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Mackay v. Superior Court of Los Angeles County

October 6, 2010

AMBER MACKAY ET AL., PETITIONERS,
v.
THE SUPERIOR COURT OF LOS ANGELES COUNTY, RESPONDENT; 21ST CENTURY INSURANCE COMPANY, REAL PARTY IN INTEREST.
21ST CENTURY INSURANCE COMPANY, PETITIONER,
v.
THE SUPERIOR COURT OF LOS ANGELES COUNTY, RESPONDENT; AMBER MACKAY ET AL., REAL PARTIES IN INTEREST.



ORIGINAL PROCEEDINGS in mandate. John S. Wiley, Jr. and Anthony J. Mohr, Judges. Petition for writ of mandate in No. B220469 is denied. Petition for writ of mandate in No. B223772 is granted. Matter is remanded with directions. (Los Angeles County Super. Ct. Nos. BC297438, BC266219, BC297438) (John S. Wiley, Jr., Judge, Anthony J. Mohr, Judge)

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

CERTIFIED FOR PUBLICATION

In California, a casualty insurance company cannot charge a rate unless the rate is part of a rate plan which has been approved in advance by the Department of Insurance (DOI). The Insurance Code provides specific administrative remedies which may be pursued in order to challenge a rate as illegal, even after the rate has been approved. Judicial review of the administrative proceedings is available by means of a petition for writ of mandate. In this case, the insureds attempted to pursue their administrative remedy, but after the DOI declined to hold a hearing, the insureds filed a civil action against the insurer, rather than seeking judicial review of the DOI's administrative decision to decline jurisdiction. The question presented by this appeal is whether, after a rate has been approved, an insured may pursue a civil action to challenge what it believes to be an illegal rate. We conclude that the statutory provisions for an administrative process (and judicial review thereof) are the exclusive means of challenging an approved rate. As there is no triable issue of fact as to the issue of the approval of the rates at issue in this case, we conclude the insurer is entitled to summary judgment.

FACTUAL AND PROCEDURAL BACKGROUND

On April 24, 2001, Dana Poss filed an action against 21st Century Insurance Company (21st Century) challenging two of its rating practices as violative of the Insurance Code. Under Insurance Code section 1861.02, there are certain factors which must be considered in determining automobile insurance rates; there are other factors which may be considered. Subdivision (c) of Insurance Code section 1861.02 provides, in pertinent part, "The absence of prior automobile insurance coverage, in and of itself, shall not be a criterion for determining eligibility for a Good Driver Discount policy,[*fn1 ] or generally for automobile rates, premiums, or insurability." (Italics added.) At issue in this case are two rating practices which are alleged to violate this provision, "accident verification," and "persistency."

It is undisputed that one of the mandatory factors to be considered in rate setting, indeed, the factor to be given the most weight, is the "insured's driving safety record." (Ins. Code, § 1861.02, subd. (a)(1).) 21st Century had four ways of determining an applicant's driving safety record, although three of the four methods depended on the applicant then having insurance,*fn2 and not all applicants who were uninsured were eligible to use the fourth method.*fn3 It is alleged that, as most applicants would be unable to verify their driving records in the absence of prior insurance, 21st Century's "accident verification" practices violated the prohibition on the use of the "absence of prior automobile insurance coverage, in and of itself, [as] a criterion for determining . . . automobile rates, premiums, or insurability."*fn4

Similarly, one of the factors which an insurance company may consider in rate setting is "persistency." (Cal. Code Regs., tit. 10, § 2632.5(d)(11).) The applicable regulation was initially silent as to the definition of "persistency," and insurance companies used two different interpretations: (1) "loyalty persistency," which referred to an insured's previous coverage with the insurer itself or a related entity; or (2) "portable persistency," which referred to an insured's previous coverage with any insurer. (Foundation for Taxpayer & Consumer Rights v. Garamendi (2005) 132 Cal.App.4th 1354, 1360-1361.) It is alleged that 21st Century's use of "portable persistency" violated the prohibition on the use of the "absence of prior automobile insurance coverage, in and of itself, [as] a criterion for determining . . . automobile rates, premiums, or insurability."*fn5

Poss filed his action challenging 21st Century's accident verification and persistency practices under Business and Professions Code section 17200, proceeding as a private attorney general on behalf of the general public. Poss and 21st Century then stipulated to a voluntary dismissal without prejudice, and a tolling agreement, in order to permit Poss to pursue his administrative remedy before the DOI. Poss filed a formal complaint with the DOI, and requested a hearing. On January 29, 2002, the DOI declined to exercise jurisdiction as the DOI was proposing new regulations to resolve the issue of persistency. After further communications were exchanged, the DOI issued a similar order on April 25, 2002, declining jurisdiction over the issue of accident verification, as the DOI was similarly addressing the issue in a proposed regulation.

