ASSOCIATION OF CALIFORNIA INSURANCE COMPANIES v. JONES (To be called and continued to the November 2016 calendar.)Appellant’s Petition for ReviewCal.May 19, 2015 te 13 In the Supreme Court of the State of California ASSOCIATION OF CALIFORNIA INSURANCE COMPANIESand PERSONAL INSURANCE FEDERATION OF CALIFORNIA, Plaintiffs and Respondents, Vv. DAVE JONESinhis capacity as Commissioner of the California Departmentof Insurance, Defendant and Appellant. Licpk A. Anotaeate Ones eeu Court of Appeal, Second Appellate Case No. B248622 Superior Court of California, County of Los Angeles Case No. BC463124 Honorable Gregory W.Alarcon, Judge PETITION FOR REVIEW KAMALAD. HARRIS Attorney General of California PAUL D. GIFFORD Senior Assistant Attorney 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 Telephone: (213) 897-2481 Fax: (213) 897-5775 Email: Lisa.Chao@doj.ca.gov Attorneysfor Appellant and Petitioner Dave Jones, in his capacity as the Insurance Commissioner ofthe State of California TABLE OF CONTENTS Page Petition for REVICW .........cccesccessecstccsseecssnecesseseesssecesecssssssesueeseaeesssssesseseeaeens 1 Issue Presented ............ccccssccssssccceessnssseceeescesessscssssecsnsesessescceccessssausensseeeeeses 1 Why Review Should Be Granted ssucsearasessecsarsuseesesessursstessserestecestssessssseesesvece I Summary of the Facts and of the Court of Appeal’s Opinion.................0 4 Legal Discussion ..........:ccsssscssscesseecsssrecesssteceseesessecsseecseceseeecesssesnseseasseneeesees 8 I. Review Is Needed to Settle Whether the Commissioner Has Authority to Adopt Regulations Preventing Insurance Companies from Providing Misleadingly Incomplete Information. ................. soeaeseseececsesaesesesesessaceeseeess 8 I. Review Is Necessary to Affirm and Clarify that the Commissioner’s Rulemaking Authority Is Not Limited by His Additional Authority under the Unfair Insurance Practices ACt.......ccccesescessesesseeseecessereneesteesesseees 10 Conclusion... ceesseessctceseesseeseceseaeersseeseaecsesseeeseseseaseeseaeeeseauesasenssensessees 12 TABLE OF AUTHORITIES Page CASES Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d 805 ooccccecsescecssceseseesecsecsessecsessesecseecsaessestensesessnases 8 Credit Ins. General Agents Ass’n ofCalifornia, Inc. v. Payne (1976) 16 Cal.3d 651eeeccseseeeseceecnsnseeseeseesesssssesseeecsssesseerseesseeseeees 8 Ford Dealers Association v. Department ofMotor Vehicles (1982) 32 Cal.3d 347oiccscsssesscessesssssesessecssescssesscesseesersessessees 7,9, 10 State Farm Mut. Auto. Ins. Co.v. Garamendi (2004) 32 Cal.4th 1029iceesccssecsesssescssessessesesssessseecesscsscsssesseeesnenes 8 STATUTES Ins. Code, § 790 voce ccsccccssesssssccesssseceseessvsesssessssecseesescsesseseceaescsusscseseeeceasees 4 Ins. Code, §§ 790-790.15 vice eeeesscesesscccseeseseceacesenssseseseeeseessssssesecseesesenees 2 Ins. Code, § 790.03 oo. essessessecseeeseeseesecaeseesssecsessesssseseesseesareasseseses passim Ins. Code, § 790.03, SUD. (b) oo... eeccccssscssesssecssteseesessevesesseesssssenens passim Ins. Code, § 790.03, subd. (A) ........cececcssccssecssesssscsssssesesscscessseessscsesensveneen 8 Ins. Code, § 790.04 oo... eecssscssesscscesssecsesssecsseetesseecessessessaesesessnssssssseteversesesaes 4 Ins. Code, § 790.05 .....ccccccccccsssscsssssssesssssecsssccsssecessssvssecesseeuaeseseraes 4,5, 7,11 Ins. Code, § 790.06 oo... ccesssssessecssecsscssscesssseseesscsssssesscsecesecesseeeseeesatees passim Ins. Code, § 790.10 oo... cecssccscscssecssssscsssssssssscesessesesseesssecssssesesesaneas passim Ins. Code, § 790.035 oo cecescsscssscsssesceesecssssessecseesssscsssesseeessecsesseseseates 4,11 Ins. Code, §§ LOLO1-10107woecccseceesessscensecessessesssseeeessnssssssvescesseceenees 8 COURT RULES Cal. Rules of Court, rule 8.504(b)..........cccccsccseesssssssssssecessssscsssssesvesseeecenevens 1 il Cal. Rules of Court, rule 8.500 ......cccccceesccccssssssccessssssccccecessecessseveneecessesseeeees ] Cal. Rules of Court, rule 8.1125 v..ccc ccc cccscssecssesssssscsscsseesssssesssssteseesarees ] OTHER AUTHORITIES Cal. Code Regs., tit. 10, § 2695.183 ooo cccccscsssseceessceeesesseesesseessees 2,5, 6 ili PETITION FOR REVIEW Pursuant to California Rules of Court, rule 8.500, Appellant Dave Jones, Insurance Commissioner of the State of California, respectfully petitions this Court for review of the published opinion of Division One of the Second District Court of Appeal in Association ofCalifornia Insurance Companies v. Dave Jones (B248622),filed on April 8, 2015. A copy of the opinionis attached. (Cal. Rules of Court, rule 8.504(b).) No petition for rehearing wasfiled. The Commissioneranticipates submitting a letter requesting depublication of the Court ofAppeal’s opinion, reported at (2015) 235 Cal.App.4th 1009, within the time allowed by rule 8.1125. ISSUE PRESENTED 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? WHY REVIEW SHOULD BE GRANTED This case presents anissue of significant importance for the Commissioner and for homeownersacross the State. For many, the home is their single most valuable asset, and they rely on insuranceto protectit. More than 20 million homeownerinsurancepolicies are issued in California. The average California homeownerreasonably believes that the coverage limit of a “replacement cost”policy, derived from replacement cost estimates providedbyinsurers, will be sufficient to completely rebuild the homeif it is destroyed by a catastrophic event. In the wake ofwildfires that swept through Southern California over the last decade, however, many homeowners discovered too late that their replacement cost insurance policies did not coverall the reasonable costs incurred in rebuilding their homes; among the many underinsured, only those who could afford to pay thousands of dollars out-of-pocket or secure additional financing could rebuild. In response, the Commissioner promulgated California Code of Regulations,title 10, section 2695.183—the replacementcost regulation— exercising his authority to “promulgate reasonable rules and regulations, and amendments and additions thereto, as are necessary to administer this article [Article 6.5, Unfair Insurance Practices, Ins. Code, §§ 790-790.15].” (Ins. Code, § 790.10.)' The regulations are designed to prevent homeowners from being misled into underinsuring their homes by incomplete estimatesthat fail to considerall the costs reasonably expected to be incurred in rebuilding. The regulation requires an insurer to consider a list of minimumcosts and factors in estimating replacementcost and to All statutory referencesare to the Insurance Code unless otherwise noted. provide a written itemized estimate to the homeowner, andspecifies that | providing an incomplete estimate of replacementcost is the making of a misleading statement defined as a prohibited act or practice under section 790.03, subdivision (b) (prohibiting, among other things, “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 court of appeal struck downthe regulation, concluding that the Commissioner had exceededhis statutory authority in promulgating the replacementcost rule, and that the existence of the Commissioner’s other separate and independentstatutory powers, such as his powerto institute enforcement proceedings, suggest that his rulemaking powersin this area are limited. (Opn., pp. 23-25.) Absent review, the appellate court’s opinion threatens harm to the Commissioner’s ability to provide clear rules and a level playing field for all insurers marketing replacement cost insurance, and to protect the public against misleading practices that result in unknowing underinsurance. The Court should grant review to settle questions related to the Commissioner’s rulemaking powerin this area and toclarify that his rulemaking authority in this area is