ZHANG v. S.C. (CALIFORNIA CAPITAL INSURANCE)

Real Party in Interest, California Capital Insurance Company, Opening Brief on the Merits

Cal.May 13, 2010

STN PIS TTA TNSLory Ly VS S178542 IN THE SUPREME COURT OF CALIFORNIA SUPREME COURT RMILED YANTING ZHANG, Petitioner, WAY 7 3 OnID ety end eet eh: 7 PNG seb xv. Frederick «. Ohingh ClarkEos he HESHELwaye paar nao THE SUPERIOR COURT OF SAN BERNARDINO COUNTY¢puly/ Respondent; CALIFORNIA CAPITAL INSURANCE COMPANY, Real Party in Interest. AFTER A DECISION BY THE COURT OF APPEAL, FOURTH APPELLATE DISTRICT, DIVISION Two CASE No. E047207 OPENING BRIEF ON THE MERITS HORVITZ & LEVY LLP © GRANT, GENOVESE & BARATTA LLP PETER ABRAHAMS(BarNo.44757) LANCE D. ORLOFF (Bar No. 116070) MITCHELLC. TILNER (BAR No. 93023) AARON J. MORTENSEN(BarNo.247184) 15760 VENTURA BOULEVARD, 18TH FLOOR 2030 MAIN STREET, SUITE 1600 ENCINO, CALIFORNIA 91436-3000 IRVINE, CALIFORNIA 92614-7257 (818) 995-0800 + FAX: (818) 995-3157 (949) 660-1600 + FAX: (949) 660-6060 pabrahams@horvitzlevy.com ldo@ggb-law.com mtilner@horvitzlevy.com ajm@ggb-law.com ATTORNEYS FOR REAL PARTY IN INTEREST CALIFORNIA CAPITAL INSURANCE COMPANY TABLE OF CONTENTS Page TABLE OF AUTHORITIES.00.....cccccceccccscescessececseccescsscseesseseses ii ISSUE PRESENTED 000... ccccccccececcscssceceeseseveseeesevatearsesatsaseasses 1 INTRODUCTION(0.00. eceeececcccccccsccseesescseescsevscsesevscvacsevsesatestseeaneasens 2 STATEMENTOF THE CASE .Q.......ccccceecceccesceecececceeseesecseeeseseeees 6 LEGAL DISCUSSION0000. ecccccceccccscescescesescesseeveeseseeeverenssseeauesees 10 I. THE THIRD CAUSE OF ACTION DOES NOT ALLEGE A VIABLE UNFAIR COMPETITION CLAIM... 10 A. Though couched in termsof “false advertising,” Zhang’s UCL claim actually rests on California Capital’s alleged undervaluationof herfireloss...... 10 B. An insured who contends her insurer has undervalued her fire loss may not maintain a UCLaction becausethe Legislature has provided an adequate statutory remedy—appraisal pursuant to Insurance Codesection 20711 ................ 11 Il. ZHANG’S UCL CLAIM CONSTITUTES AN IMPROPER ATTEMPT TO PLEAD AROUND THIS COURT'S HOLDING IN MORADI-SHALAL THAT A PRIVATE CAUSE OF ACTION CANNOT BE BASED ON A VIOLATION OF THE UIPA 0.0... .ccceeccceccccesscescccesecees 15 A. A UCL action against an insurer may not be based on claims handling conduct that violates only the UIPA.....oc iecccceccccesseeceeeeceeeetsceeectseceeses 15 B. Zhang’s third causeof action alleges conduct that violates only the UIPA, and therefore does not state a claim under the UCL..........cccoccoooocoeccccccecceeee 21 Ill. A UCL ACTION BASED UPON AN INSURER'S VIOLATION OF THE CLAIMS HANDLING PROVISIONS OF THE UIPA WOULD BE UNMANAGEABLE AND WOULD DEFEAT THE LEGISLATURE’S PURPOSE IN ENACTING THE UCL.cccceececeaeeeessesacesecseecasesesesssstesscssesasenssaeuaneares 22 IV. NEITHER OF THE REMEDIES AVAILABLE UNDER THE UCL IS A FEASIBLE REMEDY FOR AN ALLEGED PRACTICE OF IMPROPER CLAIMS HANDLINGLoccece eeceseseteseesceeeessessetssesscsastseseresers 24 V. STATEFARMFIRE & CASUALTYCO. V. SUPERIOR COURTSHOULD BE DISAPPROVED..........0eeeeeeee: 30 CONCLUSION0ccccecceecceeeeseeseseesecsssseesesssessesesssssssseasereesensens 33 CERTIFICATE OF WORD COUNT.......ccccceecccceeeseceeseetseeens 34 ul TABLE OF AUTHORITIES Page(s) Cases 20th Century Ins. Co. v. Garamendi (1994) 8 Cal.4th 216 oo...ccccceeseseseceessrteesensssrseseeeeens 27 Adler v. Drudis (1947) 30 Cal.2d 372 oo. icccccccsseseeseeesceessceeeetsseeerstaess 24, 25 Alvarado v. Selma Convalescent Hospital (2007) 153 Cal.App.4th 1292 00... ccceccccceceeceseceseeeessssseece 28 American Internat. Group, Inc. v. Superior Court (1991) 234 CalApp.3d 749.000.0000ccc ccceeeceececeeseessecesssceesenses 27 Bank of the West v. Superior Court (1992) 2 Cal. 4th 1254.0...cccccceccccccecesceceeeeeetsseeeceesentseese 23 Brandt v. Superior Court (1985) 37 Cal.3d 813 ooo. ccsccceceeeseecceseccceeetsseeesstseeeesees 21 Bronco Wine Co. v. Frank A. Logoluso Farms (1989) 214 CalApp.3d 699.00...ieee cececcecesscccceesscecesesseeeeeees 29 Carroll v. Girard Fire Ins. Co. (1887) 72 Cal. 297.0... .ccccccccccccccccccsssssssccesssesecttesecenttecesssaaeeeeess 14 Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 168.0... ccsececeeseesseceseeeesteseeeeeespassim Cheeks v. California Fair Plan Assn. (1998) 61 Cal.App.4th 423 ooo... cecceescessnccceeessseeeesssneeees 13 Community Assisting Recovery, Inc. v. Aegis Security Ins. Co. (2001) 92 Cal.App.4th 886.........c cece eecccceecseceesececeesssees 12, 18, 15 Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163.00... ieesessscccceeseuseeeeceeens 4, 22, 24, 32 Crusader Ins. Co. v. Scottsdale Ins. Co. (1997) 54 Cal.App.4th 121 ooo... ceceeseceessteeesssseeeesssneess 29 lil Diaz v. Kay-Dix Ranch (1970) 9 CalApp.3d 588.0000... cccccccceeccseccesecseccesereesssestseeseeaes 29 Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069.0...ceecccicesecesenseesesscecseeesseeecsssenes 25 In re Tobacco IT Cases (2009) 46 Cal.4th 298 ooo cccccccccceceecececcessssetsersttseseccersecssees 26 Jefferson Ins. Co. v. Superior Court (1970) 3 Cal.3d 398 ooo.sescssecessceeeseeeeecsseessasecsseenseees 13 Jozovich v. Central California Berry Growers Assn. (1960) 183 Cal.App.2d 216.000.0000 cece ceeceeeccssereessseesseeeenses 24, 25 Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134.00... cccececescccessseeessessesssceesseeseees 25 Kraus v. Trinity, Inc. (2000) 23 Cal.4th 116 o.oo. ccecccsssssccceceseceescsscesessecsececeeeeseeees 25 Louise Gardens of Encino Homeowners’ Assn., Inc.v. Truck Ins. Exchange, Inc. (2000) 82 CalApp.4th 648 o.oo... ieececccecccccccceccessccceccscssesccecnsssecs 12 Maler v. Superior Court (1990) 220 CalApp.3d 1592... ccccececesssssscecesssseceees 17, 19 Manufacturers Life Ins. Co. v. Superior Court (1995) 10 Cal.4th 257...ecceeeeeeees 16, 19, 20, 21, 23, 31 Moradi-Shalal v. Fireman’s Fund Ins. Co. (1988) 46 Cal.3d 287 o.cccccccscccssscssscsecsessscssssestessseseeseseeseeeeeepassim Progressive West Ins. Co. v. Superior Court (2005) 135 Cal.App.4th 268 ooo... ceeeccessceesseceseesscesseesseees 32 Prudential Home Mortgage Co. v. Superior Court (1998) 66 CalApp.4th 1286 oo... eeeccccesscccessceeesasecseeeseeee 26 QuelimaneCo. v. Stewart Title Guaranty Co. (1998) 19 Cal4th 26 ooo.cccccecseccceeesesseeceessneeens 20, 23, 31 1v Rubin v. Green (1993) 4 Cal.4th 1187.0...eccccccceessseseesseeeseseceesstanenes 17 Safeco Ins. Co. v. Superior Court (1990) 216 Cal.App.3d 1491.0...eeeceeeneeeesteeeeenes 17, 18 Samura v. Kaiser Foundation Health Plan, Inc. (1993) 17 CalApp.4th 1284 oo...ceeeeccecensecesesseeeessteceeees 28 Shadoan v. World Savings & Loan Assn. (1990) 219 Cal.App.3d 97.00. cecccccccececssecsessnsecesstseeeeensesaes 24 State Farm Fire & Casualty Co. v. Superior Court (1996) 45 Cal.App.4th 1098.00...eeeeeeenseseseees 5, 22, 30 Textron Financial Corp. v. National Union Fire Ins. Co. (2004) 118 Cal.App.4th 1061.0...eeeeeeeeeeees 21, 30, 31 Thayer Plymouth Center, Inc. v. Chrysler Motors Corp. (1967) 255 CalApp.2d 300...ccccecescceseseceesesssseeeestnsaes 26 Tricor California, Inc. v. Superior Court (1990) 220 Cal.App.3d 880.0000... cccccccescsccceecesecessnreeeerseeenssaaes 27 Troyk v. Farmers Group, Inc. (2009) 171 Cal.App.4th 1305 oo...cecececseeecseseesenseeessseees 25 Zephyr Park v. Superior Court (1989) 213 CalApp.2d 833.000... cccccccscessessseeecsscecersnssese 17, 27 Statutes Business and Professions Code § 16720 oeseceeecescesseceseeesseesecssccsecsecaesseccassesscsaevanevsreveeeeaaees 19 § OT21.B occcecececceeessceeseecseessesscesesesesseessessssvssscnevseesseeensens 19 00710) ceepassim § 17208oeeeeeeeesceseesseceseccsecesecsecnsseaccseccssssisssseessscacerstesees 24, 29 § 17204occcece cneeseeeecsecseesseeasesecseceseescesecsuesavstaeverensesesats 24 SI 5) 010, 20 Civil Code, § 47, subd. (b) ooo... cocci eeccececscccessceceeecseceesevsseceseneceees 17 Code of Civil Procedure § BDoeceeeeeneeseesesseesecesecsecsecssesscesecssssecssevsescavsusesavacenaeaaeess 24 § L285 oo ececcccscessessecsssecssesecsressessssessesstssearecsesstissrecsestseveseeseseees 13 Code of Regulations,title 10, § 2695.1, et seq. ......eccccccsssescesseeeee. 