Truta v. Avis Rent A Car System, Inc.

• Decision Date: 20 July 1987
• Citation: 193 Cal.App.3d 802,238 Cal.Rptr. 806
• Court: California Court of Appeals Court of Appeals
• Parties: , 1987-2 Trade Cases P 67,715 Marianne TRUTA, Plaintiff and Appellant, v. AVIS RENT A CAR SYSTEM, INC. et al., Defendants and Respondents. A030674.

Page 806

238 Cal.Rptr. 806

193 Cal.App.3d 802, 1987-2 Trade Cases P 67,715

Marianne TRUTA, Plaintiff and Appellant, v. AVIS RENT A CAR SYSTEM, INC. et al., Defendants and Respondents.

A030674.

Court of Appeal, First District, Division 2, California.

July 20, 1987.

Review Denied Oct. 15, 1987.

Mark Bonino, Ropers, Majeski, Kohn, Bentley, Wagner & Kane, Redwood City, Joseph Cotchett, Cotchett & Illston, Burlingame, for plaintiff and appellant.

William I. Edlund, Walter R. Allen, Bernard Zimmerman, Pillsbury, Madison & Sutro, Martha K. Cunningham, Howard, Rice, Nemerovski, Canady, Robertson & Falk, Kathy J. Bagdonas, Morrison & Foerster, Weyman Lundquist, Heller, Ehrman, White & McAuliffe, San Francisco, for defendants and respondents.

BENSON, Associate Justice.

This is an appeal from a judgment of dismissal entered after a demurrer to the complaint of Marianne Truta (plaintiff) was sustained without leave to amend. Plaintiff instituted this action for herself personally and on behalf of a class of persons similarly situated. The defendants in whose favor judgment was rendered are Avis Rent A Car System, Inc., The Hertz Corporation, Budget Rent A Car Corporation, and National Car Rental System, Inc.

The substance of plaintiff's six-count complaint is that within the four years preceding the filing of the action, plaintiff and other California residents had rented automobiles from the various defendants. Incidental to the rental of these automobiles, plaintiff and the class she purportedly represents agreed to pay an additional fee to defendants for a "collision damage waiver" (hereafter "CDW"). ¹ The CDW, which plaintiff alleges to be essentially uniform for all car rentals in California, provided that for a fee of $6 per day defendants agreed to assume responsibility (subject to certain terms and conditions) for the term of one day for collision or upset damage or loss to the vehicle in an amount up to $1,000. Attached to the complaint was a copy of the contract executed by plaintiff Truta and defendant Avis Rent A Car System, Inc. The pertinent provision of that contract states:

"LOSS OR DAMAGE TO THE CAR. I'll pay you for all loss of and damage to the car regardless of who is at fault. My responsibility for accidental collision or upset damage won't exceed the amount shown in box 38 [the amount shown was $1,000] on the other side of this agreement. If I've accepted the 'collision damage waiver' option, I won't have to pay anything. But I will be responsible for the full amount of the damage if I violate any of the terms of this agreement or if I abuse the car or drive it recklessly or while under the influence of alcohol or drugs. I won't have to pay for accidental loss or damage from fire, theft, or other causes that are normally covered by a standard comprehensive physical damage insurance policy. I will report the loss of or any damage to the vehicle promptly by calling the phone number listed on the other side of this agreement."

The first cause of action of the complaint alleges that defendants are engaged in the business of insurance in violation of Insurance Code section 700 in that none of the defendants has been admitted to transact any class of insurance in California. ² Accordingly, the complaint alleges, defendants are engaged in unlawful business practices constituting unfair competition within the meaning of Business and Professions Code section 17200. ³

The second cause of action alleges that because defendants are charging excessive rates for insurance in violation of section 1852 of the Insurance Code, they are consequently engaged in unlawful business practices within the meaning of section 17200 of the Business and Professions Code.

Plaintiff's third and fourth causes of action sound in fraud and negligent misrepresentation respectively. The basis for these claims is that defendants represented in writing two facts that were not true: 1) That the CDW was not a contract for insurance coverage; and 2) that without the CDW, plaintiff would be responsible for loss or damage to the rented vehicle, and consequential damages to the defendants, up to certain limits, regardless of negligence attributable to plaintiff. Plaintiff maintains that the first representation was untrue and misleading in that the CDW provided for the sale of insurance; the second was untrue in that members of the class who used reasonable care in the operation of the rented vehicles were not liable to defendants for any amount of damage to the rented automobile or consequent loss to the defendants pursuant to section 1955 of the Civil Code.

