213 Cal.App.3d 833 18
Statutes
Bus. & Prof. Code § 16720 20
Bus. & Prof. Code §§ 16720-16770 19
Bus. & Prof. Code § 17200 et seq. 7
Bus. & Prof. Code § 17205 21
Civ. Code § 1457 25
Civ. Code § 1752 21
Civ. Code §§ 1754-1755 31
Civ. Code § 1780(a)(1) 23
Civ. Code § 1780(a)(3) 23
Civ. Code § 1780(a)(4) 23
Civ. Code § 1780(a)(5) 23
Civ. Code § 1780(b) 23
Code of Civ. Proc. § 1094.5 7
Gov. Code § 11500 23
Ins. Code § 790.04 et seq 23
Ins. Code § 790.09 22, 23
Ins. Code §§ 1858 through 1859.1 7
Ins. Code § 1861.03(a) 3, 29, 30, 31
Ins. Code § 1861.10(a) 19
Ins. Code §§ 1861.03(a) and 1861.10(a) 8
i
AMICUS CURIAE BRIEF
INTRODUCTION & SUMMARY OF DISCUSSION
Consumer Watchdog submits this amicus curiae brief specifically to address the “policy considerations” that figure so prominently in the opinion below.[1]
According to the Court of Appeal, where two enforcement mechanisms operate concurrently – even where, as here, the challenged conduct would be considered unlawful under both – the private right of recourse to the judicial branch, with its far broader remedies and greater due process protections, must give way, based on “policy considerations,” to a limited administrative proceeding before the Insurance Commissioner. So long as the Commissioner could have prosecuted insurer misconduct under the Unfair Insurance Practices Act (UIPA), there can be no private right of action to redress it under the Consumers Legal Remedies Act (CLRA).
This new, special judicial dispensation for insurance companies is necessary, according to the court below, because private lawsuits to enforce the CLRA against insurers would, in some unexplained way, be incompatible with the Insurance Commissioner’s powers under the UIPA, and would “wreak havoc” upon this Court’s decision in Moradi-Shalal v. Fireman’s Fund Insurance Cos. (1988) 46 Cal.3d 287 (Moradi-Shalal).
The Court of Appeal’s policy considerations are unfounded. This brief will show that:
1. The Department of Insurance and private parties have shared enforcement powers over property-casualty insurance companies for nearly 20 years pursuant to Proposition 103, and there has been no “havoc.” While Proposition 103 is an entirely different statutory framework than the CLRA, experience under its parallel enforcement system, with its cumulative remedies, belies the concerns of the panel below. Indeed, we will show that the Insurance Commissioner – the official whose responsibilities are allegedly threatened by concurrent enforcement – has emphatically embraced private enforcement as a complement to his own authority.
2. Moradi-Shalal and related cases rejecting an implied private right of action under the UIPA have no bearing on this case. Moradi-Shalal addressed the question of whether a private right of action could be implied from the UIPA. It and the other cases that followed it hold that the UIPA can only be enforced by the Insurance Commissioner. These decisions offer no guidance about cases where there is an explicit private right of action established by statute. No principle of law sanctions the nullification of later-enacted statutes by an earlier enacted statute, regardless of how compelling a judicial panel believes the policy considerations are.
3. Policy considerations weigh in favor of the application of CLRA to insurance. If recourse to “policy considerations” is necessary here as a matter of statutory construction, then Insurance Code section 1861.03(a),[2] enacted by the Proposition 103 voters twenty nine years after the passage of the UIPA, strongly supports the application of the CLRA to insurance. The subdivision directs that “[t]he business of insurance shall be subject to the laws of California applicable to any other business.” (Insurance Code § 1861.03, sub (a).) The unambiguous purpose of this statute is to sweep away the insurance industry’s exemption from the application of California’s consumer protection laws, of which the CLRA is one.
Apart from their application here, the Court of Appeal’s policy pronouncements are a matter of concern to Consumer Watchdog for another reason. Unless it is decisively rejected, the policy analysis proffered by the panel below will inevitably infect non-CLRA cases. That is because the Court of Appeal’s conclusion – that parallel statutory enforcement mechanisms cannot be permitted – has no intrinsic tether to the CLRA. Put another way, the policy reasoning below would bar CLRA suits against insurance companies even if the CLRA explicitly stated that “insurance is a service.” Indeed, insurers have advanced precisely the same policy argument to repeatedly challenge the right of consumers to bring lawsuits under the authority enacted by the voters as part of Proposition 103 nearly twenty years ago. There is no doubt that the insurance industry will seize upon any opportunity to make such arguments before the lower courts in the future. As the leading California public interest group representing California voters in Proposition 103 matters for the last two decades, Consumer Watchdog respectfully urges the Court to bear this context in mind.
DISCUSSION
I. THE COURT OF APPEAL’S POLICY CONCERNS ARE UNFOUNDED.
The issue in this matter is whether insurance is a service for purposes of lawsuits brought under the CLRA.
But that is not the question the panel below asked and then answered in its opinion. Instead, the Court postulated a conflict between the CLRA and the UIPA:
We here consider whether the generally-applicable provisions of the CLRA override the insurance-specific provisions of the UIPA, and provide for a private right of action where the UIPA provides only for administrative enforcement.
