ASSOCIATION OF CALIFORNIA INSURANCE COMPANIES v. JONES (To be called and continued to the November 2016 calendar.)

Appellant’s Opening Brief on the Merits

Cal.October 13, 2015

In the Supreme Court of the State of California ASSOCIATION OF CALIFORNIA INSURANCE COMPANIESand PERSONAL INSURANCE FEDERATION OF CALIFORNIA, Plaintiffs and Respondents, Vv. DAVE JONES,in his capacity as the Commissionerof the California Departmentof Insurance, Defendant and Appellant. Case No. $226529 SUPREME COUR? OCT 13 2015 Frank A. NicGuire Clerk Court of Appeal, Second Appellate District, Case No. B248622 Los Angeles County Superior The Honorable Gregory W.Alarcon, Judge Deputy CRO Court, Case No. BC463124 8.25(b) OPENING BRIEF ON THE MERITS KAMALA D. HARRIS Attorney General of California EDWARD C. DUMONT Solicitor General PAUL D. GIFFORD Senior Assistant Attorney General JANILL L. RICHARDS Principal Deputy Solicitor General LINDA BERG GANDARA Deputy Solicitor General DIANE S. SHAW STEPHEN LEW Supervising Deputy Attorneys General * LISA W. CHAO Deputy Attorney General State Bar No. 198536 300 South Spring Street, Suite 1702 Los Angeles, CA 90013 (213) 897-2481 Lisa.Chao@doj.ca.gov Attorneysfor Defendant and Appellant Dave Jones, in his capacity as the Insurance Commissioner ofthe State of California TABLE OF CONTENTS Page Issues Presented ..........cccccessscccessecseeneceecnseeeessnacecessussssescacesssieeseereeeesensesensees 1 Tntroduction oo... ececcceescccssecessncseeeseeseeessaeeeeseeceeaeceseeeaeeseeeaeeceueesaanecessneesaeeets 1 Background 00... ee eescccssscesseceseessetsescesnaceeesateeesseeesaeesecseensceseaeeseneesssasesaeenes 4 I, The Insurance Code and the Commissioner..............:c:ceeeeee 4 II. The Chronic Problem of Unintended Underinsurance.......... 7 Statement of the Case... cecccccesseessecesesseeeseeeecescenessesssstestecsatesseeeseeaees 13 I. The Replacement Cost Regulation...eeeeeeseeeeereeenes 13 I. Industry Challenge and Lower Court Decisions.................. 15 Standard Of REVICW .........:cecssessscseeseetseeeeseseesceeeessesesecesseeesenesensesesiueesneeas 17 ALQUMENL....cceccsessssssssssesesesesesssesesusosseseseseesescseseseseaesesueseanesauevssenseaseesescacass 18 I. Section 790.10 Grants to the Commissioner Broad Authority to Issue Regulations to Administer the Unfair Insurance Practices ACt ......ccssceeeeeeesseeeeeeees 20 I. The Commissioner’s Power to Administer the Act Includes the Power to Deem Specific Practices to Be Inherently Misleading .00....... eee eeseeeseceeeeteeeeneeeseeeeeeeeeeneeens 22 UI. The Court of Appeal’s Reading of the Act to Limit the Commissioner’s Rulemaking Authority Is Inconsistent with Legislative Intent ...........ceesescestscssesetseecssneececeesneeesaes 28 A. The legislative history supports the Commissioner’s authority... cececeeseeseeceesneeesneees 28 B. The Legislature’s subsequentactions do not call the Commissioner’s rulemaking authority into QUESTION... eeseeeesseeeseeesseeeeneeeesetsecteeenssrasersneeseeeeaeens 30 C. The Act’s distinction between defined and undefined prohibited acts, and the existence of administrative enforcementtools, do not curtail the Commissioner’s rulemaking authority................ 32 CONCI]USION.........ccssessecccccccscsesecceescestcceeesceceusensecceceeeesesceescecsseeseauarseeecseanenes 37 TABLE OF AUTHORITIES Page CASES Agricultural Labor Relations Bd. v. Superior Court _ (1976) 16 Cal.3d 392 oocecccsecsccsssesssessectssssesscseeesecseeessessesseseeses 6, 37 Bixby v. Pierno (1971) 4 Cal.3d 130oeeccsessecsesressseseessscsssessssesesseseerecascessecsesesseeees 37 California School Bds. Assn. v. State Bd. ofEducation (2010) 191 CalApp.4th 530... ccccccccsecsteetessscsssssecsesseesseessesscsnssseess 21 Chern v. Bank ofAmerica (1976) 15 Cal. 3d 866.0... ccccssscssesssscnesesssscssnssseessesssessecsssssssseesseneess 25 Credit Ins. General Agents Assn. v. Payne (1976) 16 Cal.3d 651 occcecstestecsseesseeseessesssessssssersssseseeeees 17, 22, 32 Day v. AT & T Corp. (1998) 63 CalApp.4th 325 oecccccsesssccssessesscsscssessssesesssssssessesearenes 25 Day v. City ofFontana (2001) 25 Cal.4th 268 ooo. ccccsccccssecsseessecesessesetscsssseesseseesssseueseeseeneeees 19 Even Zohar Construction & Remodeling, Inc. v. Bellaire Townhouses, LLC (2015) 61 Cal.4th 830... cscssesssesesseseessecsssesscssessessssesseeseestesseeesreses 19 Ford Dealers Assn. v. Dept. ofMotor Vehicles (1982) 32 Cal.3d 347 oo. ecscccssccesescessesccessecssesesseesessessesecens 17 et passim General Development Co., L.P., v. City ofSanta Maria (2012) 202 Cal.App.4th 1391 oeecscsscssscssssecssectsesresssessessessseaseasens 37 Kasky v. Nike, Inc. | (2002) 27 Cal.4th 939 ooccscccssssecsscsseessesseseeesseesesssseseceeeeseeseesnrens 25 Mejia v. Reed (2003) 31 Cal.4th 657 oiciecccssceccsssesscesseesscsseseseeseesssesesseeesecssesesseseeses 25 il Moorev. California State Bd. ofAccountancy (1992) 2 Cal.4th 999ooeccseeessseesssesseseseesscsesessseeeessesevesins 21,22 Morris v. Williams (1967) 67 Cal.2d 733 oieeesccsccscessceecsssssssssssesscesecsssesesesecsessssssssseaeens 24 National Petroleum Refiners Assn. v. FTC (D.C. Cir. 1937) 482 F.2d 672... cececcscesesesscsessessessessessecsseeseees 32, 34, 35 People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (2005) 37 Cal4th 707 oo. ccesecsccsccssesssessessescsecseessssesesessscseessessssceeens 31 Ralphs Grocery Co. v. Reimel | (1968) 69 Cal.2d 172 oeecsccssetsessteteceeseseseeeesesseeessecsteseesees 22, 31, 32 San Diego Nursery Co. v. Agricultural Labor Relations Bd. (1978) 100 Cal.App.3d 128 ooccccccesssssessesesscssecsesscsseesscsscssssscasseees 34 Securities and Exchange Com. v. Chenery Corp. (1947) 332 U.S. 194 iceccsescsesssesesscseescsesecsecsessessecsecesssscsesscssenenesas 34 Smith v. Superior Court (2006) 39 Cal.4th 77 ooeicescccessssssesseessssessssessseseseneenesLeeeeseeeseeeeteees 18, 19 U.S. Dept. ofTreasury v. Fabe (1993) 508 U.S. 491eccccccseetecseessessssesecseseseeesessrsessessessesstsatansresees 4 Western States Petroleum Assn. v. Bd. ofEqualization (2013) 57 Cal.4th 401 ceececcecssesseecsssesessesessecseesesssseassessesesessasens 20 Yamaha Corp. ofAmerica v. State Bd. ofEqualization (1998) 19 Cal4th 1 ooeecccccsecssessessesessescseessscescssesseeseeseessessseens 17, 18 STATUTES 15 U.S.C. § 41 Ct SOQ...ee csescscneesesteeseensescsetecsessessessseeeaeeseeeeesssesetsceseres 4 TS U.S.C. § LOD LDicesseseeseeeceecseseeesensetensssessessessecsecseessseesassscseseseesess 4 1S ULS.C. § 1012eeeeceeescesseseaeceeensesaeesecsssessesssesssssesseeseseesecssceseesensens 4 Bus. & Prof. Code, § 17500 wo. ccscccscssccsscesccsessesssecesssessessssccssesecsesseeeeens 25. Civ. Code, § 3537... .cccccccsesersssesssscssesssecssessscsscssssescesssessecssssessscarssvaeeareas 37 Gov. Code, § 11340 et SOQ. ee iecccccssssscesessesssssssceseceaessscsseeesessessusassssnavess 20 ili Gov. Code, § 11342.) viiccccssssscesssccvscessssssressscssvsesesevecseseetsesssessees 21 Gov. Code, § 11342.2 oecccscsscssccsscessesscsssesscsssessessessesessssesescesscaeesseeeeats 29 Gov. Code, § 11342.600 oeccscssscsesesesctseeesessecsssscesessesssesssseecsssecsnsees 21 Gov. Code, § 11374 voeccieecccccsscscssssscssssescsssvseccesseessacecesssecsevseeeseaseessesees 29 Health & Safety Code, § 123280 oo... cccccsesscscccsscssscssecssscessevssocsecsserseseass 21 Ins. Code, §§ 1-48... siseaeesseesveasenseseeseesnesssseecssconscsseatennsansansaneanennecneeneennes | 4 Ins. Code, § 41 ccc cc cceesccsccsssccssssecssssssccesssevsecssasecssaesesssccseseausessrsessauessssauees 4 Ins. Code, §§ 100-1879.8 voc ccscseeseseetesseeceeseeeseenecsesaeeeceenessessereseseeesseeass 4 Ins. Code, §§ 779.21-779.24 oo cicccescssccessessesstsssessessssessesscssssseseseeescsesseaseans 6 Ins. Code, § 790 oececcscecsssesscsssssessscesecsecsesscsesesesscsecseesseseasersesssssssessutens 4,5 Ins. Code, § 790.03 oo... cececcesecscesecsssesseessssessssesseesssssseseesseessseneens 5 etpassim Ins, Code, § 790.03, SUD. (8) ...c...cccecccscccseseessstseesssecessessssscesscessessusensssaters 28 Ins. Code, § 790.03, SUB. (D) ...ccccccesecsssessescssecesscseessesenseeeseeenes 3 et passim Ins. Code, § 790.03, subd. (d)sescsssccssssssssistinetessinstiesseestsasinsissseeiee 28 Ins. Code, § 790.03, SUD. (€) ......cessccssscccsssssceseecsssesseesseessevseseceescssceacenseeens 5 Ins. Code, § 790.03, subd. (£)(1) oe. ce eeccsccessetseseeesesessessesessessesssesssseesesees 28 Ins. Code, § 790.03, SUb. (A)... .eccccecsccseseessessesessessersssecusasensesses 17, 29, 30 Ins. Code, § 790.04 oo... ccccccccsssscessecccesseccesessssecssseseesssscseseeescesssserasens 4,5, 11 Ins, Code, § 790.05 oo... eiessecscceseetsecssessessesesessercsessssesecsesssaesseeeates 4 etpassim Ins. Code, § 790.06 wo... ecsecsssscseseecseeseeseeessssesesssessessseeesessssaeeees 4 etpassim Ins. Code, § 790.10 oo. cccccscccscestessssceseecssscssestersecssscsesesteseaseesnees 2 etpassim Ins. Code, § 790.034 o...icicccssscesccssesseessesesessesssesssessessessessesesecsersecsasssesesses 30 Ins. Code, § 790.035 voc esescssessessesssececseessensenecsersessvseeesevsessessesesssseeaeeasens 6 Ins. Code, § 790.036, SUbd.(a)....ccecccssccesscsssseesecessscsesesscesessescnssssessseaeeeas 28 iv Ins. Code, § 1749.1 occscsecssesesessessscssessnsesessesesesseeessssecsesessesessesssssacesenaes 9 Ins. Code, § 1749.85 ooccesccsssssssesscessssessesssesscessessceseecsessssssssesssecaeents 9,31 Ins. Code, §§ 1880-12880.5 oo. isessccsessessssssessessssessessecsecseesessesesssessseaseeaes 4 Ins. Code, § 2051.5 occccsececesssssseeesecseesesssessesseseesesssessesseasseseseeansas 8,31 Ins. Code, § L010] oo. cciccscsssssssesecetsecssesscsseesssssesssccesseesssesusssteasnsaaeens 2,31 Ins. Code, §§ LOLOL-10107 occeucseesesssessssesctsssssesseeseecssesseessavscsseneswoe 7,17 Ins. Code, § 10102 oecscscccsscseesesseesscsssesscssesscsesecssecsssssesserenses 2, 12, 30 Ins. Code, § 10103 oo...ccc ccscsscssseccesssscessscssscccssscesceeceresseeesscsatesesecausensnes 8 Ins. Code, § 10234 oo cccscssessenessessecsesssssesecessesssecsesesessessesesscsssessesseses 21 Ins. Code, §§ 12900-13813 ociccsccssssscssesssssesessessecesseesessessesscesessrecesererss 4 Ins. Code, § 12921, subd. (a) ....c cc cescssccsssssesscssecssesssceessssssecsessusssveanesseseaees 4 Ins. Code, §§ 13900-13907 wc ecccsssscsscsescsssescsescsesesssesecscssscssesscscssscsesevecevans 4 Ins. Code, §§ 14000-16032 ......seeee-.cesssesessssssssssvessasseseeseceesssesssieeseseesase 4 Stats. 1957, ch. 916, p. 2124 wo... cecccscccessessessscsssscssseccesssesssecssssssensascearees 21 Stats. 1978, ch. 797, p. 2563 ....ccecsccccccssescssescsseccsssecessssetsesesseversveseecesnseeens 32 Stats. 1992, ch. 1089, § Lcceescccsceseesessesssecsssseseseeeesseeessessesessvseesssssenees 7 Stats. 