Elgindy v. AGA Serv. Co.

Decision Date29 March 2021
Docket NumberCase No. 20-cv-06304-JST
PartiesADAM ELGINDY, et al., Plaintiffs, v. AGA SERVICE COMPANY, et al., Defendants.
CourtU.S. District Court — Northern District of California
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS
Re: ECF No. 16

Before the Court is Defendants' motion to dismiss. ECF No. 16. The Court will grant the motion in part and deny it in part.

I. BACKGROUND

Plaintiffs Adam Elgindy and Julianne Chuanroong bring this putative class action on behalf of themselves and other consumers who purchased an event ticket insurance policy or a trip, travel, or flight insurance policy from Defendants during the class period. Complaint ("Compl."), ECF No. 1 ¶¶ 5, 6, 80. Plaintiffs allege that Defendants' practice of bundling a non-optional assistance services fee with the sale of these insurance policies, and not fully disclosing the inclusion of that fee, constitutes unlawful, unfair, and deceptive conduct. Id. ¶ 1.

A. Factual Background

Defendants are all involved in the sale of insurance for event tickets and travel arrangement purchases. Id. ¶ 2. Collectively, they are the dominant providers of event ticket insurance in California, and are the main provider of insurance on the website Ticketmaster.com. Id. ¶ 23. They are also the largest providers of trip and travel insurance in California and the United States. Id. ¶ 33. Defendants Jefferson Insurance Company and BCS Insurance Company underwrite the insurance policies at issue. Id. ¶¶ 8-9. Defendant AGA Services Co. d/b/a Allianz Global Assistance ("AGA") is a registered agent and the registered administrator for insurance business transacted by Jefferson and BCS in California. Id. ¶ 7. As Jefferson's and BCS's agent, AGA is responsible for obtaining regulatory approval of the insurance policy products, as well as the marketing and sales of those products. Id. ¶ 22.

When a consumer purchases an event ticket on Ticketmaster.com, she is presented with an offer to purchase insurance. Id. ¶ 24. She is given only one vendor option to insure her purchase. Id. The same is true when a consumer purchases airfare and similar travel fares, including from websites for Hawaiian Airlines, American Airlines, and Jet Blue Airways. Id. ¶¶ 33-34.

On the Ticketmaster.com website, the offer to consumers is described as "Ticket Insurance" or "Event Ticket Insurance for an additional $[XX] per ticket." Id. ¶ 25. The offer page does not indicate that the price quoted reflects any costs beyond the cost of the insurance premium. Id. ¶¶ 25-26. Likewise, on travel websites, the offer lists a single total price for "Trip Insurance" to "protect" the trip for a specified price. Id. ¶ 35. On these travel websites, the offers sometimes, but not always, reference assistance for travel or medical emergency as one of the "benefits" of the insurance. Id. ¶¶ 34, 36.

Within the offer is a link where a consumer can access "Plan details and disclosures." Id. ¶¶ 26, 37. The link is in fine print and follows the sentence "Terms and exclusions (incl. for pre-existing conditions) apply." Id. Neither the link nor the surrounding text indicates that the plan details page will disclose a non-insurance service fee. Id. If a consumer clicks the "plan details and disclosure" link on the event ticket insurance page, the landing page explains the benefits of the policy as including "Ticket Cancellation Coverage," "Viewer Advantage," and "Pre-existing Medical Condition Exclusion Waiver." Id. ¶ 26. When a consumer clicks the same link on the travel ticket insurance page, the landing page calls the benefits "Trip Cancellation Coverage," "Trip Interruption Coverage," "Travel Delay Coverage," and "Baggage Loss Coverage." Id. ¶ 37. The plan details and disclosure webpage indicates that "24 Hour Assistance" is "Included," but does not say that the consumer is charged a separate fee for the benefit. Id. "Typically, a consumer will purchase the insurance without ever realizing that he or she paid AGA for access to a toll-free customer service line." Id. ¶ 25.

After a consumer purchases a ticket or travel insurance policy, she receives a confirmation email with the policy number and total cost of insurance. Id. ¶¶ 27, 38. The confirmation email links to the "policy documents" which include a cover letter. Id. The cover letter identifies a separate charge for "assistance" services or "Viewer Advantage Services." Id.

AGA posts pricing sheets on its website that disclose the non-insurance assistance fee. Id. ¶¶ 29, 41. These pricing sheets explain that the fee charged for assistance services is dependent on the cost of the ticket being purchased and the length of time between the purchase and event date (the "booking window"). Id. The pricing sheets are difficult to find, unlikely to be accessed by consumers, and inconsistent with the prices actually charged to consumers. Id. For example, although the pricing sheet for Domestic Trip Protector Plus states that the standard assistance fee is 1%, Plaintiff Chuanroong was charged assistance fees of 1.95%, 1.42%, and 3.64% for trips that she insured in 2019 and 2020. See id. ¶ 41.

