ZHANG v. S.C. (CALIFORNIA CAPITAL INSURANCE)Petitioner’s Answer to Petition for ReviewCal.January 28, 2010Case No. S178542 IN THE SUPREME COURT SURREME COURT OF THE STATE OF CALIFORNIA / JAN 2 # 2010 YANTING ZHANG, Frederick K. Ohirich Clerk Petitioner, "DEPUTY VS. SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SAN BERNARDINO, Respondent. CALIFORNIA CAPITAL INSURANCE COMPANY, Real Party in Interest. After A Decision By The Court Of Appeal Fourth Appellate District, Division Two [Case No. E047201] ANSWERTO PETITION FOR REVIEW Gary K. Kwasniewski (Bar No. 126808) gkk@vklawyers.com Jeanette L. Viau (Bar No. 123224) jlv@vklawyers.com VIAU & KWASNIEWSKI One BunkerHill 601 West Fifth Street, Eighth Floor Los Angeles, CA 90071-2004 Telephone: (213) 225-5855 Facsimile: (818) 790-6297 Attorneys for Petitioner YANTING ZHANG Case No. 8178542 IN THE SUPREME COURT OF THE STATE OF CALIFORNIA YANTING ZHANG, Petitioner, VS. SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SAN BERNARDINO, Respondent. CALIFORNIA CAPITAL INSURANCE COMPANY, RealParty in Interest. After A Decision By The Court Of Appeal Fourth Appellate District, Division Two [Case No. E047201] ANSWERTO PETITION FOR REVIEW Gary K. Kwasniewski (Bar No. 126808) kk@vklawyers.com Jeanette L. Viau (Bar No. 123224) ilv@vklawyers.com VIAU & KWASNIEWSKI One Bunker Hill 601 West Fifth Street, Eighth Floor Los Angeles, CA 90071-2004 Telephone: (213) 225-5855 Facsimile: (818) 790-6297 Attorneys for Petitioner YANTING ZHANG TABLE OF CONTENTS Page TABLE OF AUTHORITIES. .........ccccccceccsecsecsssesseessecsarecsssesseeesneens ii I. ISSUE PRESENTED... ccccccccesecsseseeeneecseesssseecseersseeeensees | II. INTRODUCTION... ceeccecccesesseeesseseeeeeesseecseesersesseeeseeens 2 WI. STATEMENT OF FACTS... ccccccsscccessessecseessesssesseessenes 6 IV. LEGAL DISCUSSION... cccccccccccsecsteessseesecseeeretestessseens 10 A. Petitioner’s UCL Cause Of Action Is Not Predicated On Privileged Conduct.........cccccceeeees 10 B. Conduct That Does Not Allow A Private Right Of Action Will Support A UCL Theory............ 11 C. The Conduct Here Is “Otherwise Prohibited”; Real Party’s Contention That Petitioner’s UCL Claim Is Barred BecauseIt Is Predicated Solely On The UIPA Is Erroneous.........ccccccceceeeeereees 13 D. The Court In Moradi-Shalal Acknowledged That The Legislature Could Create Additional Civil Remedies; The Legislature Did Just That Pursuant To Insurance Code Section 1861.03(a)........ 17 E. The Fourth District Court Of Appeal’s Reliance On Progressive West Was Propet........ccccccccesecseeeseees 18 F. The UCL Remedies Are “Cumulative” To All Other Remedies..........ccccccccssccsccsscesscessesesseseecseesaseass 20 V. CONCLUSION... cececeeeeseesseseeseesecsessecseeececsessesscanearseaes 21 TABLE OF AUTHORITIES CASES Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968.......cccccsseessssseeesseeeeee Gallimore v. State Farm Fire & Cas. Ins. Co. (2002) 102 Cal.App.4th 1388 ......ccccccsecsscsseeecseeseee Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553..cccccccccsccscessssesssssssesssesseeneees Kapsimallis v. Allstate Ins. Co. (2002) 104 Cal.App.4th 667...ccccsecccssessccsseessseeseenee Kasky v. Nike, Inc. (2002) 27 Cal4th 939... cecccecesseseesetesseseseseeseens Manufacturers Life Ins. Co. v. Superior Court (1995) 10 Cal.4th 257... ceccccccsesssessessessseteseaees Moradi-Shalal v. Fireman’s Fund Ins. Cos. (1988) 46 Cal.3d 287 ...ccccccsccsssesccssescesseecesssesesseeseese Progressive West Ins. Co. v. Superior Court (2005) 135 CalApp.4th 263.......cccccscesssesesecsscnsens Saunders v. Superior Court (1994) 27 Cal.App.4th 832...ccccccecccsssesesseesseesesen Stevens v. Superior Court (1999) 75 CalApp.4th 594....cccccccsescsecsstessseesecsees Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553... cccccccssesssseecsstessssessssecsssvee ll. sesnessesaseees 5,6 seeseeeneeeee 6 beeeeeeeeeeeaes 20 eceeeeneeeaes 6 siteeteneeeeaes 12 seccseteanesan 10, 11 13, 16, 17 eedeneeneeeeees passim seusesuessseees 5,15 16, 18, 19, 20 eeeeveneeeneee 12 veeeeeeteeteaes 12 ecteeeeeenenee 12 TABLE OF AUTHORITIES(cont.) Page CASES(cont.) Textron Financial Corp. v. National Union Fire Ins. Co. (2994) 118 CalApp.4th 1061... cccecseceesecseecsetssceeeeens 2,5 Troyk v. Farmers Group, Inc. (2009) 171 CalApp.4th 1305.00... cccccccsscsessccsesssessesseeseeacens 12 STATUTES Business and Professions Code section 16720........ccccccccccssesseeetseeeses 13, 14 Business and