2004, ch. 385, § 2 iccccccssssecssscessecseeseessesscessecesescsssesevsssessssessaveeees 8 Veh. Code, § 11713ieccccssssscesssssessesssesesessccsessseeseeeaeseecsecstneseesas 23, 32 Veh. Code, § 11713, Sub. (€)...... cc cecsccssssssesseseecsscesscessscessesssssssssesseesenenees 22 Veh. Code, § 34600... .ccccceseecseeressseseserssssseesessesesssessssesssreserssessesteeseeeeas 21 REGULATIONS Cal. Code Regs., tit. 10, § 2695.1 et SEQ. ...cceceesessessceseecssesscnessenserssssessens 29 Cal. Code Regs., tit. 10, § 2695.180, subd. (b) on.ceeseescetecserecrseeenssteees 2 Cal. Code Regs., tit. 10, § 2695.183 onc cceceeseteescccssecssctsenersessssees 2,3, 13 Cal. Code Regs., tit. 10, § 2695.183, Subd.(i) ..c.ceccccssesessecsrsessstessesseessesees 15 Cal. Code Regs.,tit. 10, § 2695.183, subd. (2) .....ccceescsseessessseessesssscsesesens 15 Cal. Code Regs., tit. 10, § 2695.183, subd. (jf)... .cccecceseessssssssseesseseeees 3,15 Cal. Code Regs., tit. 13, § 262.03 ......ccceccsccsccssscsccesssseceesssssssevssscctseseeseees 23 OTHER AUTHORITIES Bonfield, State Administrative Policy Formulation and the Choice ofLawmaking Methodology (1990) 42 Admin.L. Rev. 121ee ccccsesssccsesreeeceeceneeensenscsenssseerensceeeseeeeseesseeeesasersas beseenaneeetees 34 _ Snyder, "Preserving" Civil RICO: How the Model Unfair Trade Practices Act Affects RICO’s Private Right of Action under the McCarran-Ferguson Act (2011) 86 Notre Dame L.Rev. 1767 oo... eceesesseescesesseeeeenrecsseesessssessessesseesssersaeessase 5 Webster’s Collegiate Thesaurus (1976) .......ccccscccssscsssessseessssestssssessteeseseees 24 vi ISSUES PRESENTED Asstated in the petition for review, this case presents the following issue: “Did the Commissioner act within his statutory authority in promulgating regulations designed to prevent insurers from providing homeowners purchasing or renewing insurancepolicies with ‘replacement cost’ estimates that the Commissioner reasonably concluded would be incomplete and potentially misleading?” More specifically, the Court’s order granting review directs the parties to address “whether the Commissionerhasthe statutory authority to promulgate a regulation specifying that the communication of a replacement cost estimate which omits one or more of the components in subdivisions (a)-(e) of section 2695.183 oftitle 10 of the California Code of Regulationsis a ‘misleading’ statement with respect to the business of insurance. (Cal. Code of Regs., tit. 10, § 2695.183, subd. (j).)” INTRODUCTION Catastrophic wildfires, which putlives at risk and destroy thousands of homes, are a recurring problem in California. So too is the problem of unanticipated underinsurance. Overthe past two decades, after every major wildfire, lawmakers and the Commissioner have been inundated with complaints. Post-fire, homeownerstell a familiar story. They reasonably relied on the expertise of their insurers to provide them with estimates for what it would cost to rebuild their homes—often their single most valuable asset—and usedthose estimates to select coverage limits. After the loss, however, they discovered that the estimates did not include necessary expenses, such asthe cost to replace the foundation, or take into account the features and circumstancesof their homes that substantially affect the cost of rebuilding. These homeownerslearned toolate that their “replacement cost” policies were insufficient to allow them to replace their homes. Together, the Legislature and the Commissioner have worked to understand the problem of unintended underinsurance and taken various steps to remedy it. The Legislature has, for example, mandated that insurers provide customers with standardized disclosures that define the available types of replacementcost insurance, warn ofthe risks of underinsurance, and encourage homeownersto obtain current estimates of the cost to rebuild. (Ins. Code, §§ 10101, 10102.)' And,relevant to this case, the Commissioner promulgated California Code of Regulations,title 10, section 2695.183—the replacementcost regulation—exercising his authority “‘as conditions warrant” to “promulgate reasonable rules and regulations, and amendments and additions thereto, as are necessary to administer” Article 6.5 of the Insurance Code, the Unfair Insurance Practices Act (§§ 790-790.15). (§ 790.10.) The Commissioner’s replacement cost regulation is designed to prevent homeowners from being misled into underinsuring their homes by incomplete estimates that fail to considerall the costs reasonably expected to be incurred in rebuilding. The regulation requires the insurer to consider and include a list of minimum costs and factors, such as demolition and debris removal, type of foundation, and geographic location; base the estimate on whatit will actually cost to rebuild; and take steps annually to ' All statutory references are to the Insurance Code unless otherwise noted, As used in this brief, “insurer” has the same meaning as “licensee” in section 2695.180, subdivision (b) of title 10 of the California Code of Regulations—specifically, any person or entity holding a license or certificate of authority issued by the Departmentof Insurance, a broker- agent, or any other entity for whom the Commissioner’s consent is required before transacting business in the State of California or with California residents. ensure that estimating tools reflect current conditions. (Cal. Code Regs., tit. 10 (Regs.), § 2695.183, subds. (a)-(e).) The regulation further providesthat failing to follow these steps in providing an estimate of replacement cost constitutes a misleading statement, whichis a violation of the Unfair InsurancePractices Act. (Regs., § 2695.183, subd. (j); see § 790.03, subd. (b) [prohibiting, amongotherthings, “any statement... which is untrue, deceptive, or misleading, and which is known,or which by the exercise of reasonable care should be known,to be untrue, deceptive, or misleading”].) The regulation thus helps to ensure that when homeownersrequest replacementcost estimates to inform their insurance decisions—asthe standardized disclosures encourage them to do—the information they receive from insurers is complete and not misleading. The court of appeal struck down the replacementcost regulation, concluding that the Commissioner had exceededhis statutory authority in promulgating it, and that the existence of the Commissioner’s other statutory powers, such as his powerto institute enforcement proceedings, limits his rulemaking powersin this area. (Opinion (Opn.) 23-25.) In so doing, the court failed to properly apply the rules of statutory construction and to give effect to the Legislature’s intent that the Commissioner, exercising his expert judgment, should have broad, quasi-legislative rulemaking authority to act without delay or the need for specific legislative direction to protect consumers, create a level and well-defined playing field for the insurance industry, andfill the statute’s gaps. This Court should reverse the court of appeal’s decision, confirm the Commissioner’s broad rulemaking authority, and uphold the replacement cost regulation. BACKGROUND I, THE INSURANCE CODE AND THE COMMISSIONER ‘All insurancein this State is governed by the provisionsof[the Insurance Clode.” (§ 41.) In addition to its general provisions (§§ 1-48), the Insurance Codeconsists of five divisions setting out general rules governing insurance (Division 1, §§ 100-1879.8) and addressing classes of insurance, including residential property insurance (Division 2, §§ 1880- 12880.5); the powers and duties of the Commissioner (Division 3, §§ 12900-13813); affordable housing entities’ pooling of self-insured claimsor losses (Division 4, §§ 13900-13907); and insurance adjusters (Division 5, §§ 14000-16032). As set out generally in Division 3, “[t]he . commissionershall perform all duties imposed upon him orherby the provisions ofthis code andother laws regulating the business of insurance in this state, and shall enforce the execution of those provisions and laws.” (§ 12921, subd.(a).) Among the Commissioner’s duties is the responsibility to ensure that the purposes of the code’s Unfair Insurances Practices Act, Division 1, Part 2, chapter 1, article 6.5, sections 790-790.15, are carried out. (See §§ 790.04, 790.05, 790.06, 790.10.) Enacted in 1959, the Unfair Practices Act codified certain provisions of the Uniform Fair Trade Practices Model Act developed by the National Association of Insurance Commissioners following Congress’s enactment ofthe McCarran-Ferguson Act (15 U.S.C. § 1011 et seq.). (§ 790.) The McCarran-Ferguson Act declared the business of insuranceto be a subject of state regulation and exempted state law enacted for the purposeof insurance regulation from federal preemption. (15 U.S.C. §§ 1011, 1012; see U.S. Dept. ofTreasury v. Fabe (1993) 508 U.S. 491, 499-500 [discussing history of McCarran-Ferguson Act].) The Model Act closely paralleled the Federal Trade Commission Act (15 U.S.C. § 41 et seq.) to avoid potential federal preemption ofstate regulation of unfair or deceptive insurancetrade practices. (Snyder, “Preserving” Civil RICO. How the Model Unfair Trade Practices Act Affects RICO’s Private Right ofAction under the McCarran-Ferguson Act (2011) 86 Notre Dame L.Rev. 1767, 1777.) The purpose of the Unfair Insurance Practices Actis to “regulate trade practices in the business of insurance in accordance with the intent of Congress as expressed in the [McCarran-Ferguson Act], by defining, or providing for the determination of, all such practices in this State which constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the _ trade practices so defined or determined.” (§ 790.) Section 790.03 defines and prohibits certain acts “as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance.” For example, it specifically prohibits “[m]aking any false entry in any book,report, or statement of any insurer with intent to deceive any agent or examiner lawfully appointed to examineinto its condition or into any ofits affairs... .” (§ 790.03, subd. (e).) More broadly, section 790.03 also prohibits making or disseminating . . . any statement containing any assertion, representation, or statement with respect to the business of insurance or with respect to any person in the conduct of his or her insurance business, which is untrue, deceptive, or misleading, and which is known, or which by the exercise of reasonable care should be known,to be untrue, deceptive, or misleading. (§ 790.03, subd.