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Ellena v. Department of Insurance

California Court of Appeals, First District, Second Division

October 1, 2014

CASSAUNDRA ELLENA, Plaintiff and Appellant,
DEPARTMENT OF INSURANCE et al., Defendants and Respondents.

San Francisco County Super. Ct. No. CGC-11-516008 Hon. Harold E. Kahn, Judge.

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Law Office of Bennett M. Cohen and Bennett M. Cohen for Plaintiff and Appellant.

Kamala D. Harris, Attorney General, Paul D. Gifford, Assistant Attorney General, Joyce E. Hee and Anne Michelle Burr, Deputy Attorneys General, for Defendants and Respondents.

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Kline, P.J.

Cassaundra Ellena appeals from a judgment of dismissal of her mandamus claim against the Department of Insurance and the Commissioner of the Department of Insurance (the commissioner; collectively, the DOI). Ellena contends, among other things, that the trial court erred when it found that she did not sufficiently allege in her pleading that the DOI violated a specific mandatory duty. We conclude that Ellena stated a viable mandamus claim because, as alleged, the commissioner violated the mandatory duty under Insurance Code sections 12921.5, 12926, and 10291.5, subdivision (b), [1] to review a new group disability insurance policy form for compliance with the law prior to approving the policy for distribution in the state. Accordingly, we reverse the judgment dismissing the DOI.


On November 18, 2011, Ellena filed a complaint against Standard Insurance Company (Standard), Stancorp Financial Group (Stancorp), and the DOI. She alleged that Standard is a wholly owned subsidiary of Stancorp, and that Standard failed to provide disability benefits to her under a group disability policy issued to her employer, the County of Sonoma (the policy), after she stopped working because of her lupus disease in April 2010.

Standard, according to Ellena’s pleading, denied her claim for disability on August 27, 2010, based on the language of a policy form entitled “Definition of Disability.” Her pleading stated that this policy form was deceptive and violated settled law in California. In her sixth cause of action, she asserted that the DOI approved the policy without complying with its mandatory duty to review the policy form in accordance with established criteria. She sought a writ of mandamus against the DOI under Code of Civil Procedure section 1085 for violating mandatory duties.

The DOI demurred, and Ellena filed a first amended complaint, alleging the same mandamus cause of action against the DOI. The DOI demurred, and the trial court sustained the demurrer with leave to amend.

On June 6, 2012, Ellena filed a second amended complaint with six causes of action. The second amended complaint set forth five causes of action against Standard and Stancorp, and included a sixth cause of action for mandamus against the DOI.

Ellena asserted that the DOI had a mandatory duty under sections 10290, 10291.5, 12921, and 12926 and under California Code of Regulations, title 10,

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section 2218.10 (regulation 2218.10) to review the policy to make sure it complied with California law prior to approving the policy. The policy, according to the second amended complaint, violated California law because the provisions granted to the insurance company the right to redefine Ellena’s “ ‘Own Occupation’ as an occupation other than the one which she actually performed and then, further, to deny her claim based on [its] determination that she was able to perform an occupation that was not her own; additionally, the [p]olicy violate[d] California law by requiring that for an insured to qualify for disability benefits under the ‘Any Occupation’ provision of the [p]olicy, the insured must be unable to perform ‘all occupations’; additionally, these aforesaid provisions and other provisions in the [p]olicy contain[ed] and/or constitute[d] limitations and exclusions with respect to when an insured qualifie[d] as disabled which [were] not plain, clear, prominent or conspicuous, which [misled] insureds as to their true rights under California law and which [were] buried in a coverage clause with respect to when an insured [was] eligible for benefits due to disability.”[2]

Two years after approving the policy for distribution in California, the DOI, according to Ellena’s pleading, defined “ ‘total disability’ ” in an agreement negotiated with another insurance company, known as the “ ‘California Settlement Agreement, ’ ” as “a disability that renders one unable to perform with reasonable continuity the substantial and material acts necessary to pursue his or her usual occupation in the usual and customary way . . . ." (Original boldface.) Ellena asserted that this definition in the California Settlement Agreement reflected settled California law and this settled law was known to the DOI when it approved the policy. The second amended complaint stated that the “ ‘Definition of Disability’ form [in the policy] that was ‘approved’ by the DOI Defendants ha[d] the effect of making it substantially easier than is permissible under settled California law for the

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insurer to deny benefits.” The DOI’s approval of the “ ‘Definition of Disability’ provision” was, according to the second amended complaint, “a substantial factor in causing the denial of [Ellena’s] claim for benefits.”

Ellena alleged that the DOI “never actually exercised” its “discretion or performed” its “mandatory duties under” the Insurance Code to determine whether the policy complied with California law or qualified for approval under the Insurance Code. Additionally, she asserted, “Assuming that the DOI Defendants actually reviewed the ‘Definition of Disability’ form under the California Insurance Code, ..., the DOI Defendants abused their discretion in approving the [p]olicy...; the DOI Defendants’ aforesaid abuses of discretion were palpably unreasonable, arbitrary and capricious.”

Ellena sought a writ of mandate to force the DOI to revoke and/or withdraw approval of the “Definition of Disability” form in the policy or to compel the DOI to exercise its discretion to approve or revoke the “Definition of Disability” form in the policy.

On June 28, 2012, the DOI again demurred to the second amended complaint. The trial court sustained the DOI’s demurrer without leave to amend. The court ruled that Ellena had not sufficiently alleged a violation of a specific mandatory duty and that a writ of mandate could not be based on general enforcement provisions or statutes involving the DOI’s exercise of discretion. On October 11, 2012, the court dismissed with prejudice the DOI from the lawsuit.

Ellena filed a timely notice of appeal. On September 16, 2013, the DOI filed in this court a motion to augment the record to include exhibits attached to the second amended complaint and a request for judicial notice of, among other things, two superior court orders in other cases. We granted the unopposed motion to augment and we took the request for judicial notice under submission, stating that we would rule on this request when deciding the merits of the appeal. We hereby grant the DOI’s request for judicial notice. On October 16, 2013, Ellena filed an unopposed request for judicial notice of superior court orders in other cases. We granted this unopposed request on November 6, 2013.


I. Standard of Review

“ ‘A demurrer tests the legal sufficiency of the complaint, and the granting of leave to amend involves the trial court’s discretion. Therefore, an appellate court employs two ...

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