28 Health and Safety Code, § 1276.5(a).......eeccccccessesccccssccecesscseseuceeee 28 Insurance Code § 790. ecccccccccesessssecsecsssussessucsessucsesssssessssuessesecstestaresevereeseseveesen 1,3 § 790.08 vo ccceccsscsccscssesseserseesessesesstsseetestessetesessesesveseeseseeees 16, 18, 19 §§ 790.05-790.09 ..o.cesseccesecsessessessessessessessessessesessessessseseseeeseeeveese 17 § 790.09 oon ccceccscecsesssssssessvsssesesssesvssersessessesesssssteseciessesseseseseaees 16, 19 § 1861.03 occ cccccescsscesssssessesecssesesesssssessecsesecssssesssesteseeseees 18, 19 § LOT oeeeecesecessessesesseesesssesseerssessseesecsessescssresseseeseesee 12, 14, 15, 26 Rules of Court Cal. Rules of Court, rule 8.520()(1)...ccccccscccecscceesscceseceessseesseeeeues 34 vi IN THE SUPREME COURT OF CALIFORNIA YANTING ZHANG, Petitioner, VU. THE SUPERIOR COURT OF SAN BERNARDINO COUNTY, Respondent; CALIFORNIA CAPITAL INSURANCE COMPANY, Real Party in Interest. OPENING BRIEF ON THE MERITS ISSUE PRESENTED The petition for review presents the following issue: Does California’s [Unfair Competition Law, Business & Professions Codesection 17200,et seq.] permit insureds and third-party claimants in claim-handling or amount- of-loss lawsuits to plead around Moradi-Shalal [v. Fireman’s Fund Ins. Co. (1988) 46 Cal.3d 287], and bring private causes of action for the very types of activities proscribed by and intrinsically intertwined with the [Unfair Insurance Practices Act, Insurance Codesection 790, et seq.}? (PFR 1.) INTRODUCTION This case presents the issue whethera policyholder may turn a dispute with herinsurer over the amount owedfora fire loss into an action under the Unfair Competition Law (UCL) (Bus. & Prof. Code, § 17200, et seq.) by alleging that the insurer has a general practice of not paying the true valueof covered claims. Plaintiff and petitioner Yanting Zhang sued defendant and real party in interest California Capital Insurance Company when, following a fire at her property, they were unable to agree on the amounts owed for damage to Zhang’s building and for business income loss. In addition to seeking contract and tort damages in her first two causes of action, in her third cause of action Zhang purported to state a UCL claim byalleging that California Capital “has nointention of properly paying the true valueof its insureds’ covered claims.” According to Zhang, because California Capital promisesits insuredsthatit will “timely pay proper coveragein the event the insured suffers a covered loss,” and allegedly did not pay what Zhang believed was the “true value” of her claim, it violated the UCL by engaging in “deceptive, untrue or misleading advertising... .” (See Bus. & Prof. Code, § 17200.) Thetrial court sustained California Capital’s demurrerto the third cause of action without leave to amend, but the Court of Appeal granted Zhang’s petition for a writ of mandate and directed the trial court to overrule the demurrer. The Court of Appeal’s decision should be reversed because Zhang’s attemptto state a UCL causeof action fails for multiple reasons. First, Zhang has not alleged false advertising because she does not allege that the coverage afforded by her policy differed from the coverage promised in California Capital’s advertising. Rather, she alleges that California Capital hasfailed to pay what it owes underits policy. Her third causeof action alleges wrongful claims handling, not false advertising. If she can state a cause of action for false advertising by alleging that California Capital breached a promise to pay the true value of covered claims, then every lawsuit challenging an insurer's claims handling practices— and particularly those involving amountof loss disputes—could be turned into a false advertising lawsuit because every insurer that advertises implicitly promisesthatit will pay what it owes underits policies. Second, Zhang’s third cause of action does not state a UCL cause of action because the Legislature has provided insureds with an adequate remedy —appraisal—in the event the insured doesnot believe that an insurer has paid the true valueofa fire loss where the amountof thatloss is in dispute. Third, even outside the context of fire losses, a UCL action cannot be maintained based on disputes regarding an insurer’s alleged claims handlingpractices and amountof loss. Although an insurer that had a practice of never paying the true value ofits policyholders’ claims wouldbein violation of the Unfair Insurance Practices Act (Ins. Code, § 790, et seq.) (UIPA) and wouldbe subject to administrative sanctions by the Insurance Commissioner, in Moradi-Shalal (1988) 46 Cal.3d 287 (Moradi-Shalal) this court held that the UIPA does not give rise to a private right of action. In addition, this court has approved decisions by the courts of appeal rejecting attemptsto “plead around” Moradi-Shalalby relabeling an action based on an insurer’s claims handling practices as a UCL action—precisely what Zhang attempts to do here. Fourth, a UCL action based on an insurer’s alleged claims handling practices would be unmanageable and inconsistent with the Legislature’s objective whenit enacted that statute, namely, “to provide a streamlined procedurefor the prevention of ongoing or threatenedacts of unfair competition ....” (Cortez v. PurolatorAir Filtration Products Co, (2000) 23 Cal.4th 163, 173-174 (Cortez).) A court tasked with determining whether an insurer has a general practice of not offering the true value of its insureds’ losses would have to examine thousandsof claims, determine the true value of each claim, compare that value to what the insurer offered, and then determine,as to each claim where the insureroffered less than the true value, whether it did so pursuant to a company-wide practice as opposed to an error in judgment by an individual adjuster, or for other reasons. Thus, the trial of such a UCL claim would necessarily devolve into thousandsof minitrials. Fifth, the only remedies available under the UCL are restitution and injunctive relief, neither of which are feasible remedies underthe facts alleged by Zhang. Any policyholder whois not offered what he or she believes is the true value of his or her claim has an adequate legal remedy—contract damages. Restitution of the premium would constitute an impermissible double recovery and an injunction is not available to remedy past acts. In addition, the courts have consistently denied injunctive relief under the UCL where there is an adequate administrative remedy. A court that attempted to police an insurer’s handling of the claims of all of its policyholders through the issuance of an injunction would undertake a highly burdensome regulatory function already performed by the Insurance Commissioner, which possessesthe expertise and statutory mandateto deal with the sort of amorphousclaims of misconduct alleged by Zhang. Finally, this