(b).) The Unfair Insurance Practices Act provides the Commissioner with certain investigative and enforcementtools. Section 790.04 empowers the Commissioner to examine and investigate the business affairs of any person to determine compliance with the Act. The Commissioner maybring enforcement actions under section 790.05 against any personalleged to have engaged in a prohibited act or practice defined in section 790.03. Upon a determination that the person has engagedin prohibited conduct, the Commissioner may assess monetary penalties under section 790.035 and may enjoin the conduct. Further, section 790.06 permits the Commissionerto initiate an administrative proceeding against a person suspected of engagingin anyact or practice that is unfair or deceptive, but is not defined in section 790.03. Section 790.06 provides that after an administrative hearing, if the Commissioner determinesthe act or practice is unfair or deceptive, he mustissue a report so declaring. (§ 790.06, subd. (a).) Under section 790.06, the Commissioner cannot directly assess monetary penalties or order the conduct to cease as he can when proceeding under section 790.05. The Commissioner must instead apply to the superior court for an injunction. (§ 790.06, subd. (b).) In addition, section 790.10 vests the Commissioner with quasi- legislative rulemakingauthority.” Section 790.10 providesthat “[t]he commissionershall, from time to time as conditions warrant, after notice and public hearing, promulgate reasonable rules and regulations, and amendments and additions thereto, as are necessary to administer this article.” In delegating rulemaking authority to the Commissioner, the Legislature intended for him to clarify and fill in the details of the broad provisions of the prohibited acts or practices defined in section 790.03, ‘**for the benefit of the public without having to wait for the Legislature to * The Legislature commonly grants agencies both adjudicatory and rulemaking authority. (See, e.g., Agricultural Labor Relations Bd. v. Superior Court (1976) 16 Cal.3d 392, 399-400 [Board has enforcement powers under Labor Code, § 1160 et seq. and rulemaking authority under Labor Code, § 1144]; see also §§ 779.21-779.24 [granting Commissioner both adjudicatory and rulemaking authority with respect to credit life and disability insurance].) 299act at a later date.’” (Opn. 28-29, quoting Assem. Com.on Finance and Insurance, summary of Assem. Bill No. 1353 (1971 Reg. Sess.) p. 1.) IJ. THE CHRONIC PROBLEM OF UNINTENDED UNDERINSURANCE The Legislature and the Commissioner have worked for over two decades to address the problem of unintended underinsurance. The severity of the underinsurance problem first became evident after the 1991 Oakland hills fire, which destroyed more than 3,000 homes. Facing what had becomeessentially empty lots, homeowners turnedto their insurers and were shockedto learn that their “replacement cost” policies werenotsufficient to cover the actual cost of rebuilding. (Appellant’s Motion for Judicial Notice (MJN), Ex. A, pp. 2-3 [Assem. Com. on Insurance, Bill Analysis of Sen. Bill No. 1854 (1991-1992 Reg. Sess.) as amended Aug. 11, 1992].) Many homeowners complained that misleading sales and marketing tactics by insurers led them to believe they were adequately insured to completely rebuild following a catastrophic event, whenin fact their coverage was substantially inadequate. (/d., at p. 3; MIN, Ex. B, p. 5 [Sen. Rules Com., Off. of Sen. Floor Analyses, analysis of Sen. Bill No. 1854 (1991-1992 Reg. Sess.) as amended Aug. 11, 1992].) In response, the Legislature added to Division 2 of the Insurance Code a set of new provisionsreferred to as the California Residential Property Insurance Disclosure Act (Disclosure Act). (§§ 10101-10107.) These new - provisions required that insurers provide homeowners with a standard disclosure form that encouraged homeownersto read their policies, and provided certain general informationrelated to property insurance, such as the meaning andtypes of “replacement cost coverage.” (Stats. 1992, ch. 1089, § 1.) The Disclosure Act was intended to ensure that homeowners were provided with “full and accurate information” to make informed decisions about coverage. (MJN,Ex.A, p. 2 [Assem. Com.on Insurance, Bill Analysis of Sen. Bill No. 1854 (1991-1992 Reg. Sess.) as amended Aug. 11, 1992].) The problem of homeowners finding themselves unexpectedly underinsured in the wakeofcatastrophicfires persisted, as evidenced by the complaints that followed the 2003 wildfires in southern California. (Rulemaking File (RF [volume]:[page]) [V:1081; V:1320-1322; VI:1431, 1524.) The disaster broughtto light a related problem—that underinsurance couldresult from cost increases occurring between the time the homeis destroyed and the time that rebuilding can commence. In response, the Legislature enacted section 2051.5, which was designed to provide homeowners adequate time to rebuild or repair and to accountfor the fact that the cost at the time of rebuilding may be higher than at the time of the actual loss. (MIJN, Ex. C, pp. 9-13 [Sen. Com.on Insurance, Bill Analysis of Assem. Bill No. 2199 (2003-2004 Reg. Sess.) as amended May 17, 2004].) The Legislature also amended section 10103 of the Disclosure Act to require the declarations page of every policy to state that the limit of liability is based on an estimate of the cost to rebuild the insured home. (Stats. 2004, ch. 385, § 2; § 10103, subd. (a)(2).) The Senate Banking, Finance and Insurance Committee also identified underinsuranceas a significant, continuing problem. (MIJN, Ex. D,pp. 16- 17 [Sen. Banking, Finance and Insurance Com., Bill Analysis of Sen. Bill No.2 (2005-2006 Reg. Sess.) as amended Mar. 29, 2005].) The Committee noted that homeowners’ lack of knowledge about construction costs, and improperly trained insurance industry personnel estimating replacement costs, contributed to underinsurance. The Committee declared that it is “critical that initial policy limits be set accurately and updated regularly.” (id. at p. 176, original underscoring.) The Committee noted that the Commissioner (the Department of Insurance) hadalso held hearings “to educate the public and to determine if market conduct exams needed to be commenced,” and that in these hearings, “underinsurance was a major issue.” (/bid.) The Senate Committee’s hearings led the Legislature in 2005 to enact section 1749.85, designed in part to educate those membersofthe industry whointeract with homeowners“in proper methodsof estimating the replacement value of structures, and of explaining various levels of coverage under a homeowners’ insurance policy.” (§ 1749.85, subd.(a).) The section required the Departmentof Insurance’s curriculum committee to make recommendations to the Commissioner on such methods by 2006. (Ubid.; see MIJN, Ex. E, pp. 24-26 [Sen. Rules Com., Third Reading of Sen. Bill No. 2 (2005-2006 Reg. Sess.) as amended August 30, 2005].)° In 2007 and 2008, large wildfires again struck the State. (See, e.g., RF V:1301-VI:1387 [newsarticles documentingfire].) Once again, the Commissioner received numerous complaints from affected homeowners whohadrealized too late that they were seriously underinsured. (See,e.g., RF [1:276-292 [summary ofinsurer actions contributing to underinsurance in Lake Tahoe and San Diego regions].) For example, a Lake Tahoe resident affected by the 2007 Angorafire reported that she was shockedto learn that she was “grossly under-insured” on two residences. (RF JI:432, 436.) She was “led to believe” by her agent that her level of insurance was “in the ballpark’” when in fact one home wasforty percent underinsured, and the other fifty percent underinsured. (RF JI:432, 436.) Anotherfire victim relied on his agent’s expertise to estimate replacement costs, and the agent’s assurancethat the limits would be adequate to rebuild his home, only to find out that the agent estimated the replacement cost based only on * Pursuant to section 1749.1, the Commissioner appoints a curriculum board to develop and recommendpre-licensing and continuing education courses of study for insurance licensees. his prior experience with construction costs and neglected to include many necessary expenses. (RF IJ:460, 481, 484.) Asa result of his reliance, the homeownerwasalmostfifty percent underinsured. (RF II:481.) Thesestories are typical. The vast majority of the underinsurance complaints were from homeowners whobelieved they had sufficient coverage, but learned after a majorfire that the replacement cost estimates that they relied on to set policy limits did not consider costs for such routine and necessary steps as replacing foundations, debris removal, demolition, overheadand profit, engineering reports and architect plans. (RF V:1173.) Many homeownersreported that they had relied on the expertise oftheir insurers, insurance agents and brokers to prepare the replacementcost estimates and had purchasedpolicies with limits based on those estimates. (See, e.g., RF I:79-80, 124-125, 139, 217; 1[:351, 421, 503; IH:584, 720- 721, 822, 826; [V:961.) Further, some homeowners reported that when they had asked to confirm the sufficiency of their insurance coverage, their agents or brokers reassured them thattheir policy limits were sufficient to rebuild. (See, e.g., RF 1:168, 200; 11:436, 484; II:790-792; IV:872, 906.) Other homeowners asked to increase coverage, but were dissuadedbytheir agents from doing so based on assurancesthat their existing coverage was sufficient. (See, €.g., RF III:582, 831.) Somealso reported that their insurers had failed properly to account for the particular characteristics of their homes, leading to underestimates. (See, e.g., RF [:55-56, 166-176, 190-210; III:582-583, 643, 672, 743, 810; IV:869, 904-915, 1024-1026.) In many cases, there was a lack of documentation establishing how the insurer determined the replacement cost estimate. (See RF IJ:276-292.) Andthese | problems were widespread; in a June 2008 survey of homeowners conducted by a nonprofit consumer advocate group, 74% of the respondentsstated that the limits were not sufficient to cover their post-fire costs of rebuilding. (RF IV:1059-1062 [United Policyholders’ survey].) 10 Pursuantto his investigative authority under section 790.04 of the Unfair Practices Act, the Commissioner conducted examinationsof four insurers that, together, account for fifty percent of the homeowners’ __ insurancepolicies issued in California. (RF IV:1027-1030; see § 790.04 [examination power].) The resulting examination report determined that despite insurers’ attempts to place the responsibility to select appropriate coverage limits on homeowners, homeownersin fact relied on insurers’ estimates of replacement cost to determine the amount of coverageto buy, and, as a result of insurers’ failure to includeall reasonable and necessary expensesin their estimates, a large number of homeowners were underinsured. (RF IV:1030.)