Interinsurance Exchange v. Superior Court

• Decision Date: 26 March 2007
• Docket Number: No. D049257.,D049257.
• Citation: 148 Cal.App.4th 1218,56 Cal.Rptr.3d 421
• Court: California Court of Appeals Court of Appeals
• Parties: INTERINSURANCE EXCHANGE OF the AUTOMOBILE CLUB, Petitioner, v. The SUPERIOR COURT of San Diego County, Respondent; Tawndra Williams et al., Real Parties in Interest.

56 Cal.Rptr.3d 421

148 Cal.App.4th 1218

INTERINSURANCE EXCHANGE OF the AUTOMOBILE CLUB, Petitioner, v. The SUPERIOR COURT of San Diego County, Respondent;

Tawndra Williams et al., Real Parties in Interest.

No. D049257.

Court of Appeal, Fourth District, Division 1.

March 26, 2007.

Luce, Forward, Hamilton & Scripps, Peter H. Klee and John T. Brooks, San Diego, for Petitioner.

No appearance for Respondent.

Lerach, Coughlin, Stoia, Geller, Rudman & Robbins, Leonard B. Simon, Timothy G. Blood, Kevin K. Green; Robbins, Umeda & Fink and Brian J. Robbins, San Diego, for Real Party in Interest Tawndra Williams.

McDONALD, J.

Tawndra Williams filed a class action against defendant Interinsurance Exchange of the Automobile Club (Exchange) for breach of contract and other causes of action. She alleged Exchange, in violation of Insurance Code section 381, subdivision (f),¹ did not state in the automobile policy issued to her the fee it charges insureds for paying the policy annual premium in installments.

Exchange filed a petition for a peremptory writ of mandate challenging the trial court's orders (1) granting Williams's motion for summary judgment and (2) denying Exchange's motion for summary judgment or, in the alternative, summary adjudication. Exchange contends: (1) the trial court erred by interpreting the term "premium," as used in section 381, subdivision (f), to include fees imposed for installment payments of the annual premium; (2) Williams agreed to pay the fees disclosed by Exchange on her billing statement; (3) it substantially complied with section 381, subdivision (f); and (4) even if it violated section 381, subdivision (f), there are triable issues of material fact that preclude summary judgment for Williams. Because we conclude the term "premium," as used in section 381, subdivision (f), does not include charges imposed for making payments of the annual premium in installments, Exchange did not violate that statute and therefore Williams is not entitled to summary judgment in her class action against Exchange and Exchange is entitled to summary judgment against Williams.

FACTUAL AND PROCEDURAL BACKGROUND

In January 2002, Williams obtained an automobile insurance policy (Policy) from Exchange. She paid the Policy's annual premium in one lump sum. In January 2003, on renewal of the Policy she again paid the Policy's annual premium in one lump sum.

In December 2003, Exchange mailed to Williams a renewal declarations page for the Policy and an accompanying billing statement for the annual renewal period beginning in January 2004. The declarations page set forth the "grand total" premium due of $1,049 and, after deduction of a policyholder's dividend of $63, required Williams to pay a "net total" premium of $986 to renew her policy for another year.² The accompanying billing statement gave Williams the option of paying the $986 annual net premium in either one lump sum or nine monthly installments, subject to additional charges for interest at a rate of 17.99 percent per year and requiring payment of only the first installment of $53.60. Williams read the billing statement, understood an election to pay the annual premium in installments would subject her to interest charges, and elected to pay the annual premium in installments rather than in one lump sum.

In December 2004, Exchange mailed to Williams a renewal declarations page for the Policy and an accompanying billing statement for the renewal period beginning in January 2005. The declarations page set forth the "total annual" premium due of $913 and, after deduction of a policyholder's dividend of $67, required Williams to pay a "net" premium of $846 to renew her policy for another year.³ The accompanying billing statement gave Williams the option of paying the $846 annual net premium in either one lump sum or nine monthly installments, subject to additional charges for interest at a rate of 18 percent per year and requiring payment initially of only the first installment of $34.48. Williams again elected to pay the annual premium in installments rather than in one lump sum.

On October 6, 2004, Williams, on behalf of herself, others similarly situated, and the general public, filed the instant complaint against Exchange alleging causes of action for: (1) breach of contract; (2) committing an unlawful business act or practice in violation of Business and Professions Code section 17200 et seq.; (3) violating the Consumers Legal Remedies Act (Civ.Code, § 3.750 et seq.); (4) unjust enrichment; and (5) money had and received. The premise for each cause of action was Exchange's alleged wrongful charging and receipt of a fee for payment of annual premiums in installments, a "premium" not slated in its policies in violation of section 381, subdivision (f).

