Heckart v. A-1 Self Storage, Inc.
| Decision Date | 23 April 2018 |
| Docket Number | S232322 |
| Citation | 415 P.3d 286,231 Cal.Rptr.3d 459,4 Cal.5th 749 |
| Court | California Supreme Court |
| Parties | Samuel HECKART, Plaintiff and Appellant, v. A-1 SELF STORAGE, INC., et al., Defendants and Respondents. |
Finkelstein & Krinsk, Jeffrey R. Krinsk, William R. Restis, David J. Harris, Jr., and Trenton R. Kashima, San Diego, for Plaintiff and Appellant.
Dale E. Washington ; Zakari Law, Raymond Zakari, Glendora; Baker, Burton & Lundy and Brad N. Baker, Hermosa Beach, as Amici Curiae on behalf of Plaintiff and Appellant.
Sheppard Mullin Richter & Hampton and John T. Brooks, San Diego, for Defendants and Respondents A-1 Self Storage, Inc., Caster Group LP, Caster Properties, Inc., and Caster Family Enterprises, Inc.
Wilson, Elser, Moskowitz, Edelman & Dicker, John R. Clifford and David J. Aveni, San Diego, for Defendant and Respondent Deans & Homer.
Dentons US and Charles A. Bird, San Diego, for California Self Storage Association as Amicus Curiae on behalf Defendants and Respondents.
Xavier Becerra, Attorney General, Diane S. Shaw, Assistant Attorney General, and Molly K. Mosley, Deputy Attorney General, for State of California as Amicus Curiae, upon the request of the Supreme Court.
In its rental agreements with tenants, defendant A-1 Self Storage, Inc. (A-1) states that it shall not be liable for loss of or damage to a tenant's stored property, and it requires the tenant to obtain insurance for such losses. A-1 also offers an alternative to the requirement that a tenant obtain insurance: in exchange for an additional $10 in rent each month, A-1 will reassume the risk of such losses, up to $2,500. Plaintiff Samuel Heckart contends this alternative constitutes a contract of insurance, and because A-1 is not licensed to sell insurance, its sale of this indemnity agreement violates the Insurance Code.
We conclude that A-1's alternative indemnity agreement is not subject to regulation under the Insurance Code. First, the code's provisions that regulate the sale of insurance by self-service storage facilities as agents for licensed insurers ( Ins. Code, § 1758.7 et seq. ; hereinafter Article 16.3; all further statutory references are to this code unless otherwise noted) have no application to A-1's alternative arrangement because A-1 is not acting as an agent for an insurer. Second, the code's definition of insurance (§ 22) has long been understood not to reach indemnification agreements between parties to a transaction if the indemnification agreement is incidental to the principal object and purpose of the parties' transaction, and it does not appear that the Legislature intended through its enactment of Article 16.3 to prohibit such incidental indemnification agreements. Here, the indemnification agreement is incidental to the principal object and purpose of renting storage space, placing it outside the scope of insurance regulation. Therefore, we will affirm the judgment of the Court of Appeal.
"In reviewing a judgment of dismissal after a demurrer is sustained without leave to amend, we must assume the truth of all facts properly pleaded by the plaintiffs, as well as those that are judicially noticeable." ( Howard Jarvis Taxpayers Assn. v. City of La Habra (2001) 25 Cal.4th 809, 814, 107 Cal.Rptr.2d 369, 23 P.3d 601.) Therefore, we take the facts from the first amended complaint and matters subject to judicial notice.
Defendant A-1 owns the self-storage facility where plaintiff rented a storage unit. Neither A-1 nor any of the defendants that have an ownership interest in A-1 or assist in its management are licensed to sell insurance in California.1 Defendant Deans & Homer is an insurance underwriter, agent, and broker licensed to sell insurance in California.
Plaintiff rented a storage unit from A-1 in June 2012 for $55 a month. The "A-1 Self Storage Rental Agreement" (Rental Agreement) signed by plaintiff released the owner of the storage facility from liability for loss of or damage to property at the facility. The Rental Agreement also required the tenant to maintain insurance for the value of the tenant's stored property. Finally, it stated that if the tenant "elects to participate in the Customer Goods Protection Plan" (Protection Plan), the provisions of the Rental Agreement related to A-1's liability would be modified by the Protection Plan.
