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Maystruk v. Infinity Insurance Co.

July 9, 2009

EUGENE MAYSTRUK, PLAINTIFF AND APPELLANT,
v.
INFINITY INSURANCE COMPANY, DEFENDANT AND RESPONDENT.



APPEAL from a judgment of the Superior Court of Los Angeles County, Rita Miller, Judge. Affirmed. (Los Angeles County Super. Ct. No. BC379881).

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

CERTIFIED FOR PUBLICATION

This lawsuit concerns Insurance Code section 758.5 (section 758.5), which applies to vehicle repairs performed at a repair shop chosen by the insured. Plaintiff Eugene Maystruk*fn1 sued defendant Infinity Insurance Company (Infinity) for allegedly violating subdivision (d)(2) of section 758.5, which states that if the insured "elects to have the vehicle repaired at the shop of his or her choice, the insurer shall not limit or discount the reasonable repair costs based on charges that would have been incurred had the vehicle been repaired by the insurer‟s chosen shop." The parties disagree as to whether Infinity‟s vehicle repair policy violates subdivision (d)(2) by providing two tiers of coverage:

(1) 100 percent coverage for reasonable costs incurred at a facility selected by the insurer; but (2) only 80 percent coverage for reasonable costs incurred at a facility selected by the insured.*fn2

The trial court dismissed the complaint after sustaining Infinity‟s demurrer without leave to amend. Plaintiff has appealed from the judgment on the grounds that: (1) the complaint sufficiently alleged or can be amended to allege a violation of section 758.5, subdivision (d)(2); and (2) the alleged statutory violation supports a claim under the unfair competition law (Bus. & Prof. Code, § 17200 et seq. (UCL)). In light of our rejection of the first contention, we need not reach the second. The judgment is affirmed.

BACKGROUND

Infinity issued plaintiff an ""RSVP‟ (Repair Satisfaction Vehicle Program) Physical Damage Only Policy" (the policy), which contains the following limitation of coverage clause: "If . . . you choose to utilize a repair facility which is not a RSVP Shop, we will pay Eighty percent (80%) of the fair and responsible charges from that repair facility." The policy lists 80 affiliated repair shops, called "RSVP shops,"*fn3 that are exempt from the limitation of coverage clause. Of the 80 RSVP shops listed in the policy, 18 are located in the Los Angeles area where plaintiff resides.

When plaintiff‟s vehicle was damaged in an automobile accident, he filed a claim with Infinity and had the vehicle repaired at a non-RSVP shop of his choice. Infinity inspected plaintiff‟s vehicle and approved the reasonable repair costs, which were discounted by 20 percent in accordance with the policy‟s limitation of coverage clause.

On October 26, 2007, plaintiff filed a purported class action complaint against Infinity based on the theory that the policy‟s limitation of coverage clause violates subdivision (d)(2) of section 758.5. Plaintiff filed the lawsuit on behalf of himself and a class of California plaintiffs who meet the following conditions: (1) plaintiffs were covered during a specified time period under the policy; (2) plaintiffs suffered covered losses to their vehicles; (3) plaintiffs had their vehicles repaired at the non-RSVP shops of their choice; and (4) due to the policy‟s limitation of coverage clause, plaintiffs received coverage for only 80 percent of the reasonable repair costs.

Based on the theory that the policy‟s limitation of coverage clause violates subdivision (d)(2) of section 758.5,*fn4 the complaint requested the following relief:

(1) compensatory damages for violation of section 758.5 (first cause of action); (2) punitive damages for breach of the implied covenant of good faith and fair dealing (second cause of action); and (3) restitution, disgorgement of profits, and injunctive relief for violation of the UCL (third cause of action). On April 4, 2008, plaintiff amended the complaint to add a fourth cause of action under a theory of unjust enrichment.

Infinity demurred to the first amended complaint on the ground that the policy‟s limitation of coverage clause does not violate section 758.5. Infinity argued that it is free to contract with its insureds for two tiers of coverage and that nothing in section 758.5 requires that it pay 100 percent of all reasonable repair costs in excess of the deductible. Infinity contended that section 758.5 allows it to provide a reduced rate of coverage for repairs performed at non-RSVP shops, provided that the reduction is not tied to the amount that would have been charged by an RSVP repair shop. Infinity asserted that because the policy‟s limitation of coverage was not "based on charges that would have been incurred had the vehicle been repaired by the insurer‟s chosen shop" (§ 758.5, subd. (d)(2)), there was no statutory violation.*fn5

In opposition to the demurrer, plaintiff argued in relevant part that the policy‟s limitation of coverage clause violates both the "express language" and the "clear intent" of section 758.5. Plaintiff contended that because the statute requires Infinity to pay 100 percent of all reasonable repair costs, the "discounts beyond the reasonable repair costs [are] a per se violation of the bill‟s express language, as well as its clear intent. The insurer must pay the prescribed coverage level, in this case 100%, of the reasonable costs of repair, less the deductible." Plaintiff further reasoned that because the reduced rate of coverage violates section 758.5, the statutory violation provides the basis for a claim under the unlawful prong of the UCL. Plaintiff pointed out that "virtually any law can serve as a predicate for a claim of unfair competition, under the unlawful prong, including a regulatory statute. Express, LLC v. Fetish Group, Inc., 464 F.Supp.2d 965 (C.D. Cal. 2006)."

The trial court rejected plaintiff‟s arguments and sustained the demurrer to the entire complaint without leave to amend. As relevant to this appeal, the trial court held that: (1) the first cause of action for violation of section 758.5 must fail because the limitation of coverage clause is not based on the amount that would have been charged by an RSVP shop and, therefore, does not violate the statute; and (2) the third cause of action for violation of the UCL must fail because "there is no illegality on which to base the [UCL] claim because there was no statutory violation."*fn6 The trial court denied leave to amend ...


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