court should disapprove State Farm Fire & Casualty Co. v. Superior Court (1996) 45 Cal.App.4th 1093 (State Farm), which held a UCL action may be based on multiple breaches of the implied covenantof good faith andfair dealing. The Court of Appeal in State Farm failed to appreciate that although an individual insured may pursuean action for breach of the implied covenant of good faith based on an insurer’s handling of that insured’s unique claim, the only remedy available to address an insurers purported general claims handling practices is an administrative proceeding instituted by the Insurance Commissioner. The Court of Appeal in State Farm also failed to appreciate that a UCL action based on an insurer’s alleged general claims handling practices would be unmanageable and would thwart the Legislature’s objective of providing a streamlined procedure for preventing unfair practices, and that neither restitutive nor injunctive relief under the UCLis a feasible remedy for an insurer’s wrongful claims handling. Indeed, in Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163 (Cel-Tech), this court called into question State Farm’s holding that a UCL action may be based on breach of the implied covenantof good faith. (Id. at pp. 186-187.) STATEMENT OF THE CASE}! Because Yanting Zhang’s writ petition challenged an order sustaining California Capital’s demurrer to her claim under the UCL,werecite the pertinent facts she alleged, which are assumed to be true only for purposes of this proceeding. Zhang ownedreal property in Hesperia, California. (AE 3.) In July 2005, a fire broke out on the property. The fire, and the water used bycity officials to suppress thefire, caused extensive damage to the property. (AE 4.) At the time of the fire, the property was insured under a policy California Capital had issued to Zhang. (AE 3.) Thepolicy covered someorall of the damageto the property. (AE 4, 10.) Immediately after the fire, Zhang notified California Capital of the losses she had sustained. (AE 4.) California Capital assigned an adjuster, Vince Furriel, who provided plaintiff with a “restoration scope and estimate” of $102,000, representing California Capital’s estimate of the cost to repair and restore the damaged property. (AE 10, 13.) Zhang believed the estimate was too low, so she asked a numberof contractors to provide their own 1 Record citations are to the Appendix of Exhibits filed in support of Zhang’s Petition for Writ of Mandate and are designated as AE, followed by the page numberin the appendix. estimates. (AE 10-11.) Those contractors purportedly estimated the cost of repairs to be about $200,000. (AE 11.) Zhang and California Capital were unable to agree on an estimate. (AE 11.) Duringthe courseoftheir dispute, the property was vandalized. ([bid.) Zhang was losing business incomebecause of the unrepaired building damage. (AE 12.) She asked Furriel to expedite the resolution of her claim. ([bid.) He agreed to do so and,in light of the vandalism, agreed to obtain additional sumsto fundtherepairs. (Ibid.) In paragraph 24 of the complaint, Zhangalleges that these assurances werefalse and no additional sums wereallocated to the repairs. ([bid.) However, in paragraph 31, Zhang alleges that Furriel agreed to increase California Capital’s initial estimate to about $117,000 to account for the vandalism, and California Capital paid plaintiff about $70,000 of that amount. (AE 13-14.) California Capital later cancelled Zhang’s policy, citing her failure to comply with the company’s loss control recommendations. (AE 13.) Zhang subsequently retained Har-BroInc. to provide another restoration scope and estimate for the damaged property. (AE 13.) Har-Bro’s estimate was $208,919. (Ibid.) Zhang gave Furriel the estimate, but he refused to consider it or to work with Har-Bro. (Ibid.) He contended that Har-Bro’s estimate was inflated and covered repairs and upgradesnotrelated to the fire. (Ibid.) Zhang contends Furriel’s contention was false and misleading. (Ibid.) The parties continuedto dispute whether California Capital’s estimate wassufficient to repair and restore the property. (AE 14.) Zhang found anothercontractor willing to do the restoration work for $185,000. (bid.) Furriel declined to increase California Capital’s estimate. (AE 14-15.) Zhangthenfiled this action against California Capital. The operative second amended complaint alleged that the basis for the action was California Capital’s “refusal to provide adequate and proper coverage for a covered first party property damage claim, and related acts, omissions, damage and injury... .” (AE 2.) Zhangpleadedcausesofaction for breach of contract (AE 21) and breach of implied covenant of good faith (AE 24), both of which included allegations that California Capital’s conduct violated Insurance Codesection 790.03 and related regulations. (AE 22, 28.) Mostsignificantly for present purposes, Zhangalso pleaded a third cause of action for violation of the UCL. (AE 31.) In that cause of action, Zhangalleged that California Capital engagedin unfair, deceptive, untrue, and/or misleading advertising when it advertised its Businessowners policy products, such as the California Capital Policy herein. California Capital... promises its insureds that it will timely pay proper coveragein the event the insured suffers a covered loss. By this promise, California Capital... agrees that if an insured suffers compensable loss, it will pay the true value of that covered claim. However, as its conduct herein demonstrates, California Capital...in fact has no intention of properly paying the true value of its insureds’ covered claims. (AE 32.) Because, according to Zhang, it has no intention of honoring its advertised promises, “California Capital has violated Business and Professions Code sections 17200, et seg., and has engaged in unfair, deceptive, untrue, and/or misleading advertising.” (Ibid.) Zhang alleged she wasentitled to “restitution of policy premium, andother appropriate restitution ....” (Ibid.) On the causeofaction for violation of the UCL, Zhang prayed for “[rJestitution to the plaintiff/insured herein,” as well as attorney fees. (AE 33-34.) California Capital demurred to the third cause of action, contendingthatit failed to allege a causeof action for violations of the UCL. (AE 149.) The trial court sustained the demurrer without leave to amend. (AE 216-217.) The Court of Appeal granted Zhang’s petition for writ of mandate anddirected the trial court to reinstate the third cause of action. The Court of Appeal held that Zhang’s “allegations in the third cause of action that real party in interest solicited her business throughfalse advertising and false promises clearly justifies a claim under the UCL.” (Typed opn., 11.) LEGAL DISCUSSION I. THE THIRD CAUSE OF ACTION DOES NOT ALLEGE A VIABLE UNFAIR COMPETITION CLAIM. A. Though couched in terms of “false advertising,” Zhang’s UCL claim actually rests on California Capital’s alleged undervaluationof herfire loss. The Court of Appeal held that Zhang’s third causeof action alleged false advertising and therefore alleged a claim for “unfair competition” under the UCL.? However, Zhang did not allege that the coverage afforded by her policy differed from the coverage promised in California Capital’s advertising. Rather, she alleged that California Capital promisesits insureds“that it will timely pay propercoveragein the event the insured suffers a covered loss” but, “as its conduct herein demonstrates, California Capital Insurance