Professions Code section 17200......:cccssceseseseseeeees passim Business and Professions Code section 17204.......cccccccccccceseseeseesees 20 Business and Professions Code section 17500........ccccsscesescsereees 14 Civil Procedure section 1021.5 ......cccccceccccesssessssesesssecsecesesesseesses 20, 21 Insurance Code section 790.03(a).....ccccscscsccescsscsessssessesscssssserenes 13 Insurance Code section 790.03(b).......cccscccsssscssesscsesescesecssesreeseeteas 13, 14 Insurance Code section 790.03(I).....c.ccccseesssscescsessscsssssescesecssesseees passim Insurance Code section 790.03(h)(1).....cccccccsecsesscsscesecssssseessessesenees passim Insurance Code section 790.03(h)(3).....ccccccscsccessecsecssssssssessecseeses 19 Insurance Code section 790.03 (h)(6)......cccccccccsscscccsecsscssseseeseceeeees 19 Insurance Code section 790.03 (h)(9)......cccsccescsessssesssssssssssesesees 19 Insurance Code section 1861.03(a).......:ccsssseccsssseessesesscsscsesecsstsees 2,17 18, 20 California Regulations, Title 10, Chapter 5, subchapter 7.5, SECHONS 2695.1, Cf SCG. ..eceeccceccesesessessssesescsesecsssaseeecsensenteseaes 11, 12 ll. I. PRESENTED The Fourth District Court of Appeal, Division Two, concludedthat wherea plaintiff/insured alleges conduct specifically prohibited by the UCL'- such as “unfair, deceptive, untrue, and/or misleading advertising”- there is no reason why an insurance company should havespecial immunity from UCLliability not possessed by any other industry. Petitioner/insured Yanting Zhang expressly alleged that defendant/Real Party California Capital Insurance Company made “unfair” and “fraudulent” promisesin its advertising likely to deceive the public.” The Court concluded that “[nJo reason appears why an insurance company should notbe subject to similar liability under the UCLiffalse advertising or similar misrepresentations can be proved.” (Slip Op. at 9.) The Court held that Moradi-Shalal,? which prohibits a private right of action based on acts violating Insurance Code sections 790.03(h), et seg. (Unfair Insurance Practices Act, “UIPA”) does not apply to exemptcarriers from equitable responsibility for violating the UCL. The Court noted, however, that Moradi-Shalal will preclude ' Unfair Competition Law at Business and Professions Code sections 17200 ? et seq. 2 Zhang’s Second Amended Complaint, p. 32, par. 92,Il. 1-3. 3 Moradi-Shalal v. Fireman’s Fund Ins. Cos. (1988) 46 Cal.3d 287.. -|- insurance company UCLliability to the extent “a plaintiff relies on conduct that violates the Unfair Insurance Practices Act but is not otherwise prohibited. ...” (Slip Op. at 8; emphasisin original.) The issue is whether insurance companies should be protected from UCLliability when the allegations against the insurance companyare not dependent upon the UIPA. Further, pursuant to Insurance Code section 1861.03(a), Petitioner respectfully submits that direct statutory edict provides for such UCLliability. The Fourth District Court of Appeal, Division Two, properly resolved the issue presented herein. To the extent there is a conflict created by the Textron Financial Corp. v. National Union Fire Ins. Co. (2994) 118 Cal.App.4th 1061 decision, then Petitioner/insured Yanting Zhangis not in disagreement with the conclusionthat the issue should be resolved by the instant Review Petition, and by upholding the Zhang decision. Il. INTRODUCTION Real Party California Capital demurredto the third cause ofaction in Petitioner’s Second Amended Complaint, for alleged violations of Business and Professions Code sections 17200, et seg. Thetrial court sustained California Capital’s demurrer to the third cause of action, without leave to amend. The Petitioner submits that the sustaining of California Capital’s demurrer waserroneous, and, therefore, Petitioner/insured filed her Petition for Wnt of Mandate. The Court of Appeal granted Petitioner’s Writ, and reversedthetrial court’s sustaining of California Capital’s demurrer without leave to amend. Because Petitioner’s Second Amended Complaint alleged conductto support the UCL causeofaction - separate and apart from the conduct constituting violations of the UIPA - the Fourth District concludedthat the UCLclaims were valid. The Fourth District Court emphasizedthat insurance companies do not have a unique immunity from UCLliability: “The UCL, which onits face applies to all ‘businesses’ and certainly does not expressly except or exemptinsurers, does authorize any injured personto sue for the violation ofits requirements and/or prohibitions - that is, for ‘unfair competition.’ (Bus. & Prof. Code, § 17204.) ‘Unfair competition’ is defined in section 17200 to ‘include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue, or misleading advertising. . . . Undoubtedly an insureris subjectto suit under the UCL, and numerouscasessoreflect. (See, e.g., Quelimane Co. v. StewartTitle Guaranty Co., supra, 19 Cal.4th 26; Ticconi v. Blue Shield of California Life & Health Ins. Co. (2008) 160 Cal.App.4th 528.)” (Slip. Op.at 5.) Real Party argued that Moradi-Shalal prohibited Petitioner’s UCL theory, despite the fact that conduct other than acts violating the UIPA were -3- alleged to support that theory. The Fourth District Court rejected such a sweeping application of Moradi-Shalal’s proscriptions, stating: “Butif a plaintiff expressly alleges conduct expressly prohibited by the UCL, such as fraudulent conductlikely to deceive the public (McKell v. Washington Mutual, Inc., supra, 142 Cal.App.4th 1457) or false advertising, there is simply no reason to apply Moradi-Shalal to prohibit the cause of action. Such a case does not represent an attempt to ~ subvert or work around the Supreme Court’s holding; although the Unfair Insurance Practices Act does not providea private cause of action, in the UCL the Legislature clearly has provided such a remedy for conduct whichfalls within its purview. Again westress that to construe the Unfair Insurance Practices Act as immunizing insurers from the consequences of misconduct that other business must suffer would simply makeno sense. Moradi-Shalal does not require such a result and the decision in Manufacturers’ Life in fact supports this conclusion.” (Slip. Op. at 10 - 11.) Finally, the Court acknowledged that ““a somewhat closer question would be presented”if the pleading’s UCL causeofaction were predicated solely on UIPA violations. In Moradi-Shalal, the Supreme Court decided that there is no private right of action for civil damages pursuant to the UIPA based on claims mishandling. That case does not, however, immunize insurance companies from the consequences(including equitable) ofall other unlawful, unfair, or fraudulent business acts or practices, or of unfair, deceptive, untrue, or misleading advertising. To immunize insurance companies from the consequences of misconductfor which other businesses must answer “makesno sense.” Finally, the Fourth District Court agreed with the “approach” in Progressive West Ins. Co. v. Superior Court (2005) 135 Cal.App.4th 263, where the Third District Court of Appeal affirmed the overruling of a demurrer as to a UCL claim. The Court in Progressive West concluded that the insured’s third causeofaction was valid basedonthe factual allegations as to Progressive’s violations of the UCLbyits deceptive and misleading statements concerningits insurance products. The Court concludedthat the carrier’s “conductis likely to deceive the public... .” As such, “we conclude that Preciado has stated a [UCL] cause ofaction and the demurrer was properly overruled.” See, Progressive West, supra, 135 Cal.App.4th at 284 - 285. The Fourth District Court in Zhang concludedthat“to the extent” that Textron Financial Corp. v. National Union Fire Ins. Co. (2004) 118 Cal.App.4th 1061 “is inconsistent, we disagree.” (Slip. Op. 10.) The notion that insurance companies do not enjoy impunity for unlawful, unfair, or fraudulent business practices - separate and apart from UIPA misconduct- patently is not new. See, e.g., Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 984; Gallimore v. State Farm Fire & Cas. Ins. Co. (2002) 102 Cal.App.4th 1388, 1392; Kapsimallis v. Allstate Ins. Co. (2002) 104 Cal.App.4th 667, 676 - 677. As such,Petitioner respectfully submits that the Fourth District Court’s decision in Zhang was sound, andthat thereis no basis for Supreme Court review. However, if the Court finds thatthere is a conflict among the Courts of Appeal, Petitioner submits that review is proper, and that the Zhang decision should be upheld. Il. STATEMENT OF FACTS ~ Petitioner Yanting Zhang previously owned the insured property at issue, located at 17518 Sequoia Avenue, Hesperia, California, 92345 (“Property”). Petitioner purchased the California Capital Policy in the event of damageandloss at the Property. On July 5, 2005, a fire erupted;thefire, and the water used to extinguish the fire, caused widespread damage. Subsequentto