separate and distinct from his other statutory powers and authorities under the Unfair Insurance Practices Act. SUMMARYOF THE FACTS AND OF THE COURT OF APPEAL’S OPINION The Unfair Insurance Practices Act vests the Commissioner with broad powersto regulate insurance trade practices in California. (§ 790.) Section 790.03 of the Act generally defines a numberofunfair methods of competition and unfair or deceptive acts or practices that are prohibited, including the making and dissemination of untrue, deceptive or misleading statements under subdivision (b). The Act provides the Commissioner with a numberof separate but complementary procedural powersand tools to stop or to prevent unfair or deceptive insurance trade practices. Section 790.04 empowers the Commissioner to examine and investigate the businessaffairs of any person to determine compliance with the Act. The Commissioner may bring enforcement actions under section 790.05 against any person alleged to have engagedin a defined prohibited act or practice. Upona finding that the person has engaged in 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 engaging in any act or practice that is unfair or deceptive, but is not defined as one under section 790.03. After an administrative hearing, the Commissioner must issue a report declaring the act or practice to be unfair or deceptive. The Commissioner cannot assess monetary penalties or order the conductto cease as he can in an enforcementaction undersection 790.05. He must instead apply to the superior court for an injunction. Section 790.10 vests the Commissioner with rulemaking authority to promulgate reasonable rules and regulations necessary to the administration of the Act. In delegating rulemaking authority to the Commissioner, the Legislature intended for him to make specific and definite 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 act at a later date.” (Opn., pp. 28-29 [citing Assem. Com. on Finance and Insurance, summary of Assem. Bill No. 1353 (1971 Reg. Sess.) p. 1].) The Commissioner promulgated regulations to ensure that homeownersreceive from insurers complete information about estimates of replacement costs so they can make informed decisionsin selecting appropriate coverage limits. (Opn., p. 6.) One regulation, California Code of Regulations,title 10, section 2695.183, requires the insurer to consider a list of factors and minimum cost components that would reasonably be ~ incurred to rebuild a home. (Cal. Code Regs., tit. 10, § 2695.183, subds. (a)-(e).) The regulation requires insurers to provide a written itemized estimate to the homeowner. (/d., subd. (g).) The regulation further defines as misleading, under section 790.03, subdivision (b), an insurer’s communication of a replacement cost estimate that has not considered these minimum costs. (/d., subd. (j).) Two insurance trade associations, Association of California Insurance Companies and Personal Insurance Federation of California, brought a declaratory relief action challenging the validity of the regulation. _ Thetrade associations argued that the Commissioner had narrow rulemaking authority under section 790.10 and was required instead to comply with the procedural requirements of section 790.06 to establish the communication of incomplete estimates of replacement cost as a new unfair or deceptive practice.” They, however, did not contest the necessity of the regulation or that the basic costs components identified in the regulation should not be considered in estimating replacement cost. (Opn., pp. 8-15.) The Commissioner responded that, under section 790.10, he could by regulation makedefinite and specific a particular type of misleading statement falling under the general prohibition against misleading | statements in section 790.03, subdivision (b), and that section 790.06 does not supplant his rulemaking authority. (Opn., pp. 15-16.) Following a court trial, the trial court declared the regulation invalid. * The trade associations additionally contended that the regulation impacts insurance underwriting and infringes on insurers’ right to free speech. Neither the trial court nor the Court of Appeal reached the merits of those two issues. (Opn., pp. 18, 31.) In a published opinion, the Court of Appeal affirmed. The Court of Appeal found the Act defines unfair or deceptiveacts or practices and none of those definitions involve the content and format of replacement cost estimates. The Court of Appeal inferred “that the absence ofa provision regarding replacementcost estimates was a deliberate choice” by the Legislature. (Opn., p. 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).” (Jbid.) The Court of Appeal also rejected the Commissioner’s argument that an incomplete cost estimate is a type of misleading statement under section 790.03, subdivision (b). It reasoned that the regulation would be unnecessary in that case because the Commissioner could already enforceit in a proceeding under section 790.05. The Court of Appealalso held that the Commissioner’s reasoning renders section 790.06 superfluous because the Commissioner could always promulgate a regulation to declare a particular conduct misleading. (Opn., pp. 24-25.) The appellate court distinguished Ford Dealers Association v. Department ofMotor Vehicles (1982) 32 Cal.3d 347, purportedly because it presented a different statutory scheme with the notable absenceofa statute similar to section 790.06. (Opn., pp. 26-28.) The Court of Appeal acknowledgedthat the legislative history of section 790.10 may support the Commissioner’s position that he could promulgate the regulation. However, the court determined that subsequent additions to section 790.03 adding the Unfair Claims Settlement Practices Act (section 790.03, subd. (h)), as well as statutes mandating disclosures for homeownerinsurancepolicies (sections 10101-10107), are inconsistent with the original legislative intent. (Opn., pp. 28-29.) LEGAL DISCUSSION I. REVIEW Is NEEDED TO SETTLE WHETHER THE COMMISSIONER HAS AUTHORITY TO ADOPT REGULATIONS PREVENTING INSURANCE COMPANIES FROM PROVIDING MISLEADINGLY INCOMPLETE INFORMATION. The Commissionerhastraditionally been afforded “broad discretion to adopt rules and regulations as necessary to promote the public welfare.” (Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d 805, 824; see State Farm Mut. Auto. Ins. Co. v. Garamendi (2004) 32 Cal.4th 1029, 1040 [citing Calfarm].) The absenceof a specific provision in the enabling statute about the subject or content of a regulation does not deprive an enforcement agencyofthe authority to promulgate regulations. (Credit Ins. General - Agents Ass'n ofCalifornia, Inc. v. Payne (1976) 16 Cal.3d 651, 656.) The statutory omission only meansthat the Legislature “mayelect to defer to and rely uponthe expertise of administrative agencies...” (Ibid) This rule applies with great force to regulations enacted pursuant to remedial statutes intended to protect the public. A remedial statute should be “liberally construed ‘to effectuate its object and purpose, and to suppress the mischief at which it is directed.’” (Ford Dealers Ass’n v. Department ofMotor Vehicles, supra, 32 Cal.3d at p. 356.) In such instances, an agencyhasthe discretion to determine what specific actsor statements are misleading to the public and is authorized to enact regulations to prevent such misleading statements to “fill up the details’ of the statutory scheme.” (Ud., at pp. 362-363.) The Court of Appeal’s opinion injects uncertainty into the application of these longstanding principles in the context of the marketing of replacement cost policies. Instead of permitting the Commissionerto “fill up the details” of the Act with a regulation clarifying the meaning of a misleading statement, the Court of Appeal erroneously