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Eric E. Ortega v. Topa Insurance Company et al

May 24, 2012

ERIC E. ORTEGA, PLAINTIFF AND APPELLANT,
v.
TOPA INSURANCE COMPANY ET AL., DEFENDANTS AND RESPONDENTS.



APPEAL from an order of the Superior Court of Los Angeles County, Carl J. West, Judge. Super. Ct. No. BC382796)

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

CERTIFIED FOR PUBLICATION

(Los Angeles County

Affirmed.

Plaintiff and class representative Eric Ortega had a restricted policy of automobile insurance in which the insurer, defendant Topa Insurance Company (Topa), provided two tiers of physical damage coverage, paying all of the reasonable costs incurred at the insurers' preferred repair facility (PRF), but only 80 percent of the reasonable costs incurred at an unapproved repair facility selected by the insured. Ortega filed a class action complaint against Topa arising from the two-tier coverage alleging two statutory violations: Topa's payment practice is unlawful under Insurance Code section 758.5, subdivision (d)(2), and the application for insurance did not prominently disclose the limited physical damage coverage in violation of subdivision (d)(1).*fn1 In several motions before class certification, the trial court determined that the Topa policy and application did not violate the statute and thereafter struck the class allegations because the operative second amended complaint (complaint) did not plead the requisite class requirements. (Code Civ. Proc., § 382.)

In what appears to be an issue of first impression, we conclude the insurance application meets the statutory disclosure requirement and "prominently discloses" to the applicant that the auto insurance policy he or she applied for includes a contract provision suggesting or recommending a particular automotive repair facility. The Topa application states "this is a restricted policy," and contains a separate section entitled "certification of the applicant," explaining the limited physical damage coverage and asking the applicant to certify his or her understanding of the restricted policy.

We also conclude the limited physical damage coverage provision in the policy does not violate section 758.5, subdivision (d)(2), and agree with Maystruk v. Infinity Ins. Co. (2009) 175 Cal.App.4th 881 (Maystruk). To the extent that policyholders used a PRF to repair their damaged vehicle and were not satisfied with the repairs because the facility did not return the covered vehicle to its pre-loss condition, the trial court did not err in concluding that the complaint does not allege common issues of fact. Thus, we affirm the order striking the class allegations.

BACKGROUND

1. Insurance Application and Limited Physical Damage Coverage in the Policy

Topa's application for auto liability and physical damage insurance states in bold lettering on the first page: "This is a restricted policy."*fn2 In the boxed-off section entitled "CERTIFICATION OF APPLICANT," the application states in the second paragraph: "I certify that I understand that this is a restricted policy with coverage limitations and that I am aware of the policy limitations. I understand that in exchange for reduced physical damage premiums this policy has limited physical damage coverages and that repairs must be effected by an approved Preferred Repair Facility. Should I decide to have repairs performed by an unapproved facility, coverage will be limited to 80% of the covered loss subject to all applicable deductibles." This boxed-off section includes three other paragraphs, each one separated by spacing. This section also has a signature line for the applicant to "certify" his or her understanding of the terms of the restricted policy. Ortega's wife signed the application.

Topa issued the restricted policy to the Ortegas. The payment of loss provision states: "At our option we may: [¶] . . . [¶] (f) require that repair or replacement be effected by a 'Preferred Repair Facility'. [sic] 'Preferred Repair Facility' means an organization that meets and maintains repair and replacement standards required by us and which ensures quality repair and replacement services on all business that we direct to them. If you decide to have repairs or replacement services performed by other than a 'Preferred Replacement Facility,' [sic] we will pay only eighty percent (80%), less any applicable deductible, of the amount necessary to repair or replace the damaged or stolen property."

The payment of loss provision further states that in determining the amount necessary to restore damaged property to its pre-loss condition, the estimate will be based upon the prevailing competitive labor rates and "the cost of repair or replacement parts, which may be new, refurbished, restored, or used, including, but not limited to: [¶] (1) original manufacturer parts or equipment; and [¶] (2) nonoriginal manufacturer parts or equipment."

Ortega's 2003 Mercedes Benz E320 was a covered vehicle under this policy.

2. Events Alleged in the Complaint Leading to this Class Action

The complaint alleges that Ortega filed a claim under the policy when Ortega's Mercedes was vandalized. Ortega intended to select a repair facility, but Topa's third-party claims administrator informed him in writing of the limited physical damage coverage in his policy.

Ortega took his car to a PRF, but he allegedly was dissatisfied with the repairs and reported additional damages. Ortega alleged the PRF repairs did not restore his car to its pre-loss condition because the PRF replaced the damaged parts with nonoriginal equipment or manufacturer (non-OEM) parts.

3. Class Action Complaint

Ortega filed a class action complaint against Topa arising from the two tiers of physical damage coverage. Ortega alleged the limited physical damage coverage provision in the policy violates section 758.5, subdivision (d)(2). Ortega also alleged the insurance application violates the disclosure requirement of section 758.5, subdivision (d)(1). Ortega sought to represent three putative classes.

Class A is described as the "Discounted Claimant Class," and consists of Topa policyholders who chose to take their vehicle to a non-PRF and were "subjected to an unlawful discount."*fn3

Class B, referred to as the "Steered Claimant Class," is defined in the complaint as those policyholders who took their vehicle to a PRF for repairs and had non-OEM parts used in the repair that disrupted the warranty by failing to repair the vehicle to its pre-loss condition.*fn4 In subsequent proceedings, Class B was redefined to remove the disruption of warranty language and instead specified the categories of non-OEM parts used in repairs.*fn5

Class C is the "Policyholder Class," which includes policyholders who were subject to the "stated general business practice of requiring claimants to use a PRF or incur a twenty percent (20%) discount for using a non-PRF of the policyholder's choice."*fn6

Ortega, individually, and on behalf of the putative classes, asserted causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, and violations of the Consumers Legal Remedies Act (CLRA) (Civ. Code, ยง 1750 et seq.) and the ...


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