Companyin fact hasnointention of properly paying the true value of its insureds’ covered claims.” (AE 32.) Because the UCL addressesacts and practices, not intentions, Zhang’s allegation that California Capital advertises with no intention to pay the full value of claimsis directed at California Capital's claims handling,notits 2 Business and Professions Code section 17200 provides: “As used in this chapter, unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code.” 10 advertising. Indeed, Zhang’s second amended complaint alleged that the basis for her action was California Capital’s “refusal to provide adequate and proper coverage for a covered first party property damage claim, and related acts, omissions, damage and injury ....” (AE 2.) As we demonstrate (§ IV, post), neither remedy under the UCL for false advertising—restitution and an injunction—is feasible based on Zhang’s allegations, which confirms she has not stated a claim for false advertising. If Zhang’s pleading is construed as a claim for false advertising, then every lawsuit challenging an insurer’s claims handling practices or the amountsit paysfor claims could be turned into a false advertising lawsuit because every insurer that advertises implicitly promisesthat it will pay what it owes underits policies. As we show, because Zhang’s third causeof action rests on the wrongful handling and underpaymentofherfire loss claim,it does not state a UCL claim. B. Aninsured who contendsher insurer has undervalued her fire loss may not maintain a UCL action because the Legislature has provided an adequate statutory remedy—appraisal pursuant to Insurance Code section 2071. As this court explained in Cel-Tech, supra, 20 Cal.4th 163: “fi]fthe Legislature has . . . considered a situation and concluded no action should lie, courts may not override that determination. Whenspecific legislation providesa ‘safe harbor’ plaintiffs may not 11 use the general unfair competition law to assault that harbor.” Ud. at p. 182.) Here, as the Court of Appeal in Community Assisting Recovery, Inc. v. Aegis Security Ins. Co. (2001) 92 Cal.App.4th 886 (CAR) explained, the Legislature has considered the situation alleged by Zhang and determined that noactionfor restitution or an injunction under the UCL maybe maintained. Rather, if an insurer fails to offer what the insuredbelievesis the true value ofa fire loss, the insured has an adequate remedy through appraisal, a form of arbitration. Specifically, Insurance Code section 2071 mandates that every fire insurance policy include a provision that if the insured and the insurer cannot agree on the amountofa fireloss, either can demand an appraisal. The amountfor which the insurer is liable shall be payable 60 days after either the insured and the insurer agree as to the amount of the loss or the filing of an appraisal awardin the event they are unable to agree. In addition, section 2071 provides: Nosuit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within 12 months next after inception of the loss. (Emphasis added.) The provision for appraisal mandated by section 2071 “constitutes an ‘agreement’ within the meaning of [Code of Civil Procedure] section 1280, subdivision (a), and therefore is considered to be an arbitration agreementsubject to the statutory contractual arbitration law.” (Louise Gardens of Encino Homeowners’ Assn., 12 Inc. v. Truck Ins. Exchange, Inc. (2000) 82 Cal.App.4th 648, 658.) Consequently,ifan insuredis dissatisfied with the appraisal award, his or her remedyis to petition to vacate the award pursuant to Codeof Civil Procedure section 1285. (Jefferson Ins. Co. v. Superior Court (1970) 3 Cal.3d 398; Cheeks v. California Fair Plan Assn. (1998) 61 Cal.App.4th 423.) In CAR, supra, 92 Cal.App.4th 886, the Court of Appeal, relying upon the appraisal process mandated by Insurance Code section 2071, rejected an attempt to state a UCL claim very similar to the claim Zhang asserts in this case. In CAR, the plaintiff brought an action against 194 insurance companies, alleging that their formula for valuing property loss claims violated the UCL. Thetrial court sustained the insurers’ demurrers without leave to amend and dismissed the action. The Court ofAppeal affirmed. It explained that because “[t]he appraisal term [in section 2071] creates an arbitration agreement subject to the statutory 107contractual arbitration law,” “notwithstanding how the insurer approachesvaluation ofthe damagedproperty during adjustment of the claim, the Legislature has provided the remedy to which the parties must resort for determination of the amountof the loss.” Ud. at p. 893.) The Court of Appeal concluded: “[I]f the insured disagrees with a value suggested by the carrier, the appraisal process provides the means by whichthe disputeis to be settled. In light of the scheme providedby section 2071, plaintiff has failed to demonstrate an unlawful or unfair practice.” (Id. at p. 895.) CAR demonstrates that the Court of Appeal here erred in holding Zhang stated a causeof action under the UCL. Even if she 13 is correct that California Capital “has no intention of properly payingthe true valueof its insureds’ covered claims” (AE 32), under the appraisal process mandated by Insurance Code section 2071, California Capital’s “promise is not to pay such damage as the insured should suffer, but to pay such sum asthearbitrator should fix as the amount of damage sustained.” (Carroll v. Girard Fire Ins. Co. (1887) 72 Cal. 297, 302.) In other words, even accepting as true Zhang’s allegation that California Capital has no intention of payingthe true valueofclaims, an insured who disagrees with what an insureroffers for a claim may compelit to submit the dispute to bindingresolution in appraisal. Thus, if any of California Capital’s other insureds havenotreceived the full value of their losses,it is not because California Capital acted “unfair[ly]’ or “unlawful[ly]” (see Bus. & Prof. Code, § 17200), but because they either failed to avail themselvesofthe appraisal process or the appraisers erred in appraisingtheloss. Zhang alleged that California Capital waived an appraisal because its adjuster told her she had no alternative other than to accept California Capital’s valuation of her loss. (AE 16.)3 But Zhang does not rest her UCL cause of action on this ground. She contends that California Capital has a general practice of not offering to pay the true value of its insureds’ claims. As the Court of Appealhere acknowledged, Zhang cannot “recover under[herthird] 3 The allegation that California Capital “waived an appraisal” isa legal conclusion, and, moreover, irrelevant. The issue is whether Zhang is entitled to appraisal. Insurance Code section 2071 does not place any limitation on the time within which an insured may demandan appraisal. 