Petitioner’s timely notice to California Capital, the carrier proceeded to engage in a campaign of harassing conduct. As Petitioner alleges in the operative pleading, California Capital’s conduct took on a personally malevolent tenor, such that its behavior and actions went far beyond mere “claims handling.” To summarize the dispute between the parties: On January 4, 2006, California Capital concluded that the cost to repair the extensive real property damagetotaled $111,277.75. Overthe next year and a half, Petitioner obtained repair scopes and bids which were well in excess of California Capital’s estimate of $111,277.75, and presented the scopes and bids to California Capital. California Capital refused to reconsiderits position. Petitioner had no choice but to pay for the Property repairs herself, given that California Capital’s estimate and offer were far less than what was needed to repair the Property. Representing herself, Petitioner finally was forcedto file a lawsuit on July 5, 2007 against California Capital. Petitioner subsequently retained her current counsel of record. When Petitioner’s counsel sought to engage in litigation, California Capital invoked Appraisal. Eachparty retained a disinterested, qualified Appraiser. The Appraisers selected a neutral Umpire. The Appraisal Award was issued on May 21, 2009. The Award based on November 2005 prices (California Capital’s date) totaled $185,261.47. The Award based on March 2007 prices (Petitioner’s date) totaled $194,491.41. Both Awardsare in stark contrast to the $111,277.75 California Capital demandedthat Petitioner accept. The cost ofjust the Appraisal itself exceeded $30,000, for Petitioner Zhangalone. The delays and costs now haveresultedin Petitioner Zhang losing the Property through foreclosure. The Property that was andis the subject of these proceedings no longer belongsto Petitioner Yanting Zhang. In addition to its undervaluation of Petitioner’s property loss, the carrier’s conduct included: Forwarding harassing and dunning notices advising Petitioner that if she did not repair the Property, the carrier would cancel her insurance. However, it was because of California Capital’s own unreasonable undervaluation, conduct, and delays that Petitioner could not properly repair the Property. California Capital then cancelled Petitioner’s Policy. Interfering with Petitioner’s attempts to retain a Public Adjusterto assist her. e Informing the mortgage holder on the Property that Petitioner had no intention of repairing the property, which wasfalse. By 2007, Petitioner did have the Property repaired, which was the catalyst for her substantial financial loss. California Capital’s fraudulent representations to the mortgage holder caused the mortgage holderto initiate legal proceedings against the Petitioner - legal proceedings Petitioner had to defend. Thestress resulting from the accusations against her caused Petitioner severe pregnancy complications, and the premature birth of her daughter, with its attendant health risks. Meanwhile, California Capital’s advertisementsstate, inter alia: “Our goalis to be a valuable asset to you - every step of the way, whether you have a claim or not... We are second to nonein our dedication to your safety and security. . . Our solid commitment to stay by your side has attracted the leading insurance advisors. You can rely on our expert network of independent agents to offer you custom coveragethat fits yourlife.” See, www.ciginsurance.com/main_body., web page. California Capital is not immunefrom liability pursuant to Business and Professions Codestatutory provisions specifically designedto prohibit and proscribe such “unlawful, unfair, and fraudulent” conduct. An -9- insurance carrier should not have an immunity not enjoyed by any other industry for false promises made which were andarelikely to deceive the public, and which werenot kept. IV. LEGAL DISCUSSION A. Petitioner’s UCL Cause Of Action Is Not Predicated On Privileged Conduct Real Party states that “no alleged UCL violation, even in the consumer-protection context, may be predicated upon conductthatis privileged. ...” (Petition, p. 14.) As such, Real Party contends, allowing the Business and Professions Code theory essentially undermines the holding ofMoradi-Shalal v. Fireman’s Fund Ins. Co. (1988) 46 Cal.3d 287 - becausethat case holds thereis no private right of action pursuant to Insurance Code section 790.03: “Plaintiffs [sic] cannot plead around Moradi-Shalal ‘by relying on conduct which violates only the UIPA as the 399basis for a UC[L] cause ofaction.’” (Petition, p. 15, citing to Manufacturers Life.) However, Moradi-Shalal bars private civil actions for monetary remedies based on claims handling misconduct - the case does not proscribe fraudulent advertising claims seekingrestitutionary relief. Further, in Manufacturers Life Ins. Co. v. Superior Court (1995) 10 Cal.4th 257, 277, the Court expressly held that the UIPA itself does not -10- create a “wholesale exemption” from lability for conduct that also constitutes unlawful, unfair, or fraudulent business activities. The Court in Manufacturers Life stated: “Neither the language of the UIPA nor its history suggests that the Legislature intended by its enactmentto abolish the Cartwright Act and UC[L] remedies for conduct which the UIPAalso proscribes... .” The Court in Manufacturers Life rejected the notion that in adopting the UIPA, the Legislature intended that only the Insurance Commissioner be authorized to remedy other unlawful conduct by insurance companies. Manufacturers Life, supra, 10 Cal.4th at 272 - 273. As the Fourth District Court mentioned more thanonce,here, insurance companies are not exempt from answering for misconduct engaged in separate and apart from claims handling. Petitioner specifically alleges that California Capital “engaged in unfair, deceptive, untrue, and/or misleading advertising. ...” These are acts that were notpart of the claims handling in this case. The foundational premise for Petitioner’s UCL claim is not “privileged.” B. Conduct That Does Not Allow A Private Right Of Action Will Support A UCL Theory Furthermore, Petitioner’s pleading alleges that California Capital violated numerous Regulations, set forth at the California Regulations, Title -l1- 10, Chapter 5, subchapter 7.5, sections 2695.1, et seg. As the Court stated in Stevens v. Superior Court (1999) 75 Cal.App.4th 594, 606: “A regulatory statute may form the basis for such a UCA [Business and Professions Code section 17200] action. The Supreme Court has long held that the ‘unlawful’ practices which form the basis of a UCAaction are ‘. . . any practicesforbidden by law,beit civil or criminal, federal state, or municipal, statutory, regulatory, or court-made.. .’ It is not necessary that the predicate law provide for private civil enforcement.” (Emphasesin original.) See, Stevens v. Superior Court, supra, 75 Cal.App.4th at 606, 89 Cal.Rptr.2d at 378, quoting to Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 838 - 839. The Court in Troyk v. Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1335 held that even where the offending conductviolates a statute for which there is no direct enforcement, or private right of action, the conduct may properly be the subject of a UCL claim: A private plaintiff individual may bring a 17200 action even when “the conduct alleged to constitute unfair competition violates a statute for the direct enforcement of which there is no private right of action.” Jd., citing to Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 950 and Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 565. -12- C. The Conduct Here Is “Otherwise Prohibited”; Real Party’s Contention That Petitioner’s UCL Claim Is Barred BecauseIt Is Predicated Solely On The UIPA Is Erroneous Real Party argues that Insurance Code section 790.03 includesin its proscriptions untrue, deceptive, or misleading advertising. See, Ins. C. § 790.03(a), (b). Real Party contends that pursuant to the UIPA, unfair, fraudulent, or false advertising “cannot be parsed or separated from conduct covered by the UIPA.” (Petition, p. 17.) Thus, according to California Capital, Moradi-Shalal proscribes an insurance company’s liability for fraudulent or false advertising under the UCL. Petitioner respectfully submits that such a broad and sweeping view ofUIPA proscriptions wasnot intended by the Court in Moradi-Shalal. First, the action in Moradi-Shalalpertained to an insurer’s alleged refusal to promptly and fairly settle the plaintiff's claim against the carrier’s insured. At issue wasa third party claim - not a first party claim - predicatedsolely on alleged claims handling misconduct. The relief sought was civil monetary damages. Further, it is apparent from the Court’s decision in Manufacturers Life Ins. Co. v. Superior Court, supra, that an insurance companyis not shielded from liability