(Fairbanks v. Superior Court (2007) 154 Cal.App.4th 435, 447 (Farmers New World Life Insurance Co. et al., Real Parties in Interest) (Fairbanks).)
Long established principles of statutory construction direct that courts focus first on the plain text and ordinary meaning of the statutes, thus avoiding, if possible, resort to legislative intent or inquiry into the policy behind the enactments. (Delaney v. Superior Court (1990) 50 Cal.3d 785, 798; Day v. City of Fontana (2001) 25 Cal.4th 268, 272; see also Maricela C. v. Superior Court (1998) 66 Cal.App.4th 1138, 1144.)
Framing the issue as a question of conflicting statutes led the court to make short work of examining the plain text of the statutes, however, and the opinion quickly turns to a discussion of “policy considerations.” (Fairbanks, supra, 154 Cal.App.4th at 446.) The court below predicts dire consequences if the ostensible conflict between the statutes is not resolved in favor of the UIPA and against the CLRA:
In a practical sense, allowing for a CLRA remedy for insurance fraud would wreak havoc on the established code and decades of case history.
(Ibid.)
It is obvious that the court perceives a threat from a system under which the insurance market is policed through both administrative enforcement of the insurance laws under UIPA and civil enforcement under the CLRA. The nature of that threat is far from obvious, however.
The court is clearly not concerned that dual enforcement authority would lead to conflicting results. To the contrary, it emphasizes that both the UIPA and the CLRA could be utilized to challenge conduct that is unlawful under both statutes:
[I]f insurance were considered a “service” under the CLRA, many of the unfair and deceptive practices prohibited by the UIPA would also constitute “proscribed practices” under the CLRA.
(Ibid., emphasis in original.)
Nor does the court below express any concern about the fact that consumers are presently able to invoke traditional common law rights and remedies against practices that are also “proscribed practices” under the UIPA. Apparently the court’s fears are directed only to statutory mechanisms under which groups of injured persons may join together to seek justice through the class action device made accessible by the CLRA.
While the panel below never explains why alternative administrative and civil enforcement mechanisms are of such grave concern, nor offers any support for its prognostication of “havoc,” the panel clearly believes that the best policy would be to entrust the Insurance Commissioner with the exclusive authority to address unlawful conduct by insurance companies.
Once upon a time, that view was broadly reflected in California’s insurance laws. But the laws have changed. Experience under Proposition 103, enacted by the voters in 1988, provides a basis for assessing the Court of Appeal’s fears concerning alternative statutory enforcement mechanisms and cumulative remedies.
A. Prior to Proposition 103, the Insurance Commissioner Had “Exclusive Jurisdiction” Over Challenges to Insurance Company Acts and Practices.
Under the McBride-Grunsky Regulatory Act of 1947 (McBride Act), the property-casualty insurance industry was insulated from accountability in the courts through a combination of the “exhaustion” doctrine and various statutory immunities that precluded application of the antitrust and consumer protection laws to the industry’s rates and practices.
In the context of Proposition 103 litigation, this Court has frequently discussed the McBride Act regime. The McBride Act was enacted for the purpose of providing insurers antitrust immunity for rate-fixing practices that would otherwise be collusive. (See Amwest Surety Ins. Co. v. Wilson (1995) 11 Cal.4th 1243, 1257-1258; State Compensation Insurance Fund v. Superior Court (2001) 24 Cal.4th 930, 939; Manufacturers Life Ins. Co. v. Superior Court (1995) 10 Cal.4th 257, 281; 20th Century Ins. Co. v. Garamendi, supra, 8 Cal.4th 216, 240, quoting King v. Meese (1987) 43 Cal.3d 1217, 1221.)
The McBride Act framework effectively precluded private lawsuits under the Unfair Competition Law (Bus. & Prof. Code § 17200 et seq. [UCL]) and other state laws.[3] “[U]nder the McBride Act, the commissioner had exclusive jurisdiction to adjudicate complaints….” (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 981, emphasis added.)[4]
B. Proposition 103 Established a Dual Enforcement System and Eliminated the Commissioner’s Exclusive Jurisdiction over Violations of the Insurance Code.
In 1988, California voters enacted precisely the kind of alternative administrative and civil enforcement system that the Court of Appeal below rejects on policy grounds. Proposition 103 made “numerous fundamental changes in the regulation of automobile and other types of insurance.” (Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d 805, 812.) The measure enacted a stringent system of regulation governing the rates, premiums and underwriting practices of the industry. Though the Insurance Commissioner was entrusted with the responsibility to implement and enforce the law, the voters were not content to leave the Commissioner with sole authority to do so. They eliminated the industry’s broad immunities and established the right of individual citizens to challenge, in court, violations of Proposition 103:
In enacting Proposition 103, the voters vested the power to enforce the Insurance Code in the public as well as the Commissioner. As the plain text of Insurance Code sections 1861.03 and 1861.10 make[s] clear, Proposition 103 established a private right of action for [its] enforcement....