14 cause of action if she proves only that California Capital behaved unreasonably in handling her claim. She will also haveto establish that [California Capital] advertised or otherwise represented to the public that it operated honestly and equitably in settling claims and that it in fact had a policy or regular practice of ‘lowballing,’ delaying, or taking unfair advantage so that its advertising and/or representations were in fact likely to mislead the public.” (Typed opn., 11.) However, as the Court of Appeal in CAR, supra, 92 Cal.App.4th 886 explained, the Legislature has established that the insured’s remedyifhe or she believes a fire insurer has offered less than the true value of a claim is arbitration through appraisal, not a UCL action. A UCL action cannot be stated where the Legislature has provided the statutory remedy for amountofloss disputes that it anticipated will inevitably occur withfire losses. Il. ZHANG’S UCL CLAIM CONSTITUTES AN IMPROPER ATTEMPT TO PLEAD AROUND THIS COURT’S HOLDING IN MORADI-SHALAL THAT A PRIVATE CAUSE OF ACTION CANNOT BE BASED ON A VIOLATION OF THE UIPA. A. AUCL action against an insurer may not be based on claims handling conduct that violates only the UIPA. Because Insurance Codesection 2071 precludes a UCL action based on disputes regarding the amountoffire losses (see ante, § 1), this court need not address the broader issue whether a UCL claim 15 can everbe based on allegations that an insurerviolated the UIPA by having a general practice of not paying the true value of its insureds’ losses. If the court chooses to address that broaderissue, however, it should hold that a UCL action cannot be based on such allegations. Although this court has permitted UCL actions based on conduct that violated the UIPA if the conduct also violated “other statutory ...law (1995) 10 Cal.4th 257, 280 (Manufacturers Life), it has never (Manufacturers Life Ins. Co. v. Superior Court approved a UCL lawsuit based on conduct that violated only the provisions of the UIPA dealing with an insurer’s claims handling practices. To the contrary, it held in Moradi-Shalal, supra, 46 Cal.3d 287 that a violation of those provisions does not giverise to a private right of action, and this court has cited with approval decisions by the courts of appeal disallowing attempts to “plead around” Moradi-Shalal by relabeling an action based on an insurer’s claims handling practices as a UCL action. Specifically, in Moradi-Shalal, supra, 46 Cal.3d at page 304, this court held that “[nJeither [Insurance Code] section 790.03 nor section 790.09 was intendedto create a privatecivil cause of action against an insurer that commits oneof the various acts listed in section 790.03, subdivision (h).” Therefore, a third party claimant could not state a cause of action against an insurer based on allegations that it violated Insurance Codesection 790.03 by having a general business practice of “[nJot attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in whichliability has become reasonably clear.” (Ins. Code, § 790.03, 16 subd. (h)(5).) It explained “that our opinion leaves available the imposition of substantial administrative sanctions by the Insurance Commissioner(see §§ 790.05-790.09).” (Moradi-Shalal, at p. 304.)4 In Rubin v. Green (1993) 4 Cal.4th 1187, 1201, an action against an attorney for soliciting clients, this court held that the eeplaintiff could not “plead around”thelitigation privilege provided by Civil Code section 47, subdivision (b), by relabeling the nature of the action as one brought under the UCL. This court cited with approval Safeco Ins. Co. v. Superior Court (1990) 216 Cal.App.3d 1491 (Safeco) and Maler v. Superior Court (1990) 220 Cal.App.3d 1592 (Maler). It explained that those cases had properly “held that the bar on . . . implied private causesof action [for violation of the UIPA], imposed by our decision in Moradi-Shalal ..., may not be circumvented by recasting the action as one under [the UCL].” (Rubin, at p. 1202.) In Safeco, the plaintiff, a motorcyclist, was involved in a collision with a driver insured by Safeco. After settling his claim against Safeco’s insured, hefiled a UCL action against Safeco for both monetary and injunctive relief. He alleged that Safeco had violated the UIPA by refusingto pay a “collision damage waiver” on an automobile plaintiff rented while his motorcycle was being repaired. (Safeco, supra, 216 Cal.App.3d at p. 1492.) The Court of Appeal held the UCL “providesno toehold for scaling the barrier of Moradi-Shalal. The facts at bench are indistinguishable from those 4 In Zephyr Park v. Superior Court (1989) 213 Cal.App.2d 833 (Zephyr Park), the Court of Appeal applied the holding in Moradi-Shalal to a first party insurance claim. 17 in Moradi-Shalal. To permit plaintiff to maintain this action would render Moradi-Shalal meaningless.” (Id. at p. 1494.) Similarly, in Maler, the plaintiffs brought a UCL action against their insurers for damages and injunctiverelief after the insurers refused to defend or indemnify them in an underlying action. In an effort to circumvent this court’s holding in Moradi-Shalal, the plaintiffs contended the action was authorized by Insurance Codesection 1861.03, which was added by Proposition 103 in 1988, and provides that the businessof insuranceis subject to California laws applicable to any other business. The Court of Appealheld that plaintiffs were indirectly attempting to plead a cause of action based on a violation of the UIPA: In essence, plaintiffs allege that defendants’ breach of its statutory duties under section 790.03 amounts to unfair competition within the meaning of Business & Professions Code section 17200, thereby constituting a violation of section 1861.03. [f]... [Section 1861.03, subdivision (a), simply declares that the insurance industry is subject to California laws applicable to any other business, including the antitrust and unfair business practices laws.... Because the insurance industry obviously was subject to section 790.03 priorto the adoption of section 1861.03, the latter section did not extend the application of section 790.03 to the business of insurance. Thus, section 1861.03 cannot be construed to supersede Moradi-Shalal’s ban on a private action for damages under section 790.03. Further, plaintiffs cannot circumvent that ban by bootstrapping an alleged violation of section 790.03 18 onto Business and Professions Code section 17200 so as to state a cause of action undersection 1861.03. (Maler, supra, 220 Cal.App.3d at p. 1598.) Conversely, this court has permitted UCL actions against insurers wherethe alleged conduct, while violating the UIPA,also violated other statutes that apply to insurers. In Manufacturers Life, supra, 10 Cal.4th 257, the plaintiff, an insurance agency, brought an action against several insurance companies, alleging that they violated both the Cartwright Act (Bus. & Prof. Code, §§ 16720 & 16721.5) and the UCL by engaging in an unlawful boycott. This court agreed with the Court of Appeal in that case that “because section 790.03 does not create a private right of action, plaintiff could not plead aroundthatlimitation by relying on conduct whichviolates only the UIPAasthe basis for a [UCL] cause of action.” (Manufacturers Life, at p. 283; see also id. at p. 267 [“[t]he Court of Appeal recognized that the UIPA does not create a private right of action for violationsof its provisions[citation], and that a plaintiff may not ‘plead around’ that limitation by casting a cause of action based on a violation of the UIPA as one brought under the [UCL]”].) However,it held the action was not barred by Moradi-Shalal because “[nJeither the language of the UIPA norits history suggests that the Legislature intended by its enactment to abolish the Cartwright Act and [UCL] remedies for conduct which the UIPA also proscribes.” (Id. at p. 277.) It explained that the UIPA “neither creates new private rights nor destroys old ones... . [S]ection 790.09 “preserves any preexistingcivil or criminalliability which the insurer might face under other statutory or decisional 19 law”” (id. at p. 279) and that “a cause of action for unfair competition based on conduct made unlawful by the Cartwright Act is