if the conductis proscribed in the UIPA - as well as anotherstatutory scheme such as the Cartwright Act at Business and -|3- Professions Codesections 16720, et seq. The Court in Manufacturers Life found that conduct constituting, inter alia, “deceptive statements” (such as those proscribed by Insurance Code section 790.03(b)) were also violative of the Cartwright Act - and were actionable under the UCL. Merely because conductis proscribed in the UIPA does not meanthat such conduct will not support a UCLtheory - if the conductis “otherwise prohibited.” The Fourth District here stated: “We understandthatif a plaintiff relies on conductthat violates the Unfair Insurance Practices Act butis not otherwise prohibited, Moradi-Shalal requiresthat a civil action underthe UCLbe considered barred.” (Slip. Op. 8.) As in Manufacturers Life, supra, Petitioner alleged conducthere that is otherwise prohibited. Business and Professions Code section 17500 specifically proscribes false or misleading statements or advertising- “including overthe Internet.” This applies to “any statement. . . concerning. . Services. .. professional or otherwise. . . which is untrue or misleading, and which is known,or by the exercise of reasonable care should be known, to be untrue or misleading... .” See, Bus. & Prof. C. § 17500. Petitioner’s allegations are not limited to claims handling activities as in Moradi-Shalal. The essence ofMoradi-Shalalis that first party insureds, and third party claimants, may not predicate causes of action for -14- civil damagesbasedsolely on violations of Insurance Codesection 790.03(h) - relating specifically to claims handling activities. Moradi- Shalal did not grant insurance companies widespread immunities, including in actions seeking equitable relief due to unlawful, unfair, and fraudulent advertising practiceslikely to deceive the consumerpublic. Thus, in Progressive West, supra, 135 Cal.App.4th at 283 - 284, the Court concludedthat the insured’s UCL causeofaction wasvalid in light of its allegations that other purchasers of Progressive policies were likely to be deceived or misled regarding the carrier’s insurance products: “A fraudulent business practice under section 17200 ‘is not based upon proofof the common law tort of deceit or deception, but is instead premised on whetherthe publicis likely to be deceived.’ (Pastoria v. Nationwide Ins., supra, 112 Cal.App.4th at p. 1498.) Stated another way,‘In orderto state a cause of action underthe fraud prong of (section 17200) a plaintiff need not show that he or others were actually deceived or confused by the conductor businesspractice in question. A violation can be shown evenifno one wasactually deceived, relied upon the fraudulent practice, or sustained any damage. Instead, it is only necessary to show that membersofthe public are likely to be deceived.’ (Schnall v. Hertz Corp. (2000) 78 Cal.App.4th 1144, 1167-1168.)....” Based uponthe insured’s allegations of Progressive’s pattern and practice of deceiving consumers purchasing its insurance products, the -15- Court concludedthat the carrier’s “conductis likely to deceive the public.. . .” As such, “we concludethat Preciado hasstated a cause of action and the demurrer wasproperly overruled.” See, Progressive West, supra, 135 Cal.App.4th at 284 - 285. Asthe Court stated in Manufacturers Life, at pages 283 - 284, if there is conduct alleged, other than conduct which violates only Insurance Codesection 790.03, then an insured’s Business and Professions Code violations allegations will be upheld: “{B]ecause [Insurance Code] section 790.03 does not create a private civil cause of action, plaintiff could not plead aroundthat limitation by relying on conduct which violates only the UIPA [Insurance Codesection 790.03] as the basis for a UCA [Business and Professions Code section 17200] cause of action. It held, however, that the trial court had properly overruled defendants’ demurrers to the UCAcause of action because the conduct on whichthe plaintiff predicated that cause of action also violated the Cartwright Act. Therefore, the conduct could form the basis for a cause of action under the UCA. .. This conclusion does not compromise the tule ofMoradi-Shalal in any way. The court concludedthere that the Legislature did not intend to create new causes of action whenit described unlawful insurance business practices in section 790.03, and therefore that section did not create a private cause of action