Believing that the DOI "has done all it [wa]s going to do," and further believing that the administrative remedy is not the exclusive means of challenging approved rates, Poss's counsel filed a new civil action against 21st Century. The operative complaint is the second amended complaint; the plaintiffs are now Amber McKay and Jacqueline Leacy, suing on behalf of themselves and all others similarly situated.

Class certification was granted. The class is defined as "[a]ll persons who purchased automobile insurance from 21st Century at any time from October 1, 1997 through October 31, 2005 and who paid increased premiums due to a lack of prior insurance." The definition includes "all those individuals who paid increased premiums because they could not verify their accident record due to a lack of prior insurance, as well as all of those individuals who paid increased premiums because they were not 'persistent' due to a lack of prior insurance."

21st Century moved for summary adjudication regarding its use of portable persistency. While 21st Century raised multiple legal theories, the one with which we are concerned was 21st Century's argument that every time it used the rating factor of portable persistency, it did so pursuant to a rating plan which had been approved by the DOI. Although plaintiffs initially opposed the motion for summary adjudication on the basis that there was a triable issue of fact as to whether the DOI had actually reviewed those elements of 21st Century's rating plans which specifically referenced portable persistency, they do not pursue that challenge in the instant writ proceeding. A hearing was held before Judge John Shepard Wiley Jr., who ultimately granted summary adjudication on the basis that challenges to approved rates may only be made via the administrative procedure set forth in the Insurance Code, not by means of separate civil action under Business and Professions Code section 17200.

Plaintiffs filed a petition for writ of mandate (No. B220469) on November 24, 2009. However, by this time, 21st Century had moved for summary adjudication regarding the accident verification factor. We deferred ruling on plaintiffs' writ petition pending a trial court ruling on the accident verification summary adjudication motion. At the January 28, 2010 hearing, the trial judge, now Judge Anthony J. Mohr, indicated his tentative belief that Judge Wiley's interpretation of the law was correct. However, Judge Mohr was concerned that, with respect to accident verification, there was a triable issue of fact as to whether that rating factor had actually been approved by the DOI. The court ultimately issued a ruling declining to reach the legal issue, as the evidence failed to clearly establish that 21st Century's use of accident verification had been approved by the DOI. Thus, summary adjudication was denied. 21st Century filed its own petition for writ of mandate (No. B223772). We have consolidated the two petitions for hearing and disposition in a single opinion.

ISSUES PRESENTED

We first consider the factual issue; that is, whether a triable issue of fact exists as to the approval by the DOI of 21st Century's use of accident verification. We conclude that no triable issue of fact exists. Secondly, we turn to the legal issue; that is, whether the approval of a rating factor by the DOI precludes a civil action against the insurer challenging the use of that rating factor. We conclude that it does.

DISCUSSION

1. Standard of Review

" 'A defendant is entitled to summary judgment if the record establishes as a matter of law that none of the plaintiff's asserted causes of action can prevail.' (Molko v. Holy Spirit Assn. (1988) 46 Cal.3d 1092, 1107.) The pleadings define the issues to be considered on a motion for summary judgment. (Sadlier v. Superior Court (1986) 184 Cal.App.3d 1050, 1055.) As to each claim as framed by the complaint, the defendant must present facts to negate an essential element or to establish a defense. Only then will the burden shift to the plaintiff to demonstrate the existence of a triable, material issue of fact. (AARTS Productions, Inc. v. Crocker National Bank (1986) 179 Cal.App.3d 1061, 1064-1065.)" (Ferrari v. Grand Canyon Dories (1995) 32 Cal.App.4th 248, 252.) "There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) We review orders granting or denying a summary judgment motion de novo. (FSR Brokerage, Inc. v. Superior Court (1995) 35 Cal.App.4th 69, 72; Union Bank v. Superior Court (1995) 31 Cal.App.4th 573, 579.) We exercise "an independent assessment of the correctness of the trial court's ruling, applying the same legal standard as the trial court in determining whether there are any genuine issues of material fact or whether the moving party is entitled to judgment as a matter of law." (Iverson v. Muroc Unified School Dist. (1995) 32 Cal.App.4th 218, 222.)

2. The Accident Verification Factor was Approved by the DOI

21st Century's use of the accident verification factor, and the DOI's approval thereof, during the class period of October 1997 through October 2005, is somewhat complex. The plaintiffs do not dispute that 21st Century's use of accident verification was included in the papers that it submitted to the DOI. However, they contend that accident verification was not an approved rating factor, but only an unapproved underwriting guideline. Indeed, plaintiffs point to evidence in some DOI approval letters stating, "If any portion of the application or related documentation conflicts with California law, that portion is specifically not approved.[*fn6 ] This approval does not constitute an approval of underwriting guidelines nor the specific language, coverages, terms, covenants and conditions contained in any forms, or of the ...


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