not an ‘implied’ cause of action which Moradi-Shalal held could not be found in the UIPA. Thereis no attempt to use the [UCL] to confer private standing to enforce a provision of the UIPA”(id. at p. 284). Similarly, in Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26 (Quelimane), this court held that prospective sellers of real property could maintain a UCLaction against title insurer based on the insurer’s refusal to issue title insurance policies on property acquired at a tax sale. It explained that because the insurer advertised that it would issuetitle insurance on any property with goodtitle, “[a]rguably a violation of [Business and Professions Code] section 17500 [the false advertising statute] has been stated .... Advertising that title insurance is necessary and will be issued on any property with good title, when in factit will not be issued on tax-deeded property may be deemed both misleading andfalse.” (Id. at p. 52.) In addition, this court stated that the plaintiffs allegations might state a direct violation of the UCL, which defines unfair competition as including “deceptive, untrue or misleading advertising.” (Id. at pp. 54-55.) However, Quelimanedoesnot assist Zhang becauseshealleges that California Capital violated the UIPA by underpayinga claim, not by falsely advertising that it would issue policies coveringfire losses. 20 B. JZhang’s third cause of action alleges conduct that violates only the UIPA, and therefore does not state a claim under the UCL. This caseis like Safeco and Maler, not Manufacturers Life or Quelimane. Although the UIPA ““preserves any preexisting civil or criminalliability which the insurer might face underother statutory or decisional law”” (Manufacturers Life, supra, 10 Cal.4th at p. 280), in contrast to Manufacturers Life and Quelimane, no other statutory or decisional law imposesliability upon an insurerfor the conduct alleged in Zhang’s third cause of action—a generalpractice of underpayingfire claims. An insurer that underpays an individual claim by an individual insured may beheld liable to that insured for damages for breach of contract and, potentially, breach of the implied covenant of good faith andfair dealing. (Brandt v. Superior Court (1985) 37 Cal.3d 813, 817.) But, accepting for purposes of demurrer the truth of Zhang’s allegation that California Capital has a general practice of not offering the true valueof claims, there is no common law remedy for that general practice. Rather, an insured’s only common law remedy is an action for damages caused by the insurer's handling of that insured’s individual claim. And, the only statutory remedy for such an alleged general practice is the imposition of administrative sanctions by the Insurance Commissioner pursuant to the UIPA. (Moradi-Shalal, supra, 46 Cal.3d at p. 304; see Textron Financial Corp. v. National Union Fire Ins. Co. (2004) 118 Cal.App.4th 1061, 1072 (Textron) [citing 2] Manufacturers Life and Quelimane, Court ofAppeal held that UCL action mustbe based “on legislatively declared public policy” and “reliance on general commonlaw principles to support a cause of action for unfair competition is unavailing.” Consequently, complaint alleging that insurer had practice of using misleading documentsto falsely suggest it would provide coverage whereit had no intention to do so did not state UCL action].)® Consequently, by alleging a UCL claim based on a purported general practice of underpayingclaims, Zhangis attempting to circumventthis court’s holding in Moradi-Shalal and state a private right of action under the claims handlingprovisions of the UIPA. Iii, A UCL ACTION BASED UPON AN INSURER’S VIOLATION OF THE CLAIMS’ HANDLING PROVISIONS OF THE UIPA WOULD BE UNMANAGEABLE AND WOULD DEFEAT THE LEGISLATURE’S PURPOSE IN ENACTING THE UCL. Allowing a UCLaction based onthefacts alleged in Zhang’s third cause of action would be inconsistent with the Legislature’s objective when it enacted that statute. As this court explained in Cortez, supra, 23 Cal.4th at pages 173-174 “[t]he exclusionofclaims for compensatory damages [in a UCLaction] is. . . consistent with 5 As weshow(§ V, post), State Farm, supra, 45 Cal.App.4th 1093, which held a UCL action can be based on multiple breaches of the implied covenant of good faith and fair dealing, should be disapproved. 22 the overarching legislative concern to provide a streamlined procedure for the prevention of ongoing or threatened acts of unfair competition” and permitting individual claims for compensatory damages “would tendto thwartthis objective by requiring the court to deal with a variety of damage issues of a higher order of complexity.” (See also Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1266-1267[“In drafting the [UCL], the Legislature deliberately traded the attributes of tort law for speed and administrative simplicity”].) It is one thingto litigate whether an insurer has engaged in an unlawful boycott against a single insurance agency (Manufacturers Life, supra, 10 Cal.4th 257) or whether it has a practice of refusing to issue title insurance on property acquired at a tax sale (Quelimane, supra, 19 Cal.4th 26). It is quite anotherto litigate whetheran insurer in fact has a “practice” of offering less than the true valueof eachofits thousandsofpolicyholders’ unique claims. A court tasked with determining whether an insurer has a general practice of not offering the true value of its insureds’ losses - would have to examine thousands of claims, determine the true value of each claim, comparethat value to what the insureroffered, and then determine,as to each claim where the insurerofferedless than the true value, whetherit did so pursuant to a company-wide practice as opposed to an error in judgment by an individual adjuster. Thus, trial of Zhang’s proposed UCL claim would defeat the Legislature’s objective of providing a streamlined procedure 23 (Cortez, supra, 23 Cal.4th at pp. 173-174), as it would necessarily devolve into thousandsof minitrials. IV. NEITHER OF THE REMEDIES AVAILABLE UNDER THE UCLISA FEASIBLE REMEDYFORANALLEGED PRACTICE OF IMPROPER CLAIMS HANDLING. Moreover, neither restitution nor an injunction—the only remedies available in a UCL action (Cel-Tech, supra, 20 Cal.4th at p. 179 )—arefeasible remedies when the claimed unfairpracticeis unfair claims handling. Zhang’s third cause of action seeks restitution of her premium. However,if she is able to convince a trier of fact that California Capital failed to offer the true value of her loss, a prerequisite to any relief, she will recover contract damages. She cannot thenalso recoverrestitution of the premium that she paid in orderto be entitled to those contract benefits. That would be an impermissible double recovery. (Adler v. Drudis (1947) 30 Cal.2d 372, 383 (Adler); Jozovich v. Central California Berry Growers Assn. (1960) 183 Cal.App.2d 216, 228-229 (Jozovich).) No insured would forego an awardof policy benefits in order to obtain restitution of the policy premium. Although Zhang also seeks attorneys’ fees (AE 34), they are not recoverable in a UCL action (Shadoan v. World Savings & Loan Assn. (1990) 219 Cal.App.3d 97, 108, fn. 7). Business and Professions Code Section 17203 permits a plaintiff who meets the standing requirements of Business and Professions Code Section 17204 and complies with Code of Civil 24 Procedure section 382 to bring a class action for restitution under the UCL. However,it is inconceivable that the requirementsfor a class action—predominant common questions of fact, a class representative with a claim typical of the class, and a class representative who can adequately represent the class (Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069, 1089)—could be met wherethe alleged unfair practice was an insurer’s adjustment of thousands of unique claims by thousands of individual policyholders. Moreover, and in any event, formulating an appropriate restitutive award in a class action based on unfair claims handling would be impossible. Awarding restitution of the policy premium to those policyholders who had already sued the insurer (or pursued appraisal) and recovered contract damages would result in a double recovery. (Adler, supra, 30 Cal.2d. at p. 383; Jozovich, supra, 183 Cal.App.2d at pp. 228-229). And, how could a court award restitution of the policy premium to those policyholders who had suffered a loss and were satisfied with what the insurerhadoffered, or those who hadnotyet even had a covered loss, let alone received an inadequate offer? (See Korea Supply Co. vu. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1152 [only “[a]ctual direct victims of unfair competition” may obtain restitution]; Kraus v. Trinity, Inc. (2000) 23 Cal.4th 116, 138 [only present and former tenants who were overcharged were entitled to refunds under UCL]; cf. Troyk v. Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1336, 1351-1352 [indicating that restitution of identical improper service chargepaid by all policyholders who 25 purchased one month term policy would be appropriate if named plaintiff had standing under UCL to bringaction].) Formulating and enforcing an appropriate injunction, the only other remedy under the UCL, would be even more problematic underthe facts alleged by Zhang. What would the injunction say— that the insurer must pay whatit is already contractually obligated to pay? Further, injunctive relief under the UCL is not even available if there is another adequate legal remedy. (See Prudential Home Mortgage Co. v. Superior Court (1998) 66 Cal.App.4th 1236, 1249-1250; see also Thayer Plymouth Center, Inc. v. Chrysler Motors Corp. (1967) 255 Cal.App.2d 300, 306 [injunction inappropriate where monetary damages will afford adequaterelief for breach of contract and these damages are not extremely difficult to ascertain].) If an insurer wrongfully denies or underpays policy benefits, the insured has an adequate remedy—asuit for damages or, in the caseof a fire loss, appraisal pursuant to Insurance Code section 2071. So an insured whohasalready suffered a covered loss could never obtain an injunction ordering an insurer to pay the “true value” of that claim. (See In re Tobacco II Cases (2009) 46 Cal.4th 298, 320 [“Injunctive relief operates ““in futuro.” ... Indeed, ‘[a]n injunction should not be granted as punishment for past acts whereit is unlikely they will recur”].) Moreover, assumingthat injunctiverelief is available under the UCL on behalf of a class that had not yet suffered injury (but see In re Tobacco II Cases, supra, 46 Cal.4th at p. 320, fn. 13), a court that undertook through issuance of an injunctionto police an insurer's claims handling practices towardsall of its policyholders, 26 presumably by determining in contempt hearings whether thousandsofindividual claims were being properly adjusted, would assume the authority already possessed by the Insurance Commissioner. (Moradi-Shalal, supra, 46 Cal.3d at p. 304.) The Legislature has enacted a comprehensive schemeof regulation in the Insurance Code. (American Internat. Group, Inc. v. Superior Court (1991) 234 Cal.App.3d 749, 764; cf. 20th Century Ins. Co. Ue Garamendi (1994) 8 Cal.4th 216, 240 (20th Century) [“the regulation of the insurance industry is squarely within the state’s police power”].) The comprehensive statutory scheme defines certain unfair insurance practices and authorizes the Insurance Commissionerto identify and regulate all such practices. The UIPA was enacted “to regulate trade practices in the business of insurance .. . by defining, or providing for the determination of, all such practices in this State which constitute unfair methods of competition or unfair or deceptive actsor practices ....” (Ins. Code, § 790, emphasis added.) Thus, the definition of “unfairness” in the insurance industry is entrusted by the Legislature to the Insurance Commissioner rather than to piecemeal adjudication in response to individual lawsuits. (See Zephyr Park, supra, 213 Cal.App.3d at p. 838 [“[t]he evident purpose of [section 790.03]... as confirmed by Moradi-Shalal, was to vest in an administrative agency the power to police ‘bad faith’ practices in the industry”]; Tricor California, Inc. v. Superior Court (1990) 220 Cal.App.3d 880, 887 [same]; cf. 20th Century, supra, 8 Cal.4th at p. 245 [noting the wide-ranging powersof the Insurance Commissioner and concluding “[m]uchis 27 necessarily left to the ... Commissioner, who has broad discretion to adopt rules and regulations as necessary to promote the public welfare’”’].) This conclusionis reinforced by the Insurance Commissioner’s enactment of the Fair Claims Settlement Practices Regulations, California Code of Regulations, title 10, section 2695.1, et seq., which define unfair claimspractices in detail and set forth specific criteria by which the Insurance Commissioner determinesviolations and appropriate penalties. The courts have consistently denied both injunctive and restitutive relief under the UCL where there is an effective administrative remedy. (Alvarado v. Selma Convalescent Hospital (2007) 153 Cal.App.4th 1292, 1306 [court properly denied injunction under the UCL to require owners and operators of skilled nursing and intermediate care facilities to comply with nursing home requirementsset forth in Health and Safety Code section 1276.5(a) where the “DHCShasthe power, expertise and statutory mandate to regulate and enforce section 1276.5” and granting injunctive relief “would place a tremendous burden on thetrial court to undertake a classwide regulatory function and manage the long-term monitoring process to ensure compliance with section 1276.5, subdivision (a)”]; Samura v. Kaiser Foundation Health Plan, Inc. (1993) 17 Cal.App.4th 1284, 1301-1302 [Court of Appeal reversed injunction under the UCL ordering the defendant health maintenanceorganizationto clarify a third party liability provision in its contract, explaining that “the courts cannot assumegeneral regulatory powers .. . through the guise of enforcing Business and 28 Professions Code section 17200”]; Bronco Wine Co. v. Frank A. Logoluso Farms (1989) 214 Cal.App.3d 699, 720-721 [reversing a restitution award under UCL where there was an effective administrative remedy with the DepartmentofAgriculture. “With such a remedy available, one must question whether the usual remedy undersection 17203 of the Business and Professions Code is necessary’]; Crusader Ins. Co. v. Scottsdale Ins. Co. (1997) 54 Cal.App.4th 121, 138 [criticizing use of “court-created regulation of...insurers through the medium of...injunctions and ‘restitution’ orders’]; see also Diaz v. Kay-Dix Ranch (1970) 9 Cal.App.3d 588, 599 [injunction prohibiting ranch owners from knowingly employing illegal aliens properly refused where “[m]ultiple injunctions ... would have the cumulativeeffect of a statutory regulation, administered by the superior courts through the medium of contempt hearings. The injunctive relief sought by plaintiffs would subject ... the courts to burdensome,if bearable, enforcement