County of Los Angeles v. Farmers Ins. Exchange

• Decision Date: 24 May 1982
• Citation: 132 Cal.App.3d 77,182 Cal.Rptr. 879
• Court: California Court of Appeals Court of Appeals
• Parties: COUNTY OF LOS ANGELES and, City of Los Angeles, Plaintiffs and Appellants, v. FARMERS INSURANCE EXCHANGE, et al., Defendants and Respondents. Civ. 63101.

Page 879

182 Cal.Rptr. 879

132 Cal.App.3d 77

COUNTY OF LOS ANGELES and, City of Los Angeles, Plaintiffs and Appellants, v. FARMERS INSURANCE EXCHANGE, et al., Defendants and Respondents.

Civ. 63101.

Court of Appeal, Second District, Division 4, California.

May 24, 1982.

As Modified June 3, 11, 1982.

John H. Larson, County Counsel and Frederick R. Bennett, Deputy County Counsel, Los Angeles, for plaintiff and appellant County of Los Angeles.

Ira Reiner, City Atty. and Pedro B. Echeverria, Asst. City Atty., for plaintiff and appellant City of Los Angeles.

Barger & Wolen, Kent Keller, Royal F. Oakes and Ronald D. Kent, Los Angeles, for defendant and respondent Interinsurance Exchange of The Automobile Club of Southern California.

Hagenbaugh & Murphy, Irwin Waldman, Jeffrey D. Hathaway and Robert R. Ronne, Los Angeles, for defendant and respondent Farmers Ins. Exchange.

McCLOSKY, Associate Justice.

Appellants County of Los Angeles, a political subdivision of the State of California, and City of Los Angeles, a municipal corporation, appeal from a judgment (Partial Order of Dismissal) dismissing these consolidated actions as to respondents Farmers Insurance Exchange and Interinsurance Exchange of the Automobile Club of Southern California (Code Civ.Proc., § 581, subd. 3) following the trial court having sustained their general demurrers without leave to amend to the first and second causes of action of appellants' consolidated complaint (hereafter "complaint" unless otherwise noted). At the time the court sustained the demurrers against appellants as to the aforesaid respondents, it sustained with leave to amend, the demurrer of Wesley J. Kinder, Insurance Commissioner of the State of California ¹ to the consolidated complaint. The latter defendant is not a party to this appeal.

We set forth only so much of the procedural history and facts of this voluminous case as is necessary to give meaning to our determination of it. After previous pleading, and other proceedings, which included, among others, prior complaint proceedings before the Commissioner and prior complaints in the Los Angeles Superior Court, appellants filed the "Consolidated Complaint for Declaratory Relief and Injunctive Relief" against these respondents and for the same and further relief against Commissioner.

By their consolidated complaint appellants complain of, and seek injunctive relief on behalf of their residents and themselves, to enjoin some 20 specific alleged unlawful practices ² relating to territorial rating for automobile insurance whereby their residents in certain of their territories are charged discriminating and excessive rates for automobile insurance based primarily on what part of the city and county they reside and garage their private passenger automobile; racially discriminate by "redlining" whereby automobile insurance is unavailable in areas of the city and county populated primarily by Blacks and Mexican-Americans; and methods of allocating commissions and expenses in a manner which adversely affects the cost of insurance in Los Angeles.

They alleged that respondents' illegal practices result in a large number of uninsured drivers within the county and city, burden the county with medical and other social services costs when indigents who are injured cannot resort to insurance coverage, burden the county and city with the costs of property damaged by uninsured drivers, force inhabitants out of certain high rated territories thereby exacerbating the deterioration of those territories with resultant They allege further that they have exhausted their administrative remedies before the Insurance Commissioner, which allegation will be set forth in full below.

loss in property values and property tax revenues, encourage businesses to leave such territories and relocate elsewhere thereby resulting in loss of employment opportunities and loss of sales tax revenues, and force many residents not to drive, all of which results in injury to the economy and welfare of the city and county.

The remaining causes of action of the complaint are directed against the Commissioner and are not involved in this appeal.

In sustaining respondents' general demurrers to the first two causes of action of the consolidated complaint the trial judge gave as his sole ground: "Failure to exhaust administrative remedies."