concluded that additional statutory enforcement mechanismsindicated legislative intent:to deprive the Commissioner of his rulemaking authority. Theopinion narrowly construes the Act, using an unnecessarily rigid reading of section 790.03’s defined prohibited acts to conclude that, because the content and format of replacementcost estimates are not mentioned, they therefore can be inferred as excluded. (Opn., p. 23.) The Court of Appeal did not examine the object or purpose of the Act or determine whetheran insurer’s incomplete replacementcost estimate can actually mislead a homeowner. A complete replacementcost estimate that has considered the undisputed cost componentslisted in the regulation is required because homeownersoften believe that a replacement cost estimate provided by an insurer would take into account these reasonable costs. If an estimate does not do so and is incomplete, then the homeowner would haverelied on the insurer’s estimate and be misledto select insufficient insurance coverage. Because the Court of Appeal’s decision increases the risk that homeowners will again lack the protection previously provided by the regulation, and could create a market advantage for insurance companies who do not make the details of the estimate clear to consumers, this Court should review it. II. REVIEW Is NECESSARY TO AFFIRM AND CLARIFY THAT THE COMMISSIONER’S RULEMAKING AUTHORITYIS NOT LIMITED BY HIS ADDITIONAL AUTHORITY UNDER THE UNFAIR INSURANCE PRACTICES ACT. To support its erroneous conclusion that the Commissioner cannot regulate incomplete replacement cost estimates as a form of misleading statement, the Court of Appealalso looked to section 790.06, which permits formal administrative action against a person suspected of an unfair or deceptive insurance practice not defined in section 790.03. (Opn., pp. 24- 25.) The Court ofAppeal read section 790.06 as a limiting statute and used it to distinguish the Commissioner’s authority to enact the challenged regulation from an agency’s generally broad discretion to define misleading statements by regulation upheld in Ford Dealers Association v. Department 10 ofMotor Vehicles, supra, 32 Cal.3d 347, (Opn., p. 26.) This Court should grant review andreject the Court of Appeal’s novel approach to construing the Unfair Insurance Practices Act. Section 790.06 sets forth formal administrative procedures for the Commissioner to prosecute unfair or deceptive acts or practices not defined in section 790.03. Unlike in a proceeding undersection 790.05 to enforce a violation of a prohibited act or practice defined by section 790.03, the Commissioner cannot order an insurer to cease misleading practices that result in unknowing underinsurance or assess monetary penalties in a proceeding under section 790.06. (See § 790.035 [authorizing Commissioner to impose monetary penalties].) If the conduct continues, _the Commissioner must apply to the superior court to enjoin the insurer. There is no suggestion in the Act that the procedure authorized by section 790.06, however, is intended to supplant rulemaking. Especially since that statute on its face only permits the Commissionerto act against a single insurer whois suspected of misleading homeowners with incomplete replacementcost estimates, it is properly viewed as a complementto, not a limitation of, the Commissioner’s rulemaking authority. The flaw in the Court of Appeal’s view of the law can beseeninits application. Section 790.03, subdivision (b)’s definition of amisleading statement is broad. Under the Court of Appeal’s analysis, an insurer can easily claim that a particular statement suspected to be misleadingis not 1] specifically defined by section 790.03, subdivision (b), that the Commissioner cannot enforce or regulate it, and, thus, that the Commissioneris limited to use of the alternative procedures authorized by section 790.06, thereby allowing the insurer to escapecivil penalties. This Court should grant review and confirm the Commissioner’s authority under section 790.10 extends to promulgating replacementpolicy regulationsthat clarify for the industry and consumers misleadingpractices prohibited by the Unfair Insurance Practices Act. CONCLUSION The Commissioner’s petition for review should be granted. Dated: May 18, 2015 _ Respectfully submitted, KAMALAD. HARRIS Attorney General of California PAUL D. GIFFORD Senior Assistant Attorney General DIANE S. SHAW STEPHEN LEW Supervising Deputy Attorneys General LIsA W. CHAO Deputy Attorney General Attorneysfor Appellant and Petitioner Dave Jones, in his capacity as the . Insurance Commissioner ofthe State of California LA2011600848 12 CERTIFICATE OF COMPLIANCE I certify that the attached PETITION FOR REVIEW usesa 13 point Times New Romanfont and contains 2,504 words. Dated: May 18, 2015 KAMALA D.HARRIS Attorney General of California LISA W. CHAO Deputy Attorney General Attorneysfor Appellant and Petitioner Filed 4/8/15 CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT COURT OF APPEAL — SECONDDIST. FILED Apr 08, 2015 JOSEPHA. LANE,Clerk ASSOCIATION OF CALIFORNIA B248622 sstahl Deputy Clerk INSURANCE COMPANIESetal., DIVISION ONE (Los Angeles County Plaintiffs and Respondents, Super. Ct. No. BC463124) V. DAVE JONES, as Commissioner,etc., Defendant and Appellant. APPEALfrom ajudgment of the Superior Court of Los Angeles County, Gregory Wilson Alarcon, Judge. Affirmed. Kamala D. Harris, Attorney General, Paul D. Gifford, Senior Assistant Attorney General, W. Dean Freeman, Supervising Deputy Attorney General, and Lisa W. Chao, Deputy Attorney General, for Defendant and Appellant. Amy Bach, Daniel Wade; Kerr & Wagstaffe and Ivo Michael Labar for United Policyholders, Scripps Ranch Civic Association and Rancho Bernardo Community Counsel as Amici Curiae on behalf of Defendant and Appellant. Greenberg Traurig, Gene Gordon Livingston, Gregory Sperla and Stephen E. Paffrath for Plaintiffs and Respondents. This appeal asks us to decide whether the Insurance Commissioner (Commissioner) had authority to promulgate California Code of Regulations, title 10, section 2695.183 (the Regulation) under the authority delegated to him by the Unfair Insurance Practices Act (UIPA), Insurance Code sections 790-790.15.1 Thetrial court found that he did not. We agree and affirm. PROCEDURAL AND FACTUAL BACKGROUND The Regulation — The Regulation at issue here involves homeownerinsurance, and specifically replacement coverage in the event of a covered eventlike a fire.2 In general, there are 1 Undesignated statutory references are to the Insurance Code. 2 The Regulation provides: “No licensee shall communicate an estimate of replacementcost to an applicantor insured in connectionwith an application for or renewal of a homeowners’ insurance policy that provides coverage on a replacement cost basis, unless the requirements and standardsset forth in subdivisions(a) through (e) below are met: (a) The estimate of replacement cost shall include the expenses that would reasonably be incurred to rebuild the insured structure(s) in its entirety, including at least the following: “(1) Cost of labor, building materials and supplies; (2) Overhead andprofit; “(3) Cost of demolition and debris removal; “(4) Cost of permits and architect’s plans; and “(5) Consideration of components and features of the insured structure, including at least the following: “(A) Type of foundation; “(B) Type of frame; “(C) Roofing materials and type ofroof; “(D) Siding materials and type of siding; “(E) Whetherthe structure is located on a slope; “(F) The square footage of the living space; ~ “(G) Geographic location of property; “(H) Numberofstories and any nonstandard wall heights; 2 “(I) Materials used in, and generic typesof, interior features and finishes, such as, where applicable, the type of heating