The assistance service, for which the additional fee is charged, is a toll-free line to a customer service representative. Id. ¶ 25. For event insurance, the assistance services entitle the insured to call a toll-free number to speak to a service representative for information on directions, nearby restaurants, hotels, parking garages, weather forecasts, destination information, passport-replacement information, doctors and medical facilities. Id. ¶ 27. For travel insurance, the assistance services entitle the insured to call a toll-free number to speak to a service representative for information on where to refill prescriptions or find child care equipment, pet care services, destination information, business service information, gift delivery information, passport-replacement information, doctor or medical facility information, legal referrals and translation services. Id. ¶¶ 38, 39

Plaintiffs allege that there is no significant demand for the assistance benefits offered by AGA. Id. They contend that the "services" offered by AGA under the assistance service fee is information that consumers can readily access for free on the internet. Id. Consumers would not pay for the assistance service product if given a choice not to do so. Id. ¶ 28. Additionally, Plaintiffs contend that the fee charged by Defendants is not actually used to invest in or provide the informational assistance service for which it is supposedly charged. Id. ¶ 30. "[G]iven thatDefendants make no mention of any separate charges for [assistance] services at the time they present their insurance offers to consumers, consumers have no reason to suspect they are being charged for AGA's non-insurance assistance service at the time they insure their ticket purchases." Id. ¶ 39.

B. Statutory and Regulatory Background

Plaintiffs ground their claims on several different California insurance statutes and rules. First, Insurance Code Section 1861.01 requires that "insurance rates subject to this chapter must be approved by the commissioner prior to their use." Section 1861.05 details the approval of insurance rates and provides, among other things, that rates will not be approved if "excessive, inadequate, unfairly discriminatory." Cal. Ins. Code § 1861.05(a). Both of these provisions were added to the Insurance Code by Proposition 103, approved by California voters on November 8, 1988. See State Farm Mut. Auto. Ins. Co. v. Garamendi, 32 Cal. 4th 1029, 1035 (2004). Beyond the requirement of requirement for insurance rate pre-approval, Proposition 103 further "provide[d] for consumer participation in the administrative ratesetting process." Id. (quoting Walker v. Allstate Indemnity Co., 77 Cal. App. 4th 750, 753 (2000). "In enacting Proposition 103, the voters vested the power to enforce the Insurance Code in the public as well as the Commissioner." Donabedian v. Mercury Ins. Co., 116 Cal. App. 4th 968, 982 (2004) (quoting an amicus brief filed by the California Department of Insurance).

In addition to the setting of rates, California insurance law also regulates the sale of insurance and the practices of agents and brokers. See generally Cal. Ins. Code Art. 5.3 (§§ 769-769.56). California Insurance Regulation Section 2189.3 details broker fee requirements and allows a broker-agent to charge a consumer a fee so long as he is "acting in the capacity of a broker." Cal. Code Regs., tit. 10, § 2189.3. This rule further requires that "[t]he broker is not an appointed agent of the insurer with which the coverage is or will be placed." Id. § 2189.3(c). "There is no authority allowing an insurance agent to charge such a fee." Mercury Ins. Co. v. Lara, 35 Cal. App. 5th 82, 88 (2019). Finally, a fee-charging broker must also disclose, "concurrent with the conveyance of an initial premium quotation, the fact that a broker fee may be charged." Cal. Code Regs., tit. 10, § 2189.3(g).

C. Procedural Background

Plaintiffs filed their complaint on September 4, 2020. ECF No. 1. The complaint brings three causes of action against Defendants. First, Plaintiffs allege unlawful, unfair, and fraudulent trade practices in violation of the California Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200. Compl. ¶¶ 90-102. Second, Plaintiffs allege that Defendants made false, deceptive, or misleading statements in connection with the sale of event and trip insurance policies in violation of the California False Advertising Law ("FAL"), Cal. Bus. & Prof. Code § 17500. Id. ¶¶ 103-15. Third, Plaintiffs bring a claim for common-law fraud, deceit, and/or misrepresentation. Id. ¶¶ 116-125.

On November 13, 2020, Defendants filed a motion to dismiss the complaint. ECF No. 16. Plaintiffs filed an opposition to the motion on December 16, 2020, ECF No. 21, and Defendants filed a reply on January 6, 2021, ECF No. 27. The Court held a hearing on the mo...

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