The Protection Plan acknowledges the provisions of the Rental Agreement that limit the operator's liability and require the tenant to obtain insurance, and then provides: The Protection Plan allows a tenant to decline to participate in the Plan, but in that event, it requires the tenant to provide to the owner, within 30 days, information concerning the tenant's own insurance policy. If such information is not provided within 30 days, the tenant will be automatically enrolled in the Protection Plan until such insurance information is provided.
Plaintiff marked on the Protection Plan that he declined to participate, but thereafter he was automatically enrolled in the plan and was charged $10 a month, presumably for failure to provide evidence of his own insurance within 30 days of signing the contract.
In April 2013, plaintiff brought this putative class action on behalf of himself and all others similarly situated, claiming the Protection Plan violates the Unfair Competition Law ( Bus. & Prof. Code, § 17200 et seq ; UCL) and the Consumers Legal Remedies Act ( Civ. Code, § 1750 et seq. ; CLRA). He also alleged theories of misrepresentation and civil conspiracy. His claims are based on the allegation that the Protection Plan is a policy of insurance, which A-1 is not licensed to sell.
The operative first amended complaint alleges that Deans & Homer created the Protection Plan, and told A-1 that if A-1 sold the Protection Plan instead of licensed insurance, A-1 "could charge higher rates than approved by the California [Department of Insurance], and avoid the additional administrative costs required if A-1 sold a licensed insurance product." In addition, A-1 "would net nearly twice the revenue from the ... Protection Plan [as] opposed to the sale of insurance." To accomplish this end, Deans & Homer provided A-1 with the language for the Protection Plan and related forms. Deans & Homer also provided policies and procedures related to implementation of the Protection Plan. A-1 consults with Deans & Homer and obtains its approval "before changing any aspect of the Protection Plan...."
The first amended complaint further alleges that to cover losses incurred by A-1 under the Protection Plan, Deans & Homer sold A-1 a "Storage Operator's Contract Liability Policy" under which Deans & Homer assumed the liability for all losses under the Protection Plan in excess of $250,000 per year. Thus, A-1 assumed the risk of the first 100 claims per year for losses of $2,500. At any given time, more than 15,000 renters are enrolled in the A-1 Protection Plan. Under the Storage Operator's Contract Liability Policy, Deans & Homer retains the "right to adjust the [Protection Plan] claim directly with the [Protection Plan] customer." The policy requires A-1 to provide monthly reports to Deans & Homer setting forth who is enrolled in the Protection Plan and their coverage dates.
According to the first amended complaint, employees at A-1 facilities are instructed to offer the Protection Plan to each rental customer. They are to tell customers that A-1 does not insure their property, and that the Protection Plan satisfies the insurance requirement of the Rental Agreement. If the customer has insurance, the employee is to "remind them that under [A-1's] plan there is no deductible and since it's not insurance no issues with rate increases etc. [will arise] down the road if there were to be a claim."
Plaintiff alleges that The first amended complaint compares the terms of the Protection Plan to the terms of a storage insurance policy offered by Deans & Homer, and asserts that 2
The complaint concludes that the Protection Plan is an insurance policy, and alleges that defendants fail to comply with insurance regulations. For example, A-1 allegedly does not provide an appeals process with respect to claims, does not maintain the payments thereunder in segregated accounts, and does not maintain reserves adequate to pay claims, as is required with respect to insurance. According to plaintiff, "[d]efendants characterize their illegal insurance plan as a ‘Customer Goods Protection Plan,’ for the sole purpose of collecting insurance premiums while avoiding the requirements of the California Insurance Code." He asserts that A-1 misleads consumers by requiring insurance on stored property, and by failing to disclose that the Protection Plan is unlicensed and illegal insurance, that A-1 does not segregate the payments or maintain reserves, that cheaper and more comprehensive insurance is available in the marketplace, that renters are not required to purchase the...
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