under the UIPA... The UIPA nowherereflects legislative intent to repeal the Cartwright Act -16- insofar as it applies to the insurance industry, and the Legislature hasclearly stated its intent that the remedies andpenalties under the UCA are cumulative to other remedies andpenalties [citing to Business and Professions Code section 17205.]” (Emphasis added.) See, Manufacturers Life Ins. Co. v. Superior Court, supra, 10 Cal.4th 257, 283 - 284. Petitioner alleged conductviolative of statutory provisions separate and apart from the UIPA. The Fourth District held that the UCL claim was supported by that conduct. Petitioner submits that the Fourth District’s decision was supported and sound. D. The Court In Moradi-Shalal Acknowledged That The Legislature Could Create Additional Civil Remedies; The | Legislature Did Just That Pursuant To Insurance CodeSection 1861.03(a) Real Party states that “Moradi-Shalal determined that the Legislature intended noprivate right of action for claims arising under the UIPA.” (Petition, p. 18.) However, the Court in Moradi-Shalal, supra, 46 Cal.3d at 305 stated: “Finally, nothing we hold herein would prevent the Legislature from creating additional civil or administrative remedies, including, of course, creation of a private cause of action for violation of section 790.03... .” After the Court’s August 18, 1988 Moradi-Shalal decision, Insurance Code section 1861.03(a) was enacted. -17- Insurance Codesection 1861.03(a)states: “§ 1861.03. Unfair insurance practices; prohibition (a) The businessofinsurance shall be subject to the laws of California applicable to any other business, including, but not limitedto. .. the. . . unfair business practices laws (Parts 2 commencing with Section 16600). . . of the Business and Professions Code. . .” (Added by Initiative Measure (Prop. 103); approved by the electors, Nov. 8, 1988. . .). (Emphasis added.) Sections 17200, et seq. are included in Part 2 of the Business and Professions Code expressly referred to in Insurance Codesection 1861.03. Thus, in addition to the discussions hereinabove, the Fourth District’s decision in Zhang was supportedby section 1861.03. E. The Fourth District Court Of Appeal’s Reliance On Progressive West Was Proper Real Party cites as demonstrative of the Fourth District Court’s improperreliance on Progressive West Ins. Co. v. Superior Court, supra, that that case “is predicated, not on a claim-handling dispute that would allege violations of the types of activities covered by the UIPA, but an insured’s post-claim reimbursementdispute.” (Petition, p. 27.) Although the claim had been paid out in Progressive West, the insured’s allegations werestill founded on conduct proscribed by the UIPA: -18- “Preciado [insured] alleges Progressive fails to investigate claims, fails to properly explain policy benefits, misled Preciado and misrepresented material facts pertaining to his claim. . . and forced Preciadoto retain an attorney and incur economic damagesin order to receive proper benefits underthe policy.. . Preciadoalleges that Progressive made material misrepresentations and misled him (and presumably eachof its customers it makes these same demandsuponas a matter of course) in this regard. This conductis likely to deceive the public. For purposesofthis pleading, we conclude that Preciado has stated a [UCL] cause of action and the demurrer was properly overruled.” See, Progressive West Ins. Co. v. Superior Court, supra, 135 Cal.App.4th at 283 and 285. Preciadothe insured alleged that Progressive, inter alia: (a) failed to properly investigate claims (Ins. C. § 790.03(h)(3)); (b) failed to properly explain policy benefits (Ins. C. § 790.03(h)(1), (9)); (c) misled regarding, and misrepresented, material claim facts (Ins. C. § 790.03(h)(1)); and (d) compelled Preciado the insuredto retain the services of an attorney (Ins. C. § 790.03(h)(6)). Theseare alleged claims handling violations. Furthermore, Insurance Code section 790.03(h)(9) providesthatitis a UIPA violation for a carrier, after payment of a claim and whenasked,to refuse to specify the coverage under which payment has been made. Thus, UIPAviolations may occur even after a claim is resolved. The fact that the -19- insured’s med pay claim had been paid in Progressive West neither distinguishes the case, nor demonstrates that the Fourth District’s reliance on the decision wasin error. Finally, the Court in Progressive West found the UCLclaim valid based