* The examination report concludedthat “the insurers’ processes andtools for estimating replacementcost are inadequate for formulating a realistic dwelling rebuilding cost” and their use “result[s] in insureds who believe they are adequately covered for the full reconstruction cost of their dwelling ....” (/bid.) In 2010, the Commissioner andthe Legislature continued to work on the problem of underinsuranceandits relationship to replacementcost estimates. In April 2010,a bill was introducedin the California State Assembly to amend the Disclosure Act—Assembly Bill No. 2022 (2009-2010 Reg. Sess.). The amendments were designed to reflect changing market conditions andto “help homeownersin reviewing the adequacyoftheir insurance coverage in the event of a catastrophe such as a wildfire.” (MIN, * As part of these examinations, Departmentof Insurancestaff. ‘reviewed a total of 188 policies on which a loss had been claimed. (RF [V:1029.) The limitation ofliability on the structure was lower than the cost to rebuild in 102 cases. (/bid.) Factoring in any extended replacement cost coverage that applied, 72 cases werestill be underinsuredfor the total loss. (Ibid.) 1] Ex. F, p. 29 [Sen. Banking, Finance and Insurance Com., Bill Analysis of Assem.Bill No. 2022 (2009-2010 Reg. Sess.) as amended May 11, 2010].) The amendments revised the standard disclosure form to highlight ways for homeownersto protect themselves against unintended underinsurance. (Jd. at p. 28.) Amongotherthings, the amended disclosure form alerts homeownersthat “[t]he coverage limit on the dwelling structure should be high enough so you can rebuild your homeifit is completely destroyed[,]” and encourages homeownersto obtain estimates of replacement cost from insurers. (§ 10102, original underscoring.) Assembly Bill No. 2022 became law on September30, 2010. At roughly the sametime that Assembly Bill No. 2022 was introduced, the Commissioner proposed newregulations to address underinsurance. (RF IV:1101-1109.) The Commissioner’s Notice of Proposed Action observedthat wildfires had destroyed “a high numberof residential structures[,]” causing a substantial number of homeowners to turn to their insurers for help; only then did “they learn[ ] that the replacement value estimates madein setting coverage limits for their homes w[ere] too low, causing underinsurance issuesto arise during efforts to rebuild or replace their residences.” (RF IV:1103.) The Commissioner explained that the proposed regulation would, amongotherthings, “set out requirements applicable to replacement value and replacementcost estimates to create a more consistent, comprehensive and accurate replacementcost calculation... .” (RF IV:1101.) The Commissioner conducted a public hearing, accepted and responded to public comments, made changesto the proposed regulation in response to comments, and issued a Final Statement of Reasonsfor the replacement cost regulation on November17, 2010. (RF V:1111-1164, 1165-1257, 1258-1273.) The Office of Administrative Law approved the regulation pursuant to Government Codesection 11349.3 on December29, 12 2010. (RF 1:2.)° On June 26, 2011, the replacement cost regulation became effective. bid.) STATEMENT OF THE CASE I. THE REPLACEMENT COST REGULATION The replacementcost regulation, California Code of Regulations,title 10, section 2695.183 provides in relevantpart: Nolicensee shall communicate an estimate of replacement cost to an applicantor insured in connection with an application for or renewal of a homeowners’ insurancepolicy that provides coverage on a replacementcost basis, unless the requirements and standardsset forth in subdivisions(a) through (e) below are met:.... Subdivision (a) provides that “[t]he estimate of replacementcost shall include the expensesthat would reasonably be incurred to rebuild the insured structure(s)in its entirety,” and must includeat least the following five items: cost of labor; overhead and profit; cost of demolition and debris removal; cost of permits and architect’s plans; and “[c]onsideration of components and features of the insured structure[.]” (Regs., § 2695.183, subd.(a)(1)-(5).) Such components and features include eleven specific items relevant to a typical rebuild, which include type of foundation; type of frame; roofing and siding materials; size of living space; and the structure’s geographic location. (Regs., § 2695.183, subd. (a)(5)(A)-(K).) These components reflect not only the Department of Insurance’s expertise and experience,but also its extensive investigation and research into the costs of rebuilding and consideration of comments from the industry and other affected parties. - ° The specifics ofthe final replacement cost regulation are discussed in greater detail in the next section. 13 Subdivision (b) provides that the estimate must “tak[e] into account the cost to reconstruct the single property being evaluated, as comparedto the cost to build multiple, or tract, dwellings’—-meaningthatit must not include discounts that might be available to developers butnotto individual homeowners. Moreover, under subdivision (c), the estimate cannot be based on the resale value of the land, or on the amountor outstanding balance of any loan, and under subdivision (d),it “shall not include a deduction for physical depreciation.” Subdivision (e) further provides that, at least annually, the insurer must “take reasonable steps to verify that the sources and methods used to generate the estimate of replacement cost are kept current to reflect changes in the costs of reconstruction and rebuilding, including changesin labor, building materials, and supplies, based upon the geographic location of the insured structure[,|’’ and the estimate “shall be created using such reasonably current sources and methods.” As the Commissioner noted in response to comments, the purpose of the regulation is to ensure that “if a licensee communicates an estimate of replacementcost, the estimate must be complete and containall the components that a reasonable consumer would assumeto bepart of a complete rebuild of the structure.” (RF VI:1419.) As evidenced by post- fire homeowner complaints, “[t]o do otherwise, creates consumer confusion and is misleading.” (/bid.) The regulation is designed to “end any ambiguity” about “what components are included in making the [replacement cost] estimate.” (RF VI:1430.) Consistent with the Commissioner’s view of the need for and purpose of the regulation, the regulation provides that if an insurer communicates an estimate of replacementcosts that does not comport with subdivisions(a) through (e), this “constitutes making a statement with respect to the business of insurance which is misleading and which bythe exercise of 14 reasonable care should be knownto be misleading, pursuant to Insurance Code section 790.03.” (Regs., § 2695.183, subd. (j).) The regulation includes other requirements consistent with its purposes. For example,if the insurer will issue a replacementcost policy, then the replacementcost estimate must be itemized andin writing. (Regs., § 2695.183, subd. (g).) Further, the regulation imposescertain recordkeeping obligations on insurers. (Regs., § 2695.183, subd.(i).) Failure to comply with these other requirements is not, however, encompassed within subdivision (j)’s definition of misleading statement. Asset out in the Initial and Final Statement of Reasonsandin his response to comments, the Commissioner’s considered view wasthat section 790.10, which empowers the Commissionerto issue regulations necessary to administer the Unfair Insurance Practices Act, authorized him to issue the replacementcost regulations. (See RF VI:1433-1434, 1471.) Il. INDUSTRY CHALLENGE AND LOWER COURT DECISIONS Two insurance trade associations, respondents Association of | California Insurance Companies and Personal Insurance Federation of California, brought a declaratory relief action challenging the validity of the regulation. The trade associations argued that the Commissioner has no authority under sections 790.10 and 790.03, subdivision (b) to promulgate content and form requirements for replacementcost estimates. They alleged that the Commissioneris authorized only to administratively enforce against specific actors pursuant to section 790.06, which applies to unfair or deceptive acts not defined in 790.03.° Respondents did not, ° The trade associations additionally contended that the regulation affects insurance underwriting and infringes on insurers’ right to free speech. Neitherthe trial court nor the court of appeal reached the merits of those two issues (see Opn. 18, 31), and they are not at issue in this appeal. 15 however, argue that the cost components identified in the regulation should not be considered in estimating replacement cost. (Opn. 8-15.) The Commissioner respondedthat, under section 790.10, he could by regulation makedefinite and specific a particular type of misleading statementfalling under the general prohibition in section 790.03, subdivision (b), and that section 790.06 does not supplant his rulemaking authority. (Opn. 15-16.) Following a benchtrial, the trial court declared the regulation invalid. (Opn. 17-18.) The court of appeal affirmed, concluding that the Legislature has not delegated to the Commissionerthe authority to determine that incomplete replacementcost estimates are misleading as defined in § 790.03, subdivision (b). (Opn. 22.) Relying on the rule of expressio unius est exclusio alterius, the court of appeal inferred “that the absence of a provision regarding replacementcost estimates was a deliberate choice” by the Legislature. (Opn. 23.) It thus concludedthat “the Commissioner did not have authority to add content and format requirements for replacement cost estimates in homeownerinsuranceto the list of practices set forth in section 790.03 under the guise of deeming nonconforming estimates misleading undersection 790.03, subdivision (b).” (/bid.) The court of appeal further stated that the Commissioner’s view ofhis rulemaking authority “proves too much”because,if it were correct, the replacementcost estimate regulation would be unnecessary, as the Commissioner could already bring an enforcement action based on any misleading estimate in a proceeding under section 790.05 (authorizing administrative enforcement against practices defined in section 790.03). The court also reasoned that this would render superfluous section 790.06, which authorizes the Commissioner to bring an action to prevent unfair practices that are not defined in section 790.03, because the Commissioner could alwaysfirst promulgate a regulation to declare particular conduct 16 misleading and then use the more streamlined enforcement processes of section 790.05, (Opn. 24-25.) The