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Fairbanks v. Superior Court of Los Angeles County

April 20, 2009

PAULINE FAIRBANKS ET AL., PETITIONERS,
v.
THE SUPERIOR COURT OF LOS ANGELES COUNTY, RESPONDENT;
FARMERS NEW WORLD LIFE INSURANCE CO. ET AL., REAL PARTIES IN INTEREST.



Ct.App. 2/3 B198538 Los Angeles County Super. Ct. No. BC305603. Judge: Anthony J. Mohr.

The opinion of the court was delivered by: Kennard, J.

Enacted in 1970, the Consumers Legal Remedies Act (Civ. Code, § 1750 et seq.) prohibits specified unfair and deceptive acts and practices in a "transaction intended to result or which results in the sale or lease of goods or services to any consumer" (id., § 1770, subd. (a)). The question we decide here is whether life insurance is a service subject to the act's remedial provisions. We conclude that it is not. As this is consistent with the Court of Appeal's decision, we affirm its judgment.

I.

In November 2003, plaintiff Pauline Fairbanks filed a complaint in superior court, on behalf on herself and all others similarly situated, naming as defendants both Farmers Group, Inc., and Farmers New World Life Insurance Company (collectively, Farmers). Michael Cobb was named as an additional plaintiff in the third amended complaint, which is the pleading at issue here.

Plaintiffs Fairbanks and Cobb have alleged that they are California residents who have purchased Farmers' policies of universal life insurance and flexible premium universal life insurance. Fairbanks is a Farmers agent; Cobb, apparently, is not. Plaintiffs sought to bring this action as a class action on behalf of all persons who purchased similar Farmers policies between November 3, 1984, and December 31, 1996.

Plaintiffs have alleged that Farmers engaged in various deceptive and unfair practices in the marketing and administration of its universal life insurance and flexible premium universal life insurance policies. Among the causes of action that plaintiffs alleged was a claim for violation of the Consumers Legal Remedies Act. As to that claim, the trial court granted Farmers' motion for judgment on the pleadings. The trial court concluded that the Consumers Legal Remedies Act did not apply because the life insurance policies that Farmers issued to plaintiffs were neither "goods" nor "services" as defined in that act.

Plaintiffs sought review of the trial court's ruling by petitioning the Court of Appeal for a writ of mandate. After issuing an order to show cause, the Court of Appeal denied the petition. Like the trial court, the Court of Appeal concluded that life insurance is not subject to the protections of the Consumers Legal Remedies Act. We granted plaintiffs' petition for review.*fn1

II.

In Civil Service Employees Ins. Co. v. Superior Court (1978) 22 Cal.3d 362, 376, this court remarked that "insurance is technically neither a 'good' nor a 'service' within the meaning of the [Consumers Legal Remedies Act]." Because the issue was not presented there, that statement was dictum. Nevertheless, federal district courts have relied upon it in concluding that annuities, which are included within the Insurance Code's definition of life insurance (Ins. Code, § 101), are neither goods nor services the sale of which is subject to regulation under the Consumers Legal Remedies Act. (Estate of Migliaccio (C.D.Cal. 2006) 436 F.Supp.2d 1095, 1108-1109; Bacon ex rel. Moroney v. American Intern. Group, con ex rel. Moroney v. American Intern. Group (N.D.Cal. 2006) 64 Fed. Rules Serv.3d 142.)

The Consumers Legal Remedies Act defines "goods" as "tangible chattels bought or leased for use primarily for personal, family, or household purposes, including certificates or coupons exchangeable for these goods, and including goods that, at the time of the sale or subsequently, are to be so affixed to real property as to become a part of real property, whether or not severable from the real property." (Civ. Code, § 1761, subd. (a).) It defines "services" as "work, labor, and services for other than a commercial or business use, including services furnished in connection with the sale or repair of goods." (Id., § 1761, subd. (b).)

Life insurance is a contract of indemnity under which, in exchange for the payment of premiums, the insurer promises to pay a sum of money to the designated beneficiary upon the death of the named insured. (Estate of Barr (1951) 104 Cal.App.2d 506, 508; see Ins. Code, §§ 22, 101.) Because life insurance is not a "tangible chattel," it is not a "good" as that term is defined in the Consumers Legal Remedies Act. (Civ. Code, § 1761, subd. (a).) Neither is life insurance a "service" under the act. An insurer's contractual obligation to pay money under a life insurance policy is not work or labor, nor is it related to the sale or repair of any tangible chattel. Accordingly, we agree with the Court of Appeal that the life insurance policies at issue here are not services as defined in the Consumers Legal Remedies Act.