on the allegations of fraudulent and deceptive business practices proscribed by the UCL. F. The UCL Remedies Are “Cumulative” To All Other Remedies Real Party posits that an insured is “made whole” by the common law remedies of breach of insurance contract and bad faith. Thus, Real Party would have insurance companies benefit from an UCL immunity not conferred on any other business, and not supported by Moradi-Shalal. Bythe statute’s express terms (see, section 17205), the remedies allowed pursuant to the UCL are cumulativeto all other remedies or penalties underall other lawsofthestate. Further, there are equitable remedies the courts may fashion pursuant to a UCLtheory that mayfit the facts of a specific case, including but not limited to, for example, restitution of premiums paid, and/or attorneys’ fees pursuant to Code of Civil Procedure section 1021.5. See, Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553 (where an aggrievedparty is harmedbythe unfair business practices of a defendant, the plaintiff may be -20- entitled under certain circumstances to attorneys’ fees pursuant to the UCL and Code of Civil Procedure section 1021.5). Thus, Real Party’s allegation that it should be conferred an immunity pursuant to the UCL merely because there are other remedies available to the Petitioner is unavailing. V. CONCLUSION Insurance companies should not be protected from UCLliability whenthe allegations against the insurance company are not dependent upon the UIPA,and the conductalleged is proscribed by other law. Moreover, direct statutory edict provides for such UCLliability, pursuant to Insurance Code section 1861.03(a) - enacted after Moradi-Shalal. Petitioner respectfully requests that Real Party’s Petition be denied. Dated: January 27, 2010 Respectfully submitted, VIAU & KWASNI By JnK.Kwasniewski Jeanette L. Viau Attorneys for Petitioner Yanting Zhang -21- CERTIFICATE OF WORD COUNT (Cal. Rules of Court, Rule 8.204(c)(1)) Petitioner’s Answerto Petition for Review consists of 4,321 words as counted by the WordPerfect version 10 word-processing program used to generate the brief. Dated: January 27, 2010 Respectfully submitted, VIAU & KWASNIEWSKI AL J Gaynary K. Kwasniewski Jeanette L. Viau Attorneys for Petitioner Yanting Zhang -22- PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF LOS ANGELES Tam residentof the State of California, over the age of 18 years, and not a party to the within action. Iam employed in the County of Los Angeles, State of California. My business address is One BunkerHill, 601 West Fifth Street, 8" Floor, Los Angeles, CA, 90071-2004. My mailing address is 466 Foothill Boulevard, No. 323, La Cafiada, CA, 91011. On January 27, 2010, I served the foregoing document describedas: PETITIONER’S ANSWERTO PETITION FOR REVIEW Asset forth on Appendix A. I declare under penalty of perjury under the lawsofthe State of California that the foregoingis true and correct. Executed on this 27" day of January, 2010, at La Cafiada, California. LPape Christina Lambert APPENDIX A California Supreme Court 350 McAllister Street San Francisco, CA 94102 Tel: (415) 865-7000 Fax: (415) 865-7183 California Court of Appeal Fourth Appellate District Division Two 3389 Twelfth Street Riverside, CA 92501 San Bernardino Superior Court Victorville District 14455 Civic Drive, Dept. V10 Victorville, CA 92392 Lance D.Orloff, Esq. Jenifer A. Pearl, Esq. Aaron J. Mortensen, Esq. Grant, Genovese & Baratta, LLP 2030 Main Street, Suite 1600 Irvine, CA 92614 Tel: (949) 660-1600 . Fax: (949) 660-6060 Steven W. Murray, Esq. A Law Corporation 14930 Ventura Boulevard, Suite 205 Sherman Oaks, CA 91403 Tel: (818) 501-2277 Fax: (818) 501-6441 William L. Guasewitz, Esq. Michelman & Robinson, LLP 915 L Street, Suite 1110 Sacramento, CA 95814 Tel: (916) 447-4044 Fax: (916) 405-3404 (By Facsimile and Federal Express) (By U.S. Mail) (By U.S. Mail) Counsel for Real Party California Capital Insurance Company (By Facsimile and U.S. Mail) Policyholders (Amicifor Petitioner Yanting Zhang) (By Facsimile and U.S. Mail) Association of California Insurance Cos. and the Personal Insurance Federation of California (Amici for Real Party California Capital) (By Facsimile and U.S. Mail) APPENDIXA (cont.) Office of the Attorney General (By U.S. Mail) of the State of California 300 South Spring Street Los Angeles, CA 90013 San Bernardino County District Attorney (By U.S. Mail) 316 North Mountain View Avenue San Bernardino, CA 92401