appellate court distinguished Ford Dealers Association v. Department ofMotor Vehicles (1982) 32 Cal.3d 347, where this Court upheld the exercise of agency rulemaking authority, on the theory that the underlying laws were different. (Opn. 26-28.) The court of appeal acknowledgedthatthelegislative history of section 790.10 appeared to support the Commissioner’s view ofhis rulemaking authority. However, the court determined that the Legislature’s subsequent addition of unfair claims settlement practices (section 790.03, subd. (h)), as well as statutes outside of the Act which mandate disclosures for homeownerinsurancepolicies (sections 10101-10107), were inconsistent with the original legislative intent. (Opn. 28-29.) It thus concludedthat “the Commissioner did not have authority to add content and format requirements for replacement cost estimates in homeowner insuranceto thelist of practices set forth in section 790.03 under the guise of deeming nonconforming estimates misleading under section 790.03, subdivision (b).” (/bid.) This Court granted the Commissioner’s petition for review on July 15, 2015. STANDARD OFREVIEW A regulation is presumed valid, and the burden to prove otherwiseis on the party seeking invalidation. (Credit Ins. General Agents Assn. v. Payne (1976) 16 Cal.3d 651, 657.) The replacementcost regulation is a quasi-legislative rule becauseit is “the substantive product of a delegated legislative power conferred on the agency.” (See Yamaha Corp. of America v. State Bd. ofEqualization (1998) 19 Cal.4th 1, 8.) In reviewing a quasi-legislative rule, a court must determine whether in promulgating the rule, the agency acted within the boundsofits statutory mandate, and, if so, whether the regulation is reasonably necessary to effectuate the purpose of 17 the statute. (/d. at pp. 9-11.) Respondents did not challenge the reasonable necessity of the regulationin the trial court or the court of appeal. (Opn.18, fn. 8.) (They had no basisto do so, given that the replacementcost regulation is a clear and reasonably necessary responseto a well- documented and recurring problem. (See BackgroundII., pp. 7-11, above.)) Reviewin this case thereforeis limited to the question of whether the replacement cost regulation lies within the Commissioner’s rulemaking authority. In answering that question, courts give “great weight”to the construction ofa statute by officials charged with its administration, though final responsibility for the interpretation of the law rests with the courts. (Yamaha, supra, 19 Cal.4th 1, 9; id. at p. 11, fn. 4.) The standard 299governing a challenge to the “‘fundamental legitimacy’” of a quasi- legislative regulation is “‘respectful nondeference.’” (/d. at p. 11, fn. 4, quoting EnvironmentalProtection Information Center v. Department of Forestry & Fire Protection (1996) 43 Cal.App.4th 1011, 1022.) “Where the Legislature has delegated to an administrative agency the responsibility to implementa statutory schemethroughrules and regulations, the courts will interfere only where the agency has clearly oversteppedits statutory authority or violated a constitutional mandate.” (Ford Dealers, supra, 32 Cal.3d 347, 356.) ARGUMENT In determining whethera regulation lies within an agency’s rulemaking authority, a court’s “fundamental task is to ascertain the Legislature’s intent so as to effectuate the purpose ofthe statute.” (Smith v. Superior Court (2006) 39 Cal.4th 77, 83.) Courts look first to the statutory languageto ascertain its usual and ordinary meaning. (/bid.) “If there is no ambiguity, then [courts] presume the lawmakers meant whatthey said, and 18 the plain meaning of the language governs.” (Day v. City ofFontana (2001) 25 Cal.4th 268, 272.) Wherethe statute is ambiguousor reasonably susceptible to more than one interpretation, a court may lookto a variety of extrinsic aids, including the object to be achieved, the evils to be remedied,the legislative history and public policy. (Smith v. Superior Court, supra, 39 Cal.4th at p. 83.) A court does not construe statutes in isolation, but reads them with reference to the entire statutory scheme and must “harmonize statutes, reconcile seeming inconsistencies in them, and construe them to give force and effect to all of their provisions.” (Even Zohar Construction & Remodeling, Inc.v. Bellaire Townhouses, LLC (2015) 61 Cal.4th 830, 837.) Ultimately, the Court “must select the construction that comports most closely with the apparent intent of the Legislature, with a view to promoting rather than defeating the general purpose of the statute, and avoid an interpretation that would lead to absurd consequences.” (Smith v. Superior Court, supra, 39 Cal.4th at p. 83.) Properly considered, section 790.10 by its plain language authorizes the Commissioner to issue regulations administering section 790.03, subdivision (b), specifying for consumers and the insurance industry statements that are inherently misleading and—more specifically—to issue the particular replacementcost regulation challenged in this case. This conclusion is supported by the Unfair Insurance Practices Act’s legislative history, as the court of appeal itself recognized. It is fully consistent with other provisions of the Act, including those that confer adjudicative power on the Commissioner. Andit is in no way at odds with, but in fact complements, the Legislature’s actions. 19 L SECTION 790.10 GRANTS TO THE COMMISSIONER BROAD AUTHORITY TO ISSUE REGULATIONS TO ADMINISTER THE UNFAIR INSURANCE PRACTICES ACT Section 790.10 provides in full that “[t]he Commissionershall, from time to time as conditions warrant, after notice and public hearing, promulgate reasonable rules and regulations, and amendments and additions thereto, as are necessary to administerthis article” (Article 6.5, the Unfair Insurance Practices Act). (§ 790.10.) This provision does not limit the circumstances under which the Commissioner may issue regulations, or mandate the content of those regulations. Rather,it delegates quasi-legislative rulemaking authority to the Commissionerto issue substantiverules of general applicability. (See Western States Petroleum Assn. v. Bd. ofEqualization (2013) 57 Cal.4th 401, 414 [holding in similar circumstances that agency’s regulation was issued pursuant to quasi-legislative power].) The court of appeal appeared to give some credence to respondents’ argument that the Legislature’s change of the operative verb from “implement”to “administer” in the course of drafting section 790.10 is evidence that the Legislature intended to confer only a limited rulemaking role on the Commissioner. (See, e.g., Opn. 20, 27; Respondents’ Motion for Judicial Notice, 2 [Assem. Bill No. 1353 (1970-1971 Reg. Sess.) as amended on Jul. 9, 1971].) There is no basis for this inference. While the reason for the change in terminologyis not specified in the legislative history, a reasonable explanation may be foundin the language ofthe California Administrative Procedure Act (APA), Government Codesection 11340 et seq. In 1971, and today, the APA defines a “regulation”to be “every rule, regulation, order, or standard of general application or the amendment, supplement, or revision of any [such] rule, regulation, order, or standard adopted by anystate agency to implement, interpret, or make 20 specific the law enforced or administered byit, or to govern its procedure.” (Gov. Code, § 11342.600 [bracketed word added]; see Stats. 1957, ch. 916, p. 2124 [bracketed wordin original].) As originally drafted, section 790.10 . was arguably incomplete, mentioning only one of several reasons that an agency might engage in rulemaking—to implementthe law it administers. Rather than adding the two otherlisted reasons for rulemaking—to “interpret or makespecific” the law—the Legislature clarified that the Commissioner has the powerto promulgate all reasonable rules and regulations, of whatever type and purpose, that the Commissioner determines are necessary to carry out his responsibility to “administer” the Unfair Insurance Practices Act. (§ 790.10.) The language of section 790.10 is not unusual. Asseen in a variety of statutes, the Legislature commonlyuses “administer,” or a variant or synonym,to confer quasi-legislative rulemaking authority. (See, e.g., Moore v. California State Bd. ofAccountancy (1992) 2 Cal.4th 999, 1010 [Bus. & Prof. Code, § 5010 authorizes Board of Accountancy to adopt rules for “administration” of Accountancy Act]; Ins. Code, § 10234 [authorizing ~ Commissionerto adopt regulations as necessary “to administer” long-term care insurance]; Health & Safety Code, § 123280 [authorizing Department of Health Services to adopt regulations to “administer” nutrition program]; Veh. Code, § 34600 [authorizing DMV to adopt regulations “necessary to administer” the Motor Carriers of Property Permit Act].) Accordingly, the only limitation on the Commissioner’s rulemaking authority under section 790.10 is that which applies to all quasi-legislative rulemaking: The regulation must be “consistent with and not in conflict with the statute and reasonably necessary to effectuate the purpose of the statute.” (Gov. Code, § 11342.1 [Administrative Procedure Act]; see also California School Bds. Assn. v. State Bd. ofEducation (2010) 191 Cal.App.4th 530, 544 [agency cannot promulgate regulations “that are 21 inconsistent with the governingstatute, alter or amend the statute, or enlarge its scope”].) II. THE COMMISSIONER’S POWER TO ADMINISTER THE ACT INCLUDES THE POWER TO DEEM SPECIFIC PRACTICES TO BE INHERENTLY MISLEADING This Court has consistently interpreted express delegations of quasi- legislative rulemaking authority broadly to include the authority to issue regulationsthatfill in the details and make specific the operation of a statutory scheme. (Ford Dealers, supra, 32 Cal.3d 347, 362-363; see also Moore, supra, 2 Cal.4th at pp. 1013-1014 [regulation prohibiting use of accountancytitles by unlicensed persons as misleading]; Credit Ins. Gen. Agents Assn. v. Payne, supra, 16 Cal.3d at p. 656 [regulation capping commissionspaid to agents on sale ofcredit life and disability insurance]; Ralphs Grocery Co. v. Reimel (1968) 69 Cal.2d 172, 182-183 [regulations prohibiting discounts on wholesale price of beer].) The decision in Ford Dealers is particularly instructive, as the agency’s statutory authority, and the nature and purposeof its regulations, are substantially similar to those at issue in this case. In Ford Dealers, automobile dealers challenged certain DMV regulations, asserting they were beyond the agency’s statutory powers. (Ford Dealers, supra, 32 Cal.3d at p. 354.) The challenged regulations were “designed to implement”a section in the Vehicle Code that broadly prohibits any licensed vehicle seller from making “‘a statement whichis untrue or misleading and whichis known, or whichby the exercise of reasonable care should be known,to be untrue or misleading ....” (Jd. at p. 356 & fn. 4; see Veh. Code, § 11713, subd.