and air conditioning system, walls, flooring, ceiling, fireplaces, kitchen, and bath(s); “(J) Age ofthe structure or the year it was built; and “(K) Size and type ofattached garage. “(b) The estimate of replacement cost shall be based on an estimate of the cost to rebuild or replace the structure taking into account the cost to reconstruct the single property being evaluated, as comparedto the cost to build multiple, ortract, dwellings. “(c) The estimate of replacementcost shall not be based uponthe resale value of the land, or upon the amountor outstanding balance of any loan. “(d) The estimate of replacement cost shall not include a deduction for physical depreciation. “(e) The licensee shall no less frequently than annually take reasonable steps to verify that the sources and methods used to generate the estimate of replacementcost are kept current to reflect changesin the costs of reconstruction and rebuilding, including changesin labor, building materials, and supplies, based upon the geographic location of the insured structure. The estimate of replacementcost shall be created using such reasonably current sources and methods. “(f) Except as provided in subdivision (k) of this Section 2695.183, the provisions of this article are binding upon licensees, notwithstanding the fact that information, data or statistical methods usedorrelied upon by a licensee to estimate replacement cost may be obtained througha third party source. Any andall information received by the Department pursuantto this article shall be accorded the degree of confidential treatment required by section 735.5 of the Insurance Code or Chapter 2 of Part 1 of Division 3 of Title 2 of the Government Code, commencing at section 11180. “(g)(1) Ifa licensee communicates an estimate of replacement cost to an applicant or insured in connection with an application for or renewal of a homeowners’ insurance policy that provides coverage on a replacementcost basis, the licensee must provide a copy of the estimate of replacementcost to the applicant or insuredat the time the estimate is communicated. However,.in the event the estimate of replacementcostis communicated by a licensee to an applicant to whomthe licensee determines an insurance policy shall not be issued, then the licensee is not required pursuantto the preceding sentence to provide a copy of the estimate of replacement cost. In the event the estimate of replacement cost is communicated by telephone to an insured, the copy of the estimate shall be mailed to the insured no later than three business days after the time of the telephone conversation. In the event the estimate of replacement costis communicated by telephone to an applicant, the copy of the estimate shall be mailed to the applicant no later than three business days after the applicant agrees to purchase the coverage. “(2) An estimate of replacement cost provided in connection with an application for or renewal of a homeowners’ insurance policythat provides coverage on a 3 replacement cost basis must itemize the projected cost for each elementspecified in paragraphs(a)(1) through (a)(4), and shall identify the assumptions made for each ofthe components and features listed in paragraph (a)(5), of this Section 2695.183. “(h) If an estimate of replacement cost is updated or revised by, or on behalf of, the licensee and the revised estimate of replacementcost is communicated to the applicant or insured in connection with an application for or renewal of a homeowners’ insurance policy that provides coverage on a replacementcost basis, the licensee shall provide a copy of the revised or updated estimate of replacement cost to the applicantas provided in paragraph (g)(1) of this Section 2695.183, or to the insured simultaneously with the renewal offer, as the case may be. This subdivision (h) shall not apply when the update or revision to the estimate of replacementcost or the policy limit results solely from the application of an inflationary provision in a policy or an inflation factor. This subdivision (h) shall not obligate a licensee to recalculate an estimate of replacement cost on an annualbasis. (i) Licensees shall maintain (1) a record of the information supplied by the applicant or insured that is used by the licensee to generate the estimate of replacement cost, and (2) a copy of any estimate of replacement cost supplied to the applicant or insured pursuant to paragraph (g)(1), or subdivision (h), ofthis Section 2695.183. Ifa policy is issued, these records and copies shall be maintained for the entire term ofthe insurance policy or the duration of coverage, whichever terminates later in time, and for five years thereafter. However,if the estimate of replacement cost is provided to an applicant to whom an insurancepolicy is never issued, the records and copies referred to in the first sentence of this subdivision (i) shall be maintained for the period of time the licensee ordinarily maintains applicant files in the normal course of business, provided that such period of time shall be at least sufficient to ensure that the licensee is able to comply with the provisions of this subdivision in the event the policy is issued to the applicant. “(j) To communicate an estimate of replacement value not comporting with subdivisions (a) through (e) of this Section 2695.183 to an applicant or insured in connection with an application for or renewal of a homeowners’ insurance policy that provides coverage on a replacementcost basis constitutes making a statement with respect to the business of insurance which is misleading and which bythe exercise of reasonable care should be knownto be misleading, pursuant to Insurance Code section 790.03. “(k) When an insureridentifies one or more specific sources or tools that a broker- agent mustuse to create an estimate of replacementcost, (1) the insurer shall prescribe complete written procedures to be followed by broker-agents when they use the sourcesor tools, (2) the insurer shall provide the broker-agent with the training andwritten training materials necessary to properly utilize the sources or tools according to the insurer’s prescribed procedures, and 4 (3) the insurer, and not the broker-agent, shall be responsible for any noncompliance with this Section 2695.183 that results from the failure of the estimate to satisfy the requirements of subdivisions (a) through (e), unless that noncomplianceresults from failure by the broker-agent to follow the insurer’s prescribed written procedures when using the source ortool. “() This Section 2695.183 applies to all communications by a licensee, verbal or written, with the sole exception of internal communications within an insurer, or confidential communications between an insurer andits contractor, that concern the insurer’s underwriting decisions and that never cometo the attention of an applicant or insured. “(m) No provisionofthis article shall be construed as requiring a licensee to estimate replacement cost or to set or recommenda policy limit to an applicant or insured. No provision of this article shall be construed as requiring a licensee to advise the applicant or insured as to the sufficiency of an estimate of replacementcost. “(n) No provision ofthis article shall limit or preclude a licensee fromproviding and explaining the California Residential Property Insurance Disclosure, as cited in. Insurance Codesection 10102, explaining the various forms of replacement cost coverage available to an applicant or insured, or explaining how replacementcost basis policies operate to pay claims. “(o) No provision ofthis article shall limit or preclude an applicant or insured from obtaining his or her ownestimate of replacement cost from an entity permitted to makesuch anestimate by Insurance Codesection 1749.85. “(p) For purposesofthis subdivision (p), ‘minimum amount of insurance’ shall] mean the lowest amount of insurance that an insurerrequires to be purchasedin orderfor. the insurer to underwrite the coverage on a particular property, based upon an insurer’s eligibility guidelines, underwriting practices and/or actuarial analysis. An insurer may communicate to an applicant or insured that an applicant or insured must purchase a minimum amountof insurance that does not comport with subdivisions (a) through (e) of this Section 2695.183; however, if the minimum amountof insurancethat is communicated is based in whole or in part on anestimate of replacement value, the estimate of replacementvalueshall also be provided to the applicant or insured and shall comply with all applicable provisionsofthis article. Nothingin thisarticle shall limit or preclude an insurer from agreeing to provide coverage for a policy limit that is greater than or less than an estimate of replacement cost provided pursuant to this article. “(q) This article shall apply only to estimates of replacement value that are prepared, communicated or used by a licensee on or after June 27, 2011.” 