On March 15, 2005, the trial court overruled Exchange's demurrer to the complaint. The trial court subsequently granted Williams's motion to represent the class of all Exchange automobile insurance policyholders who paid installment charges after October 6,2000.

On or about August 5, Williams filed a motion for summary judgment or, in the alternative, summary adjudication. On August 12, Exchange filed its motion for summary judgment or summary adjudication. On October 26, pursuant to Exchange's request, the trial court stayed the proceedings and referred to the California Department of Insurance (DOI) the question of "[w]hether installment fees [constitute a] premium as that term is used in [section] 381[, subdivision] (f)."

On April 25, 2006, the DOI issued an opinion finding "the term `premium' has several different (and sometimes conflicting) meanings depending upon the context in which it is used." It discussed the various meanings of the term "premium" in actuarial, accounting, industry practice, taxation, DOI rate approval, and other statutory contexts. Apparently finding those other meanings unhelpful in determining the meaning of the term "premium" for section 381, subdivision (f) purposes, the DOI reasoned:

"[T]he primary purpose of § 381 (as specifically stated for the automobile line of insurance in § 383.5) is to prevent fraud and mistake by requiring insurers to list the basic terms of the contract. Accordingly, it is the Commissioner's view that policyholders would be less likely to be defrauded or mistaken about the amount of premium if that term is defined in the broadest sense, in the typical way policyholders view their installment payments (i.e., the total price of obtaining coverage, including the installment fee). If that overall price varies depending on the existence of an installment fee, a policyholder will be less likely to be mistaken about the cost of insurance if the policy discloses the nature and amount of that variation. "This interpretation is consistent with 10 CCR § 2360 ..., which was promulgated to make certain that insurance companies charge policyholders the lowest available price for insurance coverage. For such a figure to be meaningful, the regulation uses a liberal definition that includes `all other items which change the amount the insurer charges to the insured,' which presumably would include installment fees. The same reasoning applies here."

Accordingly, the DOI concluded: "[T]he purpose of § 381 was not to calculate rates, determine tax liability, or assess the financial solvency of insurers, but to mandate the disclosure of material insurance contract terms, including the price. For the above reasons, the Commissioner concludes that installment fees are [a] premium under § 381, in the private passenger automobile context." The DOI then noted: "The Commissioner is giving consideration to promulgating regulations and/or proposing legislation to clarify what charges must be disclosed under premium and to address other issues raised by this referral."

On August 3, the trial court granted Williams's motion for summary judgment and denied Exchange's motion for summary judgment or summary adjudication. The court stated:

"In reaching this ruling, the Court has given the Department of Insurance's (`DOI') [opinion] some deference. In Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 11 [78 Cal.Rptr.2d 1, 960 P.2d 1031], where, in addressing the issue of relying [on] an administrative agency's interpretation of a statute, the Court said, `Because an interpretation is an agency's legal opinion, however "expert," rather than the exercise of a delegated legislative power to make law, it commands a commensurably lesser degree of judicial deference.' Thus, this Court is not precluded from giving some degree of deference to the DOI's decision in this matter.

"The decided law supports the conclusion that defendant should have included the installment fees in the premium. In Allstate Ins. Co. v. State Board of [Equalization] (1959) 169 Cal.App.2d 165, 168 , the court stated, '"Premium" in the law of insurance means the amount paid to the company for insurance. [Citation.]' The Allstate court held that, `The "installment payment fee" ... was "actually given by the insured for his insurance." [Citation.]' (Id. at p. 173, 336 P.2d 961.)

"The reasoning of the Allstate case applies here. Defendant requires payment of the installment fee as a condition of receiving insurance. Thus, the installment fees are part of the amount paid to the company for insurance. (Allstate, supra, 169 Cal.App.2d at p. 168 .) Failure to specify those fees in the policy is a violation of Insurance Code section 381, subdivision (f). This violation forms the basis for each of plaintiffs' causes of action."

The court then addressed each of Williams's five causes of action, concluding she proved her entitlement to relief under each one.

On August 24, Exchange filed the instant petition (Petition), requesting we issue a peremptory writ of mandate requiring the trial court to vacate its order granting Williams's motion for summary judgment and denying...