(a).) The Court noted that the DMV is authorized by statute“to adoptrules and regulations ‘as may be necessary to carry out the provisions’ of the Vehicle Code.” (Ford Dealers, supra, 32 Cal.3d at p. 354, quoting Veh. 22 Code, § 1651.) The DMVis also charged with implementing and enforcing Vehicle Code section 11713, “which bars the dissemination of false or misleading statements tothe public.” (/d. at p. 356.) Pursuant to these provisions, the DMVissueda set of regulations designed to prevent specific kinds of misleading statements. One regulation, for example, provides that if a franchise dealer will be reimbursed by the franchisor for expenses incurred in preparing a car for delivery, or for the delivery itself, the dealer cannot identify these things as charges in its communicationsto consumers. (Seeid. at p. 362; see also Cal. Code Regs., tit. 13, § 262.03 (former § 404.03).] Andif the franchise dealer will not be reimbursed and intends to charge the consumer, the dealer must itemize those added charges and include them in the price advertised to consumers. (/bid.) The Court interpreted the DMV’s rulemaking authority in light of the purpose of section 11713, which the DMVis charged with administering. (Ford Dealers, supra, 32 Cal.3d at p. 356.) It noted that this section was eeeenacted to “‘protect[ | the purchaser from the various harms which can be visited upon him byanirresponsible or unscrupulous dealer.’” (Ford Dealers, supra, 32 Cal.3d at p. 356, quoting Merrill v. Department of ‘Motor Vehicles (1969) 71 Cal.2d 907, 920.) Recognizing the importance of protecting the public from these harms, the Court explained that section 11713 “must be liberally construed ‘to effectuate its object and purpose, and to suppress the mischief at whichit is directed.’” (bid., quotin® California State Restaurant Assn. v. Whitlow (1976) 58 Cal.App.3d 340, 347.) The Court held that the DMV’s regulations were “authorized by the broad statutory prohibition against false and misleading statements.” (Ford Dealers, supra, 32 Cal.3d at p. 362.) It explained that an agency“is not limited to the exact provisionsof a statute in adopting regulations to enforce its mandate.” (/bid.) Upholding the regulations, the Court 23 observedthat “[t]he DMVis authorized to‘fill up the details’ of the statutory scheme.” (/bid., quoting Kugler v. Yocum (1968) 69 Cal.2d 371, 376.) More specifically, “[a] regulation barring a specific class of misleading statements falls within the authority of the DMV underthis statute.” (/d. at pp. 362-363.) “It is within the authority of the DMV to concludethat consumers confronted with an itemized charge for services performed on their automobile will assume that they are paying extra to purchase those specific services.” (/d. at p. 363.) Where that is not in fact the case, because the dealer has already been paid for the services, the DMVcould reasonably conclude that such an itemized chargeis “inherently misleading,” and could regulate to require correction. (Ibid) The circumstances ofthis case are similar in all relevant respects. The Commissioneris charged with issuing regulations to “administer” the Unfair Insurance Practices Act, just as the DMV is charged with “carrying out” the Vehicle Code. (§ 790.10.)’ The provisions that each agencyis charged with administering include a prohibition, applicable to those in a regulated industry, against making misleading statements to consumers. (§ 790.03, subd. (b).) The Commissioner, like the DMV, concluded that consumers would reasonably assumecertain things to be true—inthis case, that replacement cost estimates provided to them by their insurers would include all expenses generally necessary to rebuild. (See, e.g., RF VI:1419 [Final Statement of Reasons, Response to Comments].) The Commissioner, like the DMV,could properly conclude that a communication thatfails to 7 “Carry out”is a synonym of “administer.” (Webster’s Collegiate Thesaurus (1976) p. 16; see also Morris v. Williams (1967) 67 Cal.2d 733, 741 [citing statute conferring authority on agency to issue regulations “carrying out” statute as evidence that agency is authorized to “administer” program].) The court of appeal’s rejection of cases where the relevant statute employs “carry out” rather than “administer” is thus without merit. (See Opn.27.) 24 correct reasonable, but mistaken, consumer assumptions is inherently misleading, and then exercise his authority to require by regulation that the industry take specific action to ensure that consumers are not misled. (See RF VI:1413-1414, 1433-1434 [Final Statement of Reasons, Response to Comments, citing §§ 790.10 and 790.3, subd. (b) as source of authority].) This view of the Commissioner’s rulemaking authority is reasonable and fully consistent with the public protection purpose of the Act. (See Mejia v. Reed (2003) 31 Cal.4th 657, 663, quoting Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d:1379, 1387 [where uncertainty exists, consideration should be given to the public policy consequencesthat would flow from particular interpretation].) The fact that the contents of a replacementcost estimate that does not comply with the specific requirements in subdivisions (a) through (e) of the replacement cost rule mightnot technically be “false” doesnot call into question the Commissioner’s authority to determine that a non-compliant, and thus incomplete, estimate is inherently misleading andin violation of section 790.03, subdivision (b). This Court has long interpreted similar statutes prohibiting misleading statements, such as the Unfair Competition Law (Business and Professions Code section 17500), to encompass not only an affirmatively false statement, but also a statementthat, “‘although true, is either actually misleading or which hasa capacity, likelihood or tendency to deceive or confuse the public.’” (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 951, quoting Leoni v. State Bar (1985) 39 Cal.3d 609, 626.) | Thus, “a statement is false or misleading if members of the public are likely to be deceived.” (Chern v. Bank ofAmerica (1976) 15 Cal.3d 866, 876.) As the Ford Dealers case illustrates, statements that omit crucial information can be misleading. (Supra, 32 Cal.3d at pp. 363-364; see also Day v. AT & T Corp. (1998) 63 Cal.App.4th 325, 332-333.) The record contains overwhelming evidence that, before the - replacement cost regulation, large numbers of homeowners were misled into underinsuring their homes by estimates that omitted critical rebuild expenses. (See RF [:18-25; V1:1401-1403[listing evidence that Commissionerrelied on, including hearings, complaints, comments, surveys and newsarticles].) At the legislative hearings held after the 2003 Southern California fires, the Senate Banking, Finance and Insurance Committee observedthat “[o]f all complaints heard in both hearings, none was more frequent nor so moving as the discussion of underinsurance.” (MIN, Ex. D, p. 16 [Sen. Banking, Finance and Insurance Com., Bill Analysis of Sen. Bill No. 2 (2005-2006 Reg. Sess.) as amended Mar. 29, 2005].) Many homeownerstestified that they had relied on the estimates they were provided and believed they had sufficient insurance, only to discoverthat they were underinsured by hundreds of thousandsof dollars. (Ibid.) The Committee noted that the problem of unintended underinsurance “spanned nearly every occupational group and type of person....” (Ud. at p. 17.) The industry’s use of estimation software offering consumers“quick quotes” contributed to the problem,as it failed to take into accountall the relevant characteristics of the property. (/bid.) The Commissioner’s investigation similarly confirmed that unintended underinsurance was a widespread problem,and that the industry’s estimate practices were a significant contributing factor. (RF IV:1027-1030.) Commonsenseestablishes that a homeownerwhois comparison shopping for insurance could beattracted to a replacement cost policy that is based on an incomplete estimate of the costs to rebuild, because reducing the components coveredwill also reduce the premium. And someinsurers will be tempted to leave out important rebuilding expenses in order to keep premium quotes low andincreasetheir competitiveness. Further, a substantial number of homeowners, whoare 26 not insurance experts, will fail to perceive that differences in premium quotes may reflect real differences in coverage, and thus may be misled into underinsuring. This is confirmed by the Commissioner’s investigation, which revealed that most homeownersdid not deliberately or knowingly underinsure their homes to save money. (See, e.g., RF 1:79-80, 124, 168, 217; 11:351-352, 432; [JI:583, 789, 826.) Rather, underinsurance often resulted because homeownersrelied on the expertise of insurers, insurance agents and brokers to estimate replacementcosts, and they trusted that the estimates communicated to them would besufficient to allow them to completely rebuild. (See, e.g., RF 1:79-80, 124-125, 139, 217; 11:351, 421, 503; II:584, 720-723, 789, 822, 826; IV:961.) These homeowners used the estimates they were providedto set the policy limit, did not take independentsteps to establish adequate coverage limits, and thus were misled into a state of substantial underinsurance. (RF IV:1030 [summary of Commissioner’s market conduct examinations]; see, e.g. RF 1:217, 11:351-354, III:723, 789 [complaints from homeowners].) The replacement cost regulation helps to ensure that insurers’ communications concerning replacementcost estimates reflect homeowners’ reasonable expectations and assumptions about these estimates, in order to reduce the number of homeowners who unwittingly find themselves, post-catastrophe, to be substantially underinsured. Indeed, respondents do not dispute that the costs and factors listed in subdivisions (a) through (e) of the regulation would generally be incurred in a rebuild and should be consideredin estimating replacement cost. (See Opn. 8-15 [summarizing respondents’ arguments].) The Commissionerthus acted squarely within his authority whenheclarified by rule that replacement cost estimates omitting these undisputedly reasonable and expected cost components are inherently misleading andviolate section 790.03, subdivision (b). 