5 three kinds of replacement cost coverage. Each requires an insurer to pay replacement costs up to a limit defined in the policy or up to a set amount abovethepolicy limit.5 If the cost of repairing or rebuilding a home damagedordestroyed by a covered event exceeds that limit, the homeownerhasto pay the difference. Section 2051.5, subdivision (a) defines replacementcost, in pertinent part, as “the amountthat it would cost the insured to repair, rebuild, or replace the thing lost or injured, without a deduction for physical depreciation, or the policy limit, whicheverisless.” The Regulation was promulgated in 2010 in response to complaints received from homeowners wholost their residences in the wildfires in Southern California in 2003, 2007, and 2008. These complaints arose when homeownerslearned that they did not have enoughinsurance to coverthe full cost of repairing or rebuilding their homes because when they bought their homeowner insurance, the estimates of replacement value were too low.4 The introductory sentence of the Regulation prohibits a “licensee” from “communicat[ing] an estimate of replacementcost to an applicant or insured in connection with an application for renewal of a homeowners’ insurance policy that 3 According to the Commissioner’s “Initial Statement of Reasons,” dated April 2, 2010, issued when the Commissioner proposed the Regulation, there is “Limited _ Replacement Cost Coverage With an Additional Percentage which pays replacement costs up to a specified amount abovethe policy limit; [§] Limited Replacement Cost Coverage With No Additional Percentage which pays replacementcosts up to” the dollar limit set forth in the policy; and “Actual Cash Value Coverage which pays the fair market value of the dwelling at the time ofthe loss, or the cost to repair, rebuild, or replace the damaged or destroyed dwelling with like kind and quality construction upto the policy limit.” 4 The administrative record contains complaints about, amongother things, the estimator’s using an incorrect description of the property or its square footage,failing to inspect the property, not considering building code requirements, not including obvious costs like debris removal, and not adjusting for inflation in arriving at a replacement cost estimate. It also included a survey conducted after the 2007 wildfires reciting that 75 percent of those responding to the survey complained that their insurance limits did not coverthe cost of rebuilding their structures. 6 provides coverage on a replacement cost basis” that does not satisfy the content and formatprovisions in the Regulation. Subdivision (a) of the Regulation states, among other requirements, that an estimate of replacement cost “shall include expensesthat would reasonably be incurred to rebuild the insured structure(s) in its entirety” and requires in subdivision (a)(1)}-(4) that the estimate include the cost of labor, building materials and supplies, overhead, profit, demolition, debris removal, permits, and architect’s plans, and in subdivision (a)(5) that the licensee “consider” 11 designated “components and features ofthe insuredstructure.” | The estimate must itemize “the projected cost” of each expenselisted in subdivision (a)(1)}-(4), and the assumptions as to the componentslisted in subdivision (a)(5). (Reg., subd. (g)(2).) A copy of the estimate and any update ofthe estimate “must” be given to the applicant. (Reg., subds. (g)(1), (h).) Subdivision (e) requires that “reasonable steps” be taken to “verify . . . sources and methods usedto generate the estimate of replacement cost” “no less frequently than annually.” The Regulation also imposes recordkeeping obligations on the licensee. (Reg., subd.(i).) Ofparticular significanceto the issue before us is subdivision (j) ofthe Regulation. It provides that “communicat[ing] an estimate of replacementvalue not comporting with divisions (a) through (e)” to an applicant for homeownerinsurance “providjing] coverage on a replacementcost basis,” or any renewal thereof, “constitutes making a statement with respect to the business of insurance which is misleading and which by the exercise of reasonable care should be knownto be misleading, pursuant to Insurance Code section 790.03.” Representatives from the plaintiffs, the Association of California Insurance Companies and the Personal Insurance Federation of California (Associations), submitted comments andtestified in the May 17, 2010 “homeowners insurance hearing,” which preceded promulgation of the Regulation. During that hearing, they stated that the Commissioner lacked authority to define new unfair business practices. They questioned whether the administrative record supported the Commissioner’s assertion that there was 7 a high volume of homeowner complaints “specifically about the fact that that they were not provided certain information that they needed to make an informed decision about what insurance coverage limitation they have,”orthat the “underinsured problem” was caused by lack of knowledge. Among other comments, they decried the expense of compliance with the Regulation and predicted that the Regulation would discourage carriers from providing insurance. | The declaratory relief proceedings On June 8, 2011, the Associationsfiled a declaratory relief action. There, they sought a declaration that the Regulation was invalid because the Commissioner lacked authority to “regulate the underwriting of homeowner insurance”; section 790.03 did not authorize “the imposition of a single, detailed method for estimating the replacement cost of houses”; and the Regulation violated insurance companies’ free speech rights under the First Amendment of the United States Constitution. After the Associations’ motion for judgment on the pleadings was denied, the parties agreed that the case couldbetried based on the rulemakingfile, written briefs, and oral argument without oral testimony. Trial and oral argument were held on February 4, 2013. The Associations’ arguments In theirtrial brief, the Associations argued that in response to commentsat the administrative hearing about the Commissioner’s lack of authority to promulgate the Regulation, the Commissionercited section 790.10 of the UIPA and section 1749.85, but that neither provided any such authority. In essence, they argued that the Commissioner’s reliance on section 790.10 ignored the language and structure of the UIPA,whichattrial they characterized as “unique,” particularly its use of the terms “defined” and “determined.” Section 1749.85 merely authorized promulgating standards for calculating replacement cost estimates prepared