responsibilities”].) Indeed, a court would face the samepractical problemsevenif Zhang’s third causeofaction alleged false advertising, which it does not. To determine whether an insurer’s promises to pay whatit owed under its policies were false, a court would still have to conduct mini trials regarding the handling of thousandsof claims. An award ofboth contract damagesandrestitution of the premium wouldstill constitute a double recovery and formulating appropriate restitutive and injunctiverelief to other policyholders would not be any easier. We assume that not even Zhang would suggest that a court could issue an injunction ordering an insurer to changeits 29 advertising so that it stated the insurer did not intend to pay the true value of covered claims. V. STATE FARM FIRE & CASUALTY CO. V. SUPERIOR COURT SHOULDBE DISAPPROVED. In State Farm, supra, 45 Cal.App.4th 1093, the Court of Appeal held that a UCL cause of action seeking injunctive and restitutive relief could be based in part on allegations that the insured engaged in “lowballing” of its policyholders’ claims. Defining an “unfair” business practice as a practice that “is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers”(id. at pp. 1103-1104), the Court of Appeal in State Farm held that a breach of the implied covenant of good faith in an insurance policy could constitute an unfair practice under the UCL. (id. at pp. 1106-1108.) However, in Textron, supra, 118 Cal.App.4th 1061, where the insured attempted to state a UCL action by alleging the insurer had a practice of using misleading documentsto falsely suggest it would provide coverage where it had no intention to do so, the Court of Appeal declined to follow State Farm. It noted that its persuasiveness had been undercut by this court’s decision in Cel-Tech, supra, 20 Cal.4th 163, which stated that State Farm’s “definitions are too amorphousand provide too little guidance to courts and businesses.” (Id. at p. 185.) In Cel-Tech, this court concluded that “any finding of unfairness to competitors under section 17200 [must] be tethered to some legislatively declared 30 policy or proof of some actual or threatened impact on competition” and that under the UCL “the word ‘unfair’. .. means conduct that threatens an incipientviolation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to the same as violation of the law....” (ld. at pp. 186-187.) The Court of Appeal in Textron acknowledged that Cel-Tech limited its discussion to the context of a UCL action between competitors, leaving open whether the same definition applied to consumeractions. (Textron, supra, 118 Cal.App.4th at p. 1072; see Cel-Tech, supra, 20 Cal.4th at p. 187, fn. 12.) Nonetheless, based on this court’s decision in Moradi-Shalal, its reliance in both Manufacturers Life, supra, 10 Cal.4th 257 and Quelimane, supra, 19 Cal.4th 26, on a Cartwright Act violation to support a UCL action, its disapproval in Cel-Tech of State Farm’s “amorphous” definition of “unfair” practices and its focus in Cel-Tech on legislatively declared public policy, Textron concluded that “reliance on general commonlawprinciples to support a causeof action for unfair competition is unavailing.” (Textron, supra, 118 Cal.App.4th at p. 1072.) Textron properly refused to follow State Farm. Forall the reasonsset forth in this brief, State Farm wasincorrectly decided and should be disapproved:it failed to appreciate that although an individual insured may assert an action for breach of the implied covenant of good faith based on an insurer’s handling of that insured’s claim, the only feasible remedy available to address an insurer's purported general claims handling practices is an 31 administrative proceeding instituted by the Insurance Commissioner. In addition, the Court of Appeal in State Farm failed to appreciate that a UCL action based on an insurer’s alleged general claims handling practices would be unmanageable and would thwart the Legislature’s objective ofproviding a streamlined procedure for preventing unfair practices. (Cortez, supra, 23 Cal.4th at pp. 173-174.)é 6 In Progressive West Ins. Co. v. Superior Court (2005) 135 Cal.App.4th 263, the Court of Appeal held that a complaint alleging that an insurer had a pattern and practice of ignoring California law by seeking 100 percent reimbursement for amounts paid underits med-pay coverage regardless of whetherthe insured had been madewhole stated a UCL causeofaction. This court need not decide whether Progressive West was correctly decided because, even if it was, it does not assist Zhang. The alleged unfair practice in Progressive West did not concern the insurer’s claims adjustment practices, but rather its general policy of seeking reimbursementof med-pay payments. Moreover, in contrast to this case, if the insurer’s practice in Progressive West was unfair, it would have been a simple matter to frame an injunction directing the insurer to change that practice. 32 CONCLUSION For all the foregoing reasons, Zhang has not stated a UCL cause of action. The Court of Appeal’s decision therefore should be reversed. May12, 2010 HORVITZ & LEVY LLP PETER ABRAHAMS MITCHELL C. TILNER GRANT, GENOVESE & BARATTA LLP LANCE D. ORLOFF AARON J. MORTENSEN Attorneys for Real Party in Interest CALIFORNIA CAPITAL INSURANCE COMPANY 33 CERTIFICATE OF WORD COUNT (Cal. Rules of Court, rule 8.520(c)(1).) The text of this brief consists of 7976 words as counted by the Microsoft Word version 2007 word processing program used to generate thebrief. Dated: May 12, 2010 box / Qn TS Peter Abrahams 34 PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF LOS ANGELES At the time of service, I was over 18 years of age and not a partyto this action. I am employedin the County of Los Angeles, State of California. My business addressis 15760 Ventura Boulevard, 18th Floor, Encino, California 91436-3000. On May12, 2010, I served true copies ofthe following document(s) described as OPENING BRIEF ON THE MERITSonthe interested parties in this action as follows: SEE ATTACHED SERVICE LIST BY MAIL: I enclosed the document(s) in a sealed envelope or package addressed to the persons at the addresses listed in the Service List and placed the envelope for collection and mailing, following our ordinary business practices. I am readily familiar with Horvitz & Levy LLP’s practice for collecting and processing correspondence for mailing. On the same day that the correspondenceis placed for collection and mailing, it is deposited in the ordinary course of business with the United States Postal Service, in a sealed envelope with postage fully prepaid. I declare underpenalty ofperjury underthe lawsofthe State of California that the foregoing is true and correct. Executed on May 12, 2010, at Encino, California. (eanbeoke Victoria Beebe SERVICE LIST Yanting Zhang v. The Superior Court of San Bernardino County (California Capital Insurance Company) Case No. S178542 Jeanette Viau Attorneys for Petitioner Gary Kwasniewski Yanting Zhang Viau & Kwasniewski 601 W.Fifth Street, 8th Floor Los Angeles, CA 90071-2004 Lance David Orloff Attorneys for Real Party in Interest Grant, Genovese & Baratta, LLP California Capital Insurance Company 2030 Main Street, Suite 1600 Irvine, CA 92614 Clerk for the (Case No. CIVVS701287) Honorable Joseph Brisco San Bernardino Superior Court 8303 Haven Avenue, Dept. R10 Rancho Cucamonga, CA 91730 Office of the Clerk (Case No. E047207) California Court of Appeal Fourth Appellate District Division Two 3389 12th Street Riverside, CA 92501