27 II]. THE COURT OF APPEAL’S READING OF THE ACT TO LIMIT THE COMMISSIONER’S RULEMAKING AUTHORITYIS INCONSISTENT WITH LEGISLATIVE INTENT The court of appeal soughtto distinguish Ford Dealers and other cases that have upheld agencies’ exercise of their quasi-legislative powers based on asserted differences in the underlying statutes. The court reasoned that, notwithstanding the plain language of sections 790.10 and 790.03, subdivision (b), the larger statutory scheme establishes the Legislature’s true intent to constrain the Commissioner’s rulemaking powers. (See Opn. 21,23.) That reasoning cannot survive examination. A. Thelegislative history supports the Commissioner’s authority The court of appeal observedthat in addition to the general prohibition in section 790.03, subdivision (b) against “Cmlaking or disseminating ... any statement . . . which is untrue, deceptive, or misleading, and which is known,or which by the exercise of reasonable care should be known,to be untrue, deceptive, or misleading[,]”the Legislature has also defined as unfair or deceptive a numberofspecific actions. These include, for example, making any “estimate .. . or statement misrepresenting the terms of any policy” (§ 790.03, subd. (a)); filing or making any “false statement of financial condition” (§ 790.03, subd. (d)); “fmjaking or permitting any unfair discrimination betweenindividuals . . . in the rates charged for any contract of life insurance or oflife annuity” (§ 790.03, subd. (f)(1)); and advertising insurance that the insurer does not sell (§ 790.036, subd. (a).) (See Opn. 22-23.) From this, the court concluded that the Legislature reserved to itself the power to make law specifying unfair and misleading practices, and that “the absence of a provision regarding replacement costs wasa deliberate [legislative] choice.” (Opn. 23.) 28 This construction fails to account for the contemporaneouslegislative history explaining the Legislature’s purpose in enacting section 790.10, which the court acknowledged supports the Commissioner’s view ofthe law. (See Opn. 29.) In the words of the Assembly Committee on Finance and Insurance, section 790.10 was designed to “give[ ] the Insurance Commissioner the authority to promulgate rules and regulations so that if the need therefor arises, he can, without delay, promulgate necessary rules making such practices definite and specific for the benefit of the public without having to waitfor the Legislature to act at a later date.” (MIJN, Ex. H, p. 33 [Assem. Com. on Finance and Insurance, summary ofAssem.Bill No. 1353 (1971 Reg.Sess.),italics added].)*® This history establishes that the Commissionerhas the authority to issue rules to carry out the purposes of the Unfair Insurance Practices Act unless and untilheis instructed otherwise by the Legislature. Indeed, when the Legislature desires to check or guide the Commissioner’s broad rulemaking authority under section 790.10 concerninga particular issue, it does so expressly. For example, when the Commissioner wasin the process of promulgating the Fair Claims Settlement Practices Regulations (Cal. Code Regs., tit. 10, § 2695.1 et seq.) to specify acts prohibited under section 790.03, subdivision (h), the Assembly Committee on Insurance expressed concern that the proposed regulations wouldtreat all classes of insurance alike. (MJN, Ex. G,pp. 31- 32 [Assem. Com.on Insurance, Hearing Analysis of Sen. Bill No. 812 (1990-1991 Reg. Sess.) as introduced Mar. 7, 1991].) Accordingly, the 8 In analyzing the revised section 790.10 prior to its enactment, the Legislative Counsel observed that the Commissioner’s powerto regulate is limited only in that it must meet the consistency requirement of the Administrative Procedure Act, then Government Codesection 11374, and now Government Code section 11342.2. (MJN,Ex.I, pp. 34-37 [Legislative Counsel Opinion of Assem.Bill No. 1353 (Jul. 14, 1971)].) 29 Legislature enacted section 790.034 to require the Commissioner’s claims settlement practices regulations to account for “practices by classes of insurers.” (§ 790.034, subd.(a).) The Assembly Committee’s statement of purpose further suggests that both the Commissioner and the Legislature may makelaw to address a regulatory issue, acting in different and complementary ways, without calling the Commissioner’s authority into question. This is exactly the pattern ofjoint lawmaking seenin the area of underinsurance, where the Legislature and the Commissionerhave together over time worked to address a complicated and evolving problem. One important example, as noted, is that the Legislature amended the mandatory disclosure form that insurers must provide to their insured. That form, amongotherthings, alerts homeownersto the problem of underinsurance, and encourages them “to obtain a current estimate of the cost to rebuild” from an “insurance agent, broker, or insurance company or an independent appraisal from a local contractor, architect, or real estate appraiser.” (§ 10102.) The replacement cost regulation in turn ensures that when a homeowner heeds that advice and asks an insurer—or multiple insurers—for a replacement cost estimate, he or she will receive an estimate that is reasonably complete and consistent with the homeowner’s assumptions, reducing the occurrence of unintended underinsurance. B. The Legislature’s subsequent actions do notcall the Commissioner’s rulemaking authority into question The court of appeal further justified its narrow reading of the Commissioner’s rulemaking authority by noting that the Legislature has passed lawsrelated to prohibited acts and, more specifically, to replacement costs, and, in any of these statutes, “could have gone on to define the content and format of replacementcost estimates.” (See Opn. 29-31, citing § 790.03, subd. (h) [enumerating specific unfair claims settlement 30 practices]; § 2051.5 [defining replacementcosts], § 1749.85 [creating curriculum committee to make recommendationsontraining broker-agents on proper methods of estimating replacementvalue]; § 10101 [requiring standard written disclosures that include admonitions to consumers about adequate coverage].) The court “infer[red] that these omissions were deliberate” and concluded that the Commissioner could not “under the guise of ‘filling in the details,’ . . . do what the Legislature has chosen not to do.” (Opn.31.) Thereis no basis for this inference. Granted, subsequentlegislation interpreting a statute can in some circumstancesbe helpful to a court in establishing the Legislature’s original intent. (See, e.g., People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (2005) 37 Cal.4th 707, 724.) But the statutes cited by the court of appeal are expressionsofthe Legislature’s own prerogatives and concernsrelated to claims settlement and replacement cost estimates and do not purport to interpret, muchless limit, the Commissioner’s authority under § 790.10 to promulgate regulations administering § 790.03, subdivision (b). And, in any event, subsequent Geeinterpretive legislation ““[cannot] change the meaning [ofthe earlier 995enactment,]’” which remains controlling. (See ibid., quoting Russ Bldg. Partnership v. City and County ofSan Francisco (1988) 44 Cal.3d 839, 852 [brackets in R./. Reynolds].) The Legislature vested the Commissioner with quasi-legislative rulemaking authority in 1971 by enacting section 790.10 and has taken no subsequentaction to divest the Commissioner of this authority. Further, where, as in this case, a statute confers quasi-legislative authority on an agency, the absenceof a fully comprehensive and detailed statutory solution to a problem cannot be read to constrict the agency’s ability to address the problem through regulation. (Ralphs Grocery Co., supra, 69 Cal.2d at pp. 182-183 [fact that Legislature enacted statutes 31 governing quantity discounts on wine and milk did not prevent Department of Food and Agriculture from promulgating regulation addressing quantity discounts on beer]; see also National Petroleum Refiners Assn. v. FTC (D.C. Cir. 1937) 482 F.2d 672, 676 [rejecting argumentthat expressio unius est exclusion alterius requires inference that Legislature necessarily considered and rejected all possible alternatives to enacted statute]; see also Opn. 26 [acknowledging similarity of statutory structure at issue in Ford Dealers, where Vehicle Code’s broad prohibition against false and misleading statements was followed by detailed provisions prohibiting specific types of misleadingstatements]; Stats. 1978, ch. 797, p. 2563 [version of Veh. Code, § 11713 in effect in at time ofFord Dealers decision].) The Legislature’s limited treatment of issues related to replacementcost estimates does not meanthat it determined that this area should otherwise be left unregulated, to the detriment of the public. Rather, the logical inference is that the Legislature elected “to defer to and rely upon the expertise of[the] administrative agenc[y]”to fill any regulatory gaps related to replacement cost estimates. (See Credit Ins. General Agents Assn. v. Payne, supra, 16 Cal.3d at p. 656 [upholding Commissioner’s authority to promulgate regulations with respectto credit life and disability insurance under section 779.21 as indicating legislative deference to the Commissioner’s expertise regarding insurance]; see also Ralphs Grocery Co., supra, 69 Cal.2d at pp. 182-183.) C. The Act’s distinction between defined and undefined prohibited acts, and the existence of administrative enforcement tools, do not curtail the Commissioner’s rulemaking authority The court of appealalso relied on the Unfair Insurance Practices Act’s distinction in certain provisions between unfair or deceptive acts that are “defined” by the Legislature in section 790.03, and those that are not so defined, to hold that the Commissioner’s replacement cost regulations 32 exceeded his rulemaking powers. (Opn. 25.) For example, as the court noted, section 790.05 sets out the process for taking administrative enforcement action against practices defined in section 790.03, and section 790.06 sets out the process and additional requirements for taking enforcementaction against practices not defined in section 790.03. (See Opn. 24-25.) The court inferred that only the Legislature can “define” acts that are prohibited by section 790.03, and thus the Commissioner overstepped his authority by issuing a rule clarifying andfilling in specific types of misleading statements concerning “the business of insurance”that are prohibited by 790.03, subdivision (b). The fault in this reasoningis that all actionslisted in 790.03, including those set out in subdivision (b), are by the statute’s terms “defined as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance.” (§ 790.03, italics added.) The Commissioner here has not defined a new prohibited act, but has provided clarity about a prohibited act already definedin statute. The court of appeal also erred in adopting a constrained view of the Commissioner’s