CONTENTIONS

Appellants contend that (1) there is no available or adequate administrative remedy which appellants are required to exhaust before proceeding with the present action; (2) under the circumstances of this case they are not required to bring a separate mandate action to compel the Insurance Commissioner to make specific findings as to respondents; (3) that even though there is no administrative remedy which appellants must exhaust the court deferred the matter to the Insurance Commissioner under the doctrine of primary jurisdiction; the purpose of that doctrine now having been accomplished there is no reason to further delay the action; (4) the court did not reach the second ground of the demurrer, appellants standing to bring this action both in their individual capacity and in a representative capacity to enjoin and redress the continuing injuries to themselves and their residents caused by respondents' illegal practices.

Both respondents contend that appellants lack standing to sue, and respondent Farmers Insurance Exchange also contends that: "Appellants may not do indirectly through the judiciary system [sic] what they could not have done directly through the Legislature as the state has preempted the entire field of insurance rating practices." Lastly, both respondents contend that appellants have failed to exhaust their administrative remedies.

DISCUSSION

We conclude that appellants have failed to exhaust their administrative remedies which were available to them. That conclusion is dispositive of the matter and makes unnecessary any discussion of the other contentions of the parties.

I

Paragraph 41 of the first cause of action repeated and incorporated by reference in the second cause of action of the complaint reads as follows:

"41. The Plaintiffs have exhausted their available administrative remedies before the Insurance Commissioner. On August 14, 1978, Plaintiff COUNTY OF LOS ANGELES, in accordance with the direction of the Court filed a petition for a hearing before the Department of Insurance and Defendant KINDER, pursuant to Insurance Code Section 1858 et seq., and otherwise, in both its individual capacity and in its representative capacity on behalf of the residents of the County, which include the residents of the City of Los Angeles, raising all of the issues alleged and raised by this complaint. When the Commissioner and Department of Insurance had not granted a hearing on said petition, Plaintiffs moved the Court for an order vacating the stay order. In response to said motion, the Department of Insurance advised the Court that said hearings would begin on or before March 15, 1979. Said hearings were held by the Department of Insurance in March and April of 1979. On or about December 21, 1979, Defendant KINDER issued his findings, decision, and ruling, denying the relief prayed for."

We conclude that appellants' contention that they have exhausted their available administrative remedies and their allegation that there is no adequate administrative remedy which appellants are required to exhaust is without merit. The foregoing allegation in paragraph 41 of the complaint that they "have exhausted their available administrative remedies before the Insurance Commissioner" is a contention and a legal conclusion. While generally material facts alleged in the complaint and facts which may be implied or inferred from those expressly alleged are treated as true for the purpose of ruling on the demurrer, contentions, deductions, and conclusions of law alleged in the complaint are not considered in judging its sufficiency. (Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 572, 108 Cal.Rptr. 480, 510 P.2d 1032; see also Harvey v. Holtville (1969) 271 Cal.App.2d 816, 76 Cal.Rptr. 795.) In short, the ruling on a demurrer determines a legal issue on the basis of assumed facts, i.e., those properly alleged in the complaint, regardless of whether they ultimately prove to be true. (See generally, 3 Witkin, Cal. Procedure (2d ed. 1971) Pleading, § 800, p. 2413.) Appellants' conclusional statement that they have exhausted their available administrative remedies therefore avails them nothing. (See Pan Pacific Properties, Inc. v. County of Santa Cruz (1978) 81 Cal.App.3d 244, 251, 146 Cal.Rptr. 428.)

The balance of paragraph 41 of appellants' complaint consists of a recitation of a portion of the procedural history of this case and of the hearings held by the Department of Insurance (Insurance Commissioner) and alleges that "[O]n or about December 21, 1979, Defendant KINDER issued his findings, decision and ruling denying the relief prayed for."

In fact an examination of the portion of the judicially noticed "Notice of Public Hearing issued by the Department of Insurance" dated February 5, 1979, shows that the Commissioner gave notice that those hearings would take place in five cities on specified dates "for the purpose of developing information, receiving testimony from the public, representatives of insurance companies and rating organizations, public officials, and any other interested persons relative to the practice of automobile insurance companies of developing and using geographic areas for rating purposes." The notice stated that the proposed "hearings are designed to assist the Commissioner in determining whether current territorial rating practices meet the requirements of the laws of this state and to carry out the charge mandated by Assembly Concurrent Resolution 100 (Stats.1978)." The notice then referred to the pending actions of the appellants and of the stay issued by the...