by appraisers. Section 790.10 provides: “The 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.” The Associations conceded that section 790.10 gave authority to the Commissioner to “administer” the UIPA, but argued that it did not give him authority to define unfair business practices. Morespecifically, section 790 of the UIPA provides: “The purpose of this article is to regulate trade practices in the business of insurance in accordance with the intent of Congress as expressed in the Act of Congress of March 9, 1945 (Public Law 15, Seventy- ninth Congress), by defining, or providingfor the determinationof, 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.” (Italics added.) The Associations argued that the Legislature defined “unfair and deceptive acts or practices in the business of insurance”in section 790.03,5 which states that “[t]he 5 The full text of section 790.03 is as follows: “The following are hereby defined as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance. . “(a) Making, issuing, circulating, or causing to be made, issued or circulated, any - estimate, illustration, circular, or statement misrepresenting the terms of any policy issued or to be issued or the benefits or advantages promised thereby or the dividends or share of the surplus to be received thereon, or making any false or misleading statement as to the dividends or share of surplus previously paid on similar policies, or making any misleading representation or any misrepresentation as to the financial condition of any insurer, or as to the legal reserve system upon which anylife insurer operates, or using any nameortitle of any policy or class of policies misrepresenting the true nature thereof, or making any misrepresentation to any policyholder insuredin any companyfor the purposeof inducing or tending to induce the policyholder to lapse, forfeit, or surrender his or her insurance. “(b) Making or disseminating or causing to be made or disseminated before the public in this state, in any newspaperor other publication, or any advertising device, or by public outcry or proclamation, or in any other manner or means whatsoever, any statement containing any assertion, representation, or statement with respect to the business of insurance or with respect to any person in the conduct ofhis 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. 9 “(c) Entering into any agreement to commit, or by any concerted action committing, any act of boycott, coercion, or intimidation resulting in or tending to result in unreasonable restraint of, or monopolyin, the business ofinsurance. “(d) Filing with any supervisory or other public official, or making, publishing, disseminating, circulating, or delivering to any person, or placing before the public, or causing directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public any false statement of financial condition of an insurer with intent to deceive. . “(e) Making 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, or any public official to whom the insurer is required by law to report, or who hasauthority by law to examineinto its condition or into any ofits affairs, or, with like intent, willfully omitting to make a true entry of any material fact pertaining to the business of the insurer in any book, report, or statement of the insurer. “(f)(1) Making or permitting any unfair discrimination between individuals ofthe same class and equal expectation oflife in the rates charged for any contractoflife insuranceor of life annuity or in the dividends or other benefits payable thereon,or in any other ofthe terms and conditions ofthe contract. “(2) This subdivision shall be interpreted, for any contract of ordinary life insuranceor individuallife annuity applied for and issued on or after January 1, 1981, to require differentials based upon the sex of the individual insured or annuitant in the rates or dividends or benefits, or any combination thereof. This requirementis satisfied if those differentials are substantially supported by valid pertinent data segregated by sex, including, but not limited to, mortality data segregated by sex. (3) However, for any contract of ordinary life insurance or individual life annuity applied for and issued on or after January 1, 1981, but before the compliance date, in lieu of those differentials based on data segregated by sex, rates, or dividends or benefits, or any combination thereof, for ordinary life insurance or individual life annuity on a female life may be calculated as follows: (A) according to an age not less than three years nor more than six years younger than the actual age of the female insured or female annuitant, in the case of a contract of ordinary life insurance with a face value greater than five thousand dollars ($5,000) or a contract of individual life annuity; and (B) according to an age not morethan six years youngerthan the actual age of the female insured, in the case of a contract of ordinary life insurance with a face value offive thousand dollars ($5,000) or less. “Compliance date’ as used in this paragraph shall mean the date or dates established as the operative date or dates by future amendmentsto this code directing and authorizing life insurers to use a mortality table containing mortality data segregated by sex for the calculation of adjusted premiumsand present values for nonforfeiture benefits and valuation reservesas specified in Sections 10163.1 and 10489.2 or successor sections. 10 “(4) Notwithstanding the provisions of this subdivision, sex-based differentials in rates or dividends or benefits, or any combination thereof, shall not be required for (A) any contract oflife insuranceorlife annuity issued pursuant to arrangements which may be considered terms, conditions, or privileges of employmentas these termsare used in Title VII of the Civil Rights Act of 1964 (Public Law 88-352), as amended, and (B) tax sheltered annuities for employees of public schools or of tax-exempt organizations described in Section 501(c)(3) of the Internal Revenue Code. “(g) Making or disseminating, or causing to be madeor disseminated, before the public in this state, in any newspaperor other publication, or any other advertising device, or by public outcry or proclamation, or in any other manner or means whatever, whether directly or by implication, any statement that a named insurer, or namedinsurers, are membersofthe California Insurance Guarantee Association, or insured against insolvency as defined in Section 119.5. This subdivision shall not be interpreted to prohibit any activity of the California Insurance Guarantee Association or the commissioner authorized, directly or by implication, by Article 14.2 (commencing with Section 1063). “ch) Knowingly committing or performing with such frequencyasto indicate a general business practice any of the following unfair claims settlement practices: “(1) Misrepresenting to claimants pertinent facts or insurance policy provisions relating to any coveragesatissue. (2) Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurancepolicies. “(3) Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurancepolicies. (4) Failing to affirm or deny coverage of claims within a reasonable timeafter proof of loss requirements have been completed and submitted by the insured. “(5) Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in whichliability has become reasonablyclear. “(6) Compelling insuredsto institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by the insureds, when the insureds have made claims for amounts reasonably similar to the amounts ultimately recovered. “(7) Attempting to settle a claim by an insured for less than the amount to which a reasonable person would have believedhe or she was entitled by reference to written or printed advertising