The fifth cause of action alleges that the CDW is unconscionable for five reasons which we summarize as follows: 1) the provision provides no protection for most circumstances, a fact which defendants concealed; 2) its cost is excessive within the meaning of the California Insurance Code and far in excess of a price that would be determined in a competitive business environment; 3) the language of the provision is misleading; 4) the manner in which the rental contracts are printed, worded, packaged and presented disguises the existence of a major portion of the contractual provisions; and 5) defendants obtained unfair advantage by use of their superior bargaining position.

The sixth cause of action is for price fixing in violation of section 16720 of the Business and Professions Code. Plaintiff alleges that defendant combined, conspired and agreed together to fix and maintain prices, terms and conditions for the rental of automobiles in California.

With respect to the first, second and fifth causes of action, the complaint prays for injunctive relief, restitution and damages. The complaint also requests compensatory damages for the third and fourth causes of action, punitive damages for the third cause of action, and treble damages on the sixth cause of action.

A single demurrer was filed on behalf of all the defendants on the grounds that the complaint, and each cause of action contained therein, failed to state facts sufficient to constitute a cause of action. With respect to the first two causes defendants asserted that the CDW is only an ancillary and incidental part of the car rental contract and cannot be considered insurance. As for the third and fourth causes of action they argued in essence that as a matter of law the representations alleged by plaintiff were true. With regard to the fifth cause of action defendants claimed that unconscionability is only a defense to enforcement of a contract and not a ground for affirmative relief. Defendants also contended that plaintiff's sixth cause of action did not meet the high degree of particularity required of Cartright Act claims. In addition, defendants averred that plaintiff's failure to exhaust her administrative remedies before the California Insurance Commissioner required dismissal of each and every cause of action.

In addition to the points and authorities in support of defendants' demurrer to plaintiff's complaint, defendants submitted exhibits of four superior court decisions from foreign jurisdictions dismissing similar actions on the grounds that the CDW is not insurance. ⁴ Additional exhibits included five opinions from attorneys general or insurance departments in other states. ⁵ Each document opined that the CDW was not insurance.

After plaintiff filed her points and authorities in opposition to defendants' demurrer, defendants filed a request that the court take judicial notice of a memorandum, dated October 23, 1968, rendered by the California Department of Insurance. ⁶ The memorandum concerned a provision similar to the CDW provision before us, which was contained in contracts between the Ford Rent-A-Car System and individuals who rented Ford's vehicles. The memorandum concluded that Ford Rent-A-Car System was not involved in providing insurance.

Thereafter, defendants Hertz Corporation, Budget Rent A Car Corporation and National Car Rental System, Inc. moved for judgment on the pleadings on the first five causes of action on the grounds plaintiff had not alleged that she had any contractual or other relationship with these defendants and therefore she was not a member of the class of plaintiffs she purported to represent and lacked standing to sue these defendants. The record before us does not reflect a ruling on that motion.

A hearing on the demurrer took place. However much of what transpired at the time of hearing occurred in chambers and was not transcribed. The order sustaining the demurrer without leave to amend does reflect that plaintiff elected not to amend her complaint.

A threshold issue on appeal is whether plaintiff was required to exhaust an administrative remedy prior to filing the action in superior court. The doctrine of exhaustion of administrative remedies was extensively discussed in McKee v. Bell-Carter Olive Co. (1986) 186 Cal.App.3d 1230, 1234-1235, 231 Cal.Rptr. 304. It is sufficient to merely reiterate that "... where an administrative remedy is provided by statute, relief must be sought from the administrative body and this remedy exhausted before the courts will act." (Abelleira v. District Court of Appeal (1941) 17 Cal.2d 280, 292, 109 P.2d 942; see also McKee v. Bell-Carter Olive Co., supra, 186 Cal.App.3d at p. 1235, 231 Cal.Rptr. 304; County of Contra Costa v. State of California (1986) 177 Cal.App.3d 62, 73, 222 Cal.Rptr. 750.) However, "the doctrine of exhaustion of administrative remedies has not hardened into inflexible dogma. [Citation.] It contains its own exceptions, as when the subject matter of the controversy lies outside the administrative agency's jurisdiction [citation], when pursuit of an administrative remedy would result in irreparable harm [citations], when the administrative agency cannot grant an adequate remedy [citations], and when the aggrieved party can positively state what the administrative agency's decision in his particular...