Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEALS from an order of the Superior Court of Los Angeles County. Super. Ct. No. BC339212, Carl J. West, Judge.
Peter L. Weinberger & Associates and Doug Mastroianni for Plaintiff and Appellant.
Shoecraft Burton, Robert D. Shoecraft and Michelle L. Burton for Defendant and Respondent.
COOPER, P. J.
We hold that compliance with former Insurance Code section 791.10, subdivision (a)(1), which governs adverse underwriting decisions, was not sufficient to constitute compliance with former Insurance Code section 677, which governs the cancellation of a homeowner’s insurance policy. Under Lee v. Industrial Indemnity Co. (1986) 177 Cal.App.3d 921 (Lee), strict compliance with former section 677 was required in order to cancel a homeowner’s insurance policy. We reverse a trial court order striking class allegations.
All undesignated statutory citations are to the Insurance Code.
FACTUAL AND PROCEDURAL BACKGROUND
Pacific Specialty Insurance Company (PSIC) issued Alfredo Gonzales a policy for homeowner’s insurance effective December 2, 2002. PSIC purported to cancel the policy on May 30, 2003, the effectiveness of which is challenged by Gonzalez. The Notice of cancellation states: “Policy is being cancelled for the following reasons: Inspection 4/18/03, risk unacceptable. Dwelling is in course of construction and vacant. Substantial increase hazard.” The notice of cancellation did not state that upon written request within 15 days of the date of cancellation, the insurer shall specify the reason for cancellation. Subsequently, PSIC refused to defend or indemnify Gonzales in a personal injury lawsuit filed by Hector Comacho, who was allegedly injured while performing work at Gonzales’s home.
Gonzalez filed a complaint against PSIC on behalf of himself and all others similarly situated for negligent misrepresentation, unfair competition, breach of contract, breach of the implied covenant of good faith and fair dealing, malicious prosecution, and declaratory relief. With certain exclusions, Gonzales sought to represent “[a]ll persons in California who were issued homeowner’s policies by Pacific that were in effect for at least sixty days, and who were informed by Pacific that their policies had been cancelled by a notice which did not comply with California Insurance Code 677(a)(2).”
The parties agreed to submit “threshold questions” to the trial court. In an order, the trial court struck the class allegations finding: “Plaintiffs’ identification of the classes for which he pursues claims is inadequate and confusing. More importantly, in view of the threshold determination, Plaintiff may not pursue the generalized class claims asserted in the First Amended Complaint.” In its threshold determination, the court found (1) PSIC failed to comply strictly with former section 677; (2) PSIC complied with former section 791.10; (3) since there was compliance with former section 791.10, PSIC was not required to comply with former section 677.
The order striking the class allegations is appealable since no viable class claim remains after the trial court’s order. (Alch v. Superior Court (2004) 122 Cal.App.4th 339, 360.) Because the reason for striking the allegations incorporates the threshold determination, we review the trial court’s analysis of the relevant statutes. The parties have divided the issues decided in the threshold determination into an appeal and cross-appeal. PSIC challenges the first and Gonzalez challenges the other determinations. However, the findings are interrelated and are discussed together.
DISCUSSION
This case primarily involves the statutory interpretation of former sections 677 and 791.10. Statutory interpretation raises a question of law, which we review de novo. (Kavanaugh v. West Sonoma County Union High School Dist. (2003) 29 Cal.4th 911, 916.)
Prior to a 2006 revision, section 677 provided in pertinent part: “(a) All notices of cancellation shall be in writing, mailed to the named insured at the address shown in the policy, or to his or her last known address, and shall state, with respect to policies in effect after the time limits specified in Section 676, (1) which of the grounds set forth in Section 676 is relied upon, and (2) that, upon written request of the named insured, mailed or delivered to the insurer within 15 days of the date of cancellation, the insurer shall specify the reason for the cancellation except where the reason is for nonpayment of premium and is so stated in the cancellation notice.” (Former § 677, italics added.)
PSIC’s notice of cancellation did not state that upon written request of Gonzales “mailed or delivered to the insurer within 15 days of the date of cancellation, the insurer shall specify the reason for the cancellation . . . .” It did, however, provide the reason for cancellation as follows: “Inspection 4/18/03, risk unacceptable. Dwelling is in course of construction and vacant. Substantial increase hazard.”
I. There Must Be Strict Compliance with Former Section 677
There must be strict compliance with section 677, like other statutes governing notices of cancellation of an insurance policy. (Mackey v. Bristol West Ins. Service of Cal., Inc. (2003) 105 Cal.App.4th 1247, 1258; cf Naify v. Pacific Indemnity Co. (1938) 11 Cal.2d 5, 11 [finding notice invalid where it did not sate that “the excess premium will be refunded on demand].) “In California, there is no such thing as substantial compliance in furnishing notice that an insurance policy has been cancelled.” (Mackey v. Bristol West Ins. Service of Cal., Inc., supra, 105 Cal.App.4th at p. 1258.)