material accompanying or madepart of an application. (8) Attempting to settle claims on the basis of an application that wasaltered without notice to, or knowledge or consentof, the insured, his or her representative, agent, or broker. “(9) Failing, after paymentof a claim, to inform insuredsor beneficiaries, upon request by them, of the coverage under which payment has been made. 1] following are hereby defined as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance.” Included in the conduct and acts so defined is subdivision (b), which provides: “Making or disseminating or causing to be made or disseminated before the public in this state, in any newspaperor other publication, or any advertising device, or by public outcry or proclamation,or in any other manner or means whatsoever, any statement containing any assertion, representation, or statement with respect to the business of insurance or with respect to any person in the conductofhis or her insurance business, which is untrue, deceptive, or (10) Making knownto insureds or claimants a practice of the insurer of appealing from arbitration awardsin favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awardedin arbitration. “(11) Delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either, to submit a preliminary claim report, and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information. “(12) Failing to settle claims promptly, where liability has become apparent, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage. “(13) Failing to provide promptly a reasonable explanation ofthe basis relied on in the insurancepolicy, in relation to the facts or applicable law, for the denial of a claim or for the offer of a compromisesettlement. “(14) Directly advising a claimant not to obtain the services of an attorney. “(15) Misleading a claimantas to the applicable statute of limitations. - “(16) Delaying the paymentor provision ofhospital, medical, or surgical benefits for services provided with respect to acquired immune deficiency syndrome or AIDS- related complex for more than 60 daysafter the insurer has received a claim for those benefits, where the delay in claim paymentis for the purpose of investigating whether the condition preexisted the coverage. However, this 60-day period shall not include any time during whichthe insurer is awaiting a response for relevant medical information from a health care provider. “(1) Canceling or refusing to renew policy in violation of Section 676.10. ““(j) Holding oneself out as representing, constituting, or otherwise providing services on behalf of the California Health Benefit Exchange established pursuant to Section 100500 ofthe Government Code without a valid agreement with the California Health Benefit Exchange to engagein those activities.” 12 misleading, and which is known,or which by the exercise of reasonable care should be known,to be untrue, deceptive, or misleading.” Section 790.06, subdivision (a) states, in pertinent part: “Wheneverthe commissioner shall have reason to believe that any person engagedin the business of insurance is engaging in this state in any method of competition or in any act or practice in the conduct of the business that is not defined in Section 790.03, and that the methodis unfair or that the act or practice is unfair or deceptive and that a proceeding by him or her in respect thereto would be in the interest of the public, he or she may issue and serve upon that person an order to show cause containing a statement of the methods,acts or practices alleged to be unfair or deceptive . . . for the purpose of determining whetherthe alleged methods, acts or practices or any of them should be declared to be unfair or deceptive within the meaningofthis article.” (Italics added.)® 6 The full text of section 790.06 is as follows: ‘“(a) Whenever the commissioner shall have reason to believe that any person engaged in the business of insuranceis engaging in this state in any method of competition or in any act or practice in the conduct of the businessthat is not defined in Section 790.03, and that the methodis unfair or that the act or practice is unfair or deceptive and that a proceeding by him or her in respect thereto would bein the interest of the public, he or she may issue and serve upon that person an order to show cause containing a statement of the methods,acts or practices alleged to be unfair or deceptive and anotice of hearing thereon to be held at a time and place fixed therein, which shall not be less than 30 daysafter the service thereof, for the purpose of determining whetherthe alleged methods, acts or practices or any of them should be declared to be unfair or deceptive within the meaning ofthis article. The order shall specify the reason why the method of competition is alleged to be unfair or the act or practice is alleged to be unfair or deceptive. “The hearings provided by this section shall be conducted in accordance with the Administrative Procedure Act (Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code), except that the hearings may be conducted by an administrative law judge in the administrative law bureau whenthe proceedings involve a common question of law or fact with another proceedingarising under other Insurance Code sections that may be conducted by administrative law bureau administrative law judges. The commissioner and the appointed administrative law judge shall have all the powers granted under the Administrative Procedure Act. If the alleged methods, acts, or practices or any of them are found to be unfair or deceptive within the 13 The Associations argued that the Regulation rendered replacement cost estimates not in compliance with the Regulation’s content and format requirements “unfair and deceptive” notwithstanding that such conduct is not so “defined” in section 790.03 and that the Commissioner was required to, but did not follow the administrative and court proceduresset forth in the UIPA in section 790.06 for “determining” whetherthat conduct should be declared “unfair and deceptive.”7 meaning ofthis article the commissionershall issue and service upon that person his or her written report so declaring. “(b) If the report charges a violation ofthis article and if the method of competition, act or practice has not been discontinued, the commissioner may, through the Attorney Generalofthis state, at any time after 30 days after the service of the report cause a petition to befiled in the superior court of this state within the county wherein the personresides or hashisor her principal place of business, to enjoin andrestrain the person from engaging in the method,act or practice. The court shall have jurisdiction of the proceeding and shall have power to make and enter appropriate orders in connection therewith and to issue any writs as are ancillary to its jurisdiction or are necessary in its judgmentto prevent injury to the public pendentelite. “(c) A transcript of the proceedings before the commissioner, includingall evidence taken and the report and findings shall be filed with the petition. If either party shall apply to the court for leave to adduce additional evidence and shall show,to the satisfaction of the court, that the additional evidence is material and there were reasonable groundsforthe failure to adduce the evidence in the proceeding before the commissioner, the court may order the additional evidence to be taken before the commissioner and to be adduced upon the hearing in the manner and upon the terms and conditions as to the court may seem proper. The commissioner may modify his or her findings of fact or make new findings by reason of the additional evidence so taken, and shall file modified or new findings with the return of the additional evidence. “(d) If the court finds that the method of competition complainedofis unfair or that the act or practice complained ofis unfair or deceptive, that the proceeding by the commissioner with respect thereto is to the interest of the public and that the findings of the commissioner are supported by the weight of the evidence,it shall issue its order enjoining and restraining the continuance of the method of competition, act or practice.” 