rulemaking authority in light of his enforcement authority under sections 790.05 and 790.06. The court stated that if the Commissioner could already resort to enforcement under section 790.05 because incomplete replacement cost estimates violate section 790.03, subdivision (b), there would be no need for the replacementcost regulation. (Opn. 24.) This reasoning fails to accountfor the distinct benefits of adjudication and rulemaking and the relationship between them, however, and affords too little consideration to the Commissioner’s expert view of whethera regulatory, adjudicatory, or combined approach will best carry out the intent of the statutes he is charged with administering. In certain circumstances, proceeding by adjudication may be preferable—for example, where problemsare unforeseen, where the agency does not have sufficient experience to formulate a rule of general 33 application, or where the problem is so specialized “as to be impossible of capture within the boundaries of a general rule.” (Securities and Exchange Com. v. Chenery Corp. (1947) 332 U.S. 194, 202-203.) On the other hand, there are sound policy reasons to proceed through rulemakingin certain circumstances, particularly when an agencyseeksto set out rules of general application. As the D.C. Circuit has observed, “[t]he function offilling in the interstices” of a complex statute “should be performed, as much as possible through [the] quasi-legislative promulgation of rules to be applied in the future.” (National Petroleum Refiners, supra, 482 F.2d 672, 682 (Skelly Wright, J.), quoting Securities and Exchange Com. v. Chenery Corp., supra, 332 U.S. at p. 202.) Rulemaking avoids any appearance of “unfairly focusing on a single defendant in a restricted proceeding when promulgating a new policy with industry-wide ramifications.” (National Petroleum Refiners, supra, 482 F.2d at p. 682.) Its proceduresallow all affected parties to participate, and agencies have the benefit of that participation in formulating the final rule. (San Diego Nursery Co. v. Agricultural Labor Relations Bd. (1978) 100 Cal.App.3d 128, 142-143, quoting NLRB v. Wyman-Gordon Co. (1969) 394 U.S. 759, 777-779 (dis. opn. of Douglas, J.).) Rulemaking procedures “provide an agency about to embarkon legal innovation with all relevant arguments and information ....” (National Petroleum Refiners, supra, 482 F.2d at p. 683.) And because regulations are published and designedto be accessible, they can in many instances provide greater notice to the public and guidance to the regulated entities than decisions resulting from adjudications. (See Bonfield, State Administrative Policy Formulation and the Choice of Lawmaking Methodology (1990) 42 Admin. L. Rev. 121, 125-126.) Moreover, proceeding by rule does notrule out adjudications. Where warranted, a mixed system of rulemaking and adjudication can result in more efficient and expeditious enforcement than adjudication alone, 34 leveling the playing field for those who comply with the rules, and preventing any windfall that might cometo those who would delay or avoid compliance. (National Petroleum Refiners, supra, 482 F.2d at p. 690.) Here, the Commissioner determined that promulgating a rule requiring completeness in replacement cost estimates would yield distinct benefits and advantages. The rulemaking process allowed input from all affected parties, including the regulated industry. The resulting replacement cost regulation proactively protects California homeowners, ensuring that they immediately receive the basic information they need to make sound insuring decisions and reducing the risk of future large-scale instances of unintended underinsurance. Further, the regulation provides clear notice to the industry of certain actions that the Commissioner has determined are misleading, fostering voluntary compliance and avoiding litigation. (See National Petroleum Refiners, supra, 482 F.2d at pp. 690- 691 [industry compliance is more likely where expectationsset out in rules, rather than being established in case-by-case adjudications].) And, if individual enforcementactions prove necessary, the regulation will narrow the issues by establishing that certain omissions can make a replacement cost estimate incomplete and misleading. (See id. at p. 690.) Relying solely on enforcement actions, in contrast, would not adequately and efficiently address the widespread problem of underinsurance. The Commissioner would be forced to develop over time the necessary replacement cost estimate components, proceeding on a case- by-case basis through a series of enforcement actions. In the interim, some homeowners would continue to be provided with incomplete estimates. Membersofthe industry, too, would not have a clear set of standards to follow, and some insurers could potentially gain a market advantage by exploiting the uncertainty. Indeed, it is questionable whether the | adjudicatory process could everresult in a set of required replacement cost 35 estimate componentsthat are as clear and comprehensiveas provided by the challenged regulation. The Unfair Insurance Practices Act should not be read to produce such an unreasonable result that contravenesthe Act’s very purposes. The court of appeal also reasoned, erroneously, that recognizing the Commissioner’s authority to clarify andfill out the details of misleading statements defined in section 790.03, subdivision (b), would render section 790.06 “superfluous.” (Opn. 25.) According to the court, the Commissioner “would never have to resort to the proceduresin section 790.06 regarding practices not ‘defined’ in [section] 790.03” because he could promulgate a regulation defining the conduct as misleading under section 790.03, subdivision (b), and then rely on the enforcement procedure in section 790.05. (See Opn. 25.) The conduct described in section 790.03, subdivision (b), however, does not encompassall of the conduct described in 790.06. Section 790.03, subdivision (b) applies to any untrue, deceptive, or misleading “statement” madeto the public in certain defined ways, which the person or entity making the statement knows, or reasonably should know,is untrue, deceptive, or misleading. Section 790.06, in contrast, is not limited to “statements,” but applies more broadly to any unfair or deceptive method of competition or any act or practice that is in fact unfair or deceptive—whetheror not the actor recognizes, or should recognize,that it is unfair or deceptive. (§ 790.06, subd. (a).) Accordingly, even with a robust set of rules in place clarifying what is prohibited by section 790.03, subdivision (b), and even with the other specific acts defined in section 790.03, the Commissioner might well have occasion to rely on section 790.06 to put a stop to undefined prohibited acts. More fundamentally, even assuming the operation of sections 790.03 and 790.05 largely eliminates the Commissioner’s need to rely on section 790.06, “the presence of arguably unnecessary termsin a statute shouldnotby itself, 36 produce an interpretation that will defeat the Legislature’s central aim in enacting the law.” (General Development Co., L.P., v. City ofSanta Maria (2012) 202 Cal.App.4th 1391, 1395; see also Civ. Code, § 3537.) Confirming the Commissioner’s rulemaking authority in this case, and upholding the challenged regulations—notwithstanding any ability to enforce against misleading cost replacement estimates under section 790.05 or 790.06—servesthe Act’s intent. It preserves the Commissioner’s “delegated responsibilities” to administer the Unfair Insurance Practices Act, respecting the rule that “the choice between proceeding by general rule __ or by ad hoc adjudication ‘lies primarily in the informeddiscretion ofthe 999administrative agency.” (Agricultural Labor Relations Bd. v. Superior Court, supra, 16 Cal.3d 392, 413, quoting Securities and Exchange Com.v. Chenery Corp., supra, 332 at p. 203]; see also Bixby v. Pierno (1971) 4 Cal.3d 130, 150.) CONCLUSION The Commissioner respectfully requests that this Court reverse the court of appeal’s judgment, uphold the replacement cost regulation, and remand this matter for entry ofjudgmentin favor of the Commissioner. 37 Dated: October 9, 2015 Respectfully submitted, KAMALAD. HARRIS Attorney General of California EDWARD C, DUMONT Solicitor General PAUL D. GIFFORD Senior Assistant Attorney General JANILL L. RICHARDS Principal Deputy Solicitor General LINDA BERG GANDARA Deputy Solicitor General DIANE S. SHAW STEPHEN LEW Supervising Deputy Attorneys General LisA W. CHAO Deputy Attorney General Attorneysfor Defendant and Appellant Dave Jones, in his capacity as the Insurance Commissionerofthe State of California 38 CERTIFICATE OF COMPLIANCE I certify that the attached OPENING BRIEF ON THE MERITS uses a 13 point Times New Roman font and contains 10,389 words. Dated: October 9, 2015 KAMALAD. HARRIS Attorney General of California LISA W. CHAO Deputy Attorney General- Attorneysfor Defendant and Appellant DECLARATION OF SERVICE BY U.S. MAIL Case Name: ACIC v. Dave Jones (DOI) (Appeal) No.: $226529 I declare: I am employedin the Office of the Attorney General, whichis the office of a memberofthe California State Bar, at which member's direction this service is made. I am 18 years of age or older and nota party to this matter. I am familiar with the business practice at the Office of the Attorney General for collection and processing of correspondence for mailing with the United States Postal Service. In accordance withthat practice, correspondenceplaced in the internal mail collection system at the Office of the Attorney General is deposited with the United States Postal Service with postage thereon fully prepaid that same day in the ordinary course of business. . On October 9, 2015, I served the attached OPENING BRIEF ON THE MERITSbyplacing a - true copy thereof enclosed in a sealed envelopein the internal mail collection system at the Office of the Attorney General at 300 South Spring Street, Suite 1702, Los Angeles, CA 90013, addressed as follows: Clerk, Court of Appeal Clerk, Los Angeles County Superior Court - Second Appellate District, Division One- Honorable Gregory W. Alarcon 300 South Spring Street, 2nd Floor Department 36 - Los Angeles, California 90013 111 North Hill Street (Hand-Delivered) Los Angeles, California 90012 Gene Livingston, Esq. Greenberg Traurig LLP 1201 "K"Street, Suite 1100 Sacramento, California 95814 (Attorneysfor Plaintiffs and Respondents) I declare under penalty of perjury underthe lawsofthe State of California the foregoingis true and correct and that this declaration was executed on October 9, 2015, at Los Angeles, California. Linda Richardson wy ¥thAnhy—~ Declarant “vl Signature LA2015501583 51931881.doc