Because the statutory language is unambiguous, there is no need to consider legislative history (People v. Castenada (2000) 23 Cal.4th 743, 747), and we do so only from an abundance of caution. The legislative history of the Consumers Legal Remedies Act confirms our conclusion that it does not apply to life insurance. The California Legislature adapted this act largely from a model law, the National Consumer Act, proposed by the National Consumer Law Center at Boston College. (Assem. Com. on Judiciary, analysis of Assem. Bill No. 292 (1970 Reg. Sess.) Apr. 20, 1970, p. 1; see Reed, Legislating for the Consumer: An Insider's Analysis of the Consumers Legal Remedies Act (1971) 2 Pacific L.J. 1, 11.) The model law expressly applied to insurance because it defined "services" as including "(a) work, labor, and other personal services, [¶] (b) privileges with respect to transportation, hotel and restaurant accommodations, education, entertainment, recreation, physical culture, hospital accommodations, funerals, cemetery accommodations, and the like, and [¶] (c) insurance." (Nat. Consumer Act (Nat. Consumer L. Center 1970) § 1.301, subd. (37), pp. 23-24, italics added.) Our Legislature omitted the reference to insurance in the definition of "services," however, thereby indicating its intent not to treat all insurance as a service under the Consumers Legal Remedies Act. (See Hughes Electronics Corp. v. Citibank Delaware (2004) 120 Cal.App.4th 251, 268 [when a statute is modeled on a uniform act, deviation from the uniform act's language is presumed to be deliberate and to reflect a different intent]; Berry v. American Express Publishing, Inc. (2007)147 Cal.App.4th 224, 230-231 [deleting a specific provision from a proposed law generally reflects an intent that the law not be construed to include the omitted provision]; San Bernardino Valley Audubon Society v. City of Moreno Valley (1996) 44 Cal.App.4th 593, 604 [same].)

This intent is further confirmed by comparing the Consumers Legal Remedies Act's definition of "services" with the definition of the same word in the Unruh Act (Civ. Code, § 1801 et seq.). In 1970, when the Legislature was in the process of drafting and enacting the Consumers Legal Remedies Act, the Unruh Act defined "services" this way: " 'Services' means work, labor and services, for other than a commercial or business use, including services furnished in connection with the sale or repair of goods as defined in Section 1802.1 or furnished in connection with the repair of motor vehicles . . . or in connection with the improvement of real property or the providing of insurance . . . ." (Civ. Code, § 1802.2, added by Stats. 1959, ch. 201, § 1, pp. 2092-2093.) We presume the Legislature was aware of this Unruh Act definition when it set about defining the same word in the Consumers Legal Remedies Act, and the language of the two definitions is similar in many respects, but the express reference to insurance in the Unruh Act definition is conspicuously absent from the definition in the Consumers Legal Remedies Act. The use of differing language in otherwise parallel provisions supports an inference that a difference in meaning was intended. (Miklosy v. Regents of University of California (2008) 44 Cal.4th 876, 896.) Even under the quoted Unruh Act definition of services, moreover, insurance itself is not specifically included, but only "services furnished . . . in connection with . . . the providing of insurance." (Civ. Code, § 1802.2.) Thus, the Unruh Act definition of "services" provides additional evidence that the Legislature did not consider insurance itself to be a service for purposes of consumer protection legislation.

The legislative history that has been brought to our attention does not explain why the Legislature omitted an express reference to insurance from the definition of "services" in the Consumers Legal Remedies Act. We do know, however, that the act's final wording "was the product of intense negotiations between consumer and business groups, and represented a compromise between the two." (Berry v. American Express Publishing, Inc., supra, 147 Cal.App.4th at p. 230, citing Reed, Legislating for the Consumer: An Insider's Analysis of the Consumers Legal Remedies Act, supra, 2 Pacific L.J. 1, 8.) The omission or exclusion of insurance from the definition of "services" may have been one element of the compromise. It is also possible that the Legislature was influenced by the existence of a separate legislative scheme, the Unfair Trade Practices ...


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