Applying these principles, in Lee, supra, 177 Cal.App.3d 921 the court held a notice of cancellation insufficient where it did not state that the insured upon written request could obtain a statement of the facts upon which the cancellation was based even though the notice of cancellation included a reason for the cancellation. (Id. at p. 926.) Because the required notice was not provided, the purported cancellation was void. (Ibid.)
Lee is indistinguishable from this case. PSIC argues that the statute was modified in 1987 after Lee was decided, an accurate but unhelpful statement. At the time Lee was decided, the statute required the notice of cancellation state “upon written request of the named insured, the insurer shall furnish the facts on which the cancellation is based.” (Lee, supra, 177 Cal.App.3d at p. 923, fn. 1, quoting former § 677.) Prior to the 2006 amendment, the statute required the notice of cancellation to state “that upon written request of the named insured . . . the insurer shall specify the reason for the cancellation. . . .” While one could argue there is a distinction between “furnish the facts” and “specify the reason,” here PSIC provided no notice that the insured could receive any information and therefore the distinction is irrelevant to this case.
II. Compliance with Former Section 791.10, subdivision (a)(1) Does Not Satisfy The Requirements of Former Section 677
PSIC argues in the alternative that it complied with former section 791.10 and therefore was not required to follow each requirement of former section 677, an argument the trial court found to be persuasive. At the relevant time, section 791.10 provided in pertinent part: “(a) In the event of an adverse underwriting decision the insurance institution or agent responsible for the decision shall: [¶] (1) Either provide the applicant, policyholder or individual proposed for coverage with the specific reason or reasons for the adverse underwriting decision in writing or advise such person that upon written request he or she may receive the specific reason or reasons in writing. [¶] (2) Provide the applicant, policyholder or individual proposed for coverage with a summary of the rights established under subdivision (b) and Sections 791.08 and 791.09.” (Former § 791.10.)
The trial court erred in finding that compliance with section 791.10, subdivision (a)(1) was sufficient to satisfy the notice requirement to the insured under former section 667. Currently section 677 requires compliance with section 791.10, subdivisions (a) and (e) in addition to other requirements. It currently provides: “All notices of cancellation shall be in writing, mailed to the named insured at the address shown in the policy, or to his or her last known address, and shall state, with respect to policies in effect after the time limits specified in Section 676, (1) which of the grounds set forth in Section 676 is relied upon, and, in accordance with the requirements of subdivisions (a) and (e) of Section 791.10, and (2) the specific information supporting the cancellation, the specific items of personal and privileged information that support those reasons, if applicable, and corresponding summary of rights.” (Italics added.) Under the current version of section 677, compliance with section 791.10, subdivisions (a) and (e) is one requirement, but is not the only requirement.
Stated otherwise, compliance with section 791.10 does not excuse compliance with section 677. Instead, it currently fulfills one requirement of section 677. The two statutes are not and never were mutually exclusive. Therefore, PSIC’s argument that compliance with section 791.10 was sufficient is not persuasive. Section 677 requires compliance with each of its mandates. At the time Gonzales’s insurance was cancelled, one of those mandates included giving notice that the insured could request the reason for cancellation.
It is noteworthy that PSIC does not argue that it fully complied with section 791.10, but only that it complied with section 790.10, subdivision (a)(1). Thus, under PSIC’s statutory interpretation it is sufficient to comply with part of section 677 and part of section 791.10 in order to achieve full compliance with section 677. No rule of statutory construction allows such selective compliance with portions of different statutes.
As PSIC points out, its notice of cancellation specified the reasons, making it “redundant” to inform Gonzales that he could request the reasons for the cancellation. The Legislature eventually recognized this deficiency and amended the statute in 2006.
However, the fact that the statute, as it existed when Gonzales’s insurance was cancelled, called for different methods of achieving the same goal of informing the insured of his or her rights, does not excuse PSIC’s compliance with the clear, mandatory statutory requirement. Even though the statute could have been better, PSIC was required to strictly follow the law.
III. Gonzales Should Be Allowed to Amend the Operative Complaint
The trial court struck the class allegations because they were unclear and because of its determination of the threshold issues. The court erred in its determination of threshold issues and the record does not elucidate whether, absent this error, the court would have struck the class allegations. Gonzales should have an opportunity to amend the complaint to clarify the class allegations.
DISPOSITION
The trial court’s order striking the class allegations is reversed. The case is remanded to the trial court. Gonzales is entitled to costs on appeal.
We concur: BOLAND, J., FLIER, J.