7 It was undisputed in the proceedings below that the Commissionerdid not follow the proceduresin section 790.06, which in addition to administrative processes, require a court order to enjoin conduct found to be unfair and deceptive. 14 Furthermore, the Regulation renders as unfair and deceptive estimates that are accurate, but not in the format dictated by the Regulation. At the sametime,the Regulation does not sanction an inaccurate estimate that complies with the format and content requirements of the Regulation. The Associations cited as an admission the eeCommissioner’s statement during an administrative hearing that [t]he regulations do not require of replacement value estimates any particular degree of accuracy.’” The Associations also argued that that the Regulation “Unlawfully Restrict[ed] Underwriting” because despite the exemption for “internal communications within an insurer” in subdivision (/) of the Regulation, in practice, “communications about insurer’s underwriting decisions do cometo the attention of applicants and insureds, and particularly so with respect to adverse underwriting decisions.” Because “[t]he amount of homeowners’ insuranceis an essential part of the underwriting decision,” the Regulation “unlawfully restricted homeownerinsurers[’] underwriting” and was therefore invalid. Finally, the Associations argued that the Regulation was subject to the higherlevel of scrutiny imposed by Central Hudson Gas & Elec. v. Public Serv. Comm’n (1980) 447 U.S. 557 [100 S.Ct. 2343] (Central Hudson) on government regulation of commercial speech under the First Amendment, and that the Regulation did not pass constitutional muster underthecriteria set forth in Central Hudson. The Commissioner’s arguments Asdiscussed post, the Commissioner disavowedreliance on section 1749.85 as a source of authority to promulgate the Regulation except as to that portion ofthe Regulation regarding training of broker-agents. Instead, his authority to promulgate the Regulation was grounded in section 790.10, and the UIPA must be construed broadly “to promote public welfare.” The Commissionercited Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d 805 (Calfarm) and Credit Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal.3d 651 (Payne) to support this proposition. Citing Batt v. City and County ofSan 15 Francisco (2010) 184 Cal.App.4th 163, the Commissioner argued that his powers include elaborating on the meaning ofkey legislative terms. . Indeed, that “the promulgation of a regulation that defines a specific type of misleading statement is within the agency’s rulemaking authority under a broad statutory prohibition against false and misleading statements” was recognized with respect to licensed automobile dealers in Ford Dealers Assn. v. Department ofMotor Vehicles (1982) 32 Cal.3d 347 (Ford Dealers). Similarly, the Commissioner has authority to promulgate a regulation prohibiting a specific type of misleading statement from being communicated to purchasers of homeowners insurance. Therefore, it was a non sequitur for the Associations to argue that, just because estimates of replacement costs were not specifically identified in section 790.03, the Commissioner exceededhis authorityin regulating them. The Commissioneralso argued that 790.06 was not a mechanismfor adding new categories of unfair and deceptive insurance business practices. Instead, it is an enforcementtool to “enjoin a particular practice engaged by an individual insurer through procedures similar to an administrative disciplinary action.” The Commissioneralso faulted the Associations for taking the Commissioner’s statement regarding “accuracy”out of context because the statement wasfollowed by a statementat the hearing that “all the regulations do [is] require that any estimate of replace[ment] cost be complete and must not ignore outright any of the basic cost components universally acknowledgedto figure into replacement cost.” The Commissionerfurther argued that accuracy was not required because “the Commissioner does not expect insurers to guarantee replacementcost.” The Regulation also does not regulate underwriting becauseit does not specify or otherwise dictate what risks insurance companies should underwrite and does not prevent an insurer from setting minimum or maximum amounts of coverage or any amount of coveragethat is different from the estimate of replacementcost; in fact, subdivision (p) of the Regulation expressly so provides. Furthermore, the Regulation does not dictate how 16 the estimate is to be calculated; insteadit requires that it be complete, based on current data, and communicated to the consumer. In response to the Associations’ free speech challenge to the Regulation, the Commissionerargued thatrestrictions on misleading commercial speech are evaluated under the “reasonably related” test in Zauderer v. Office ofDisciplinary Counsel (1985) 471 U.S. 626 [105 S.Ct. 2265] (Zauderer) and not the intermediate scrutiny criteria set forth in Central Hudson, supra, 447 U.S. 557. Undereither standard, however, he argued that the Regulation did not violate the Associations’ free speech rights. In their reply, the Associations largely repeated arguments from their opening brief. They also gave illustrations of how the Regulation expandedthe definition of unfair and deceptive practices in section 790.03, subdivision (b). They hypothesized an estimate from a reputable contractor in a single figure to replace a home,including every detail down to the bathroom floorfinishing, that was true, but that would be rendered “misleading” under the Regulation becauseit failed to itemize its components. The same would betrue for an oral estimate because the Regulation requires the estimate to be in writing. In the Associations’ own words, “Mandatory, specified communication is a far cry from prohibiting misleading statements.” Thetrial court’s statement of decision Thetrial court agreed with the Associations’ contention that the Commissioner did not have authority to promulgate the Regulation. The court reasoned that estimates of replacementcosts, although “inherently inaccurate,” are not misleading. By characterizing all estimates of replacements costs as misleading except onesthat complied with the content and format requirementsin the Regulation, the Commissioner “expands the meaning of something ‘known’ or which ‘should be known’to be misleading beyond the parameters of §790.03(b).” The court concludedthat section 790.03, subdivision (b) did not give the Commissioner authority “to penalize acts not known or cannot be determined through reasonable care to be misleading.” 17 Thetrial court also dismissed the Commissioner’s legal authorities. Thus, the court concluded that Calfarm, supra, 48 Cal.3d 805, involved dicta regarding a void statutory schemethat required the “agencyto fill in the blanks,” and Payne, supra, 16 Cal.3d 651, expressly “caution[ed]” againstissuing regulations that conflicted with the enabling statute. Because the Regulation renders conduct not described in section 790.03, subdivision (b) as misleading, the Commissioner wasrequired to follow the procedures in section 790.06, which he had failed to do. Because thetrial court found that the Regulation was unauthorized, it did not address the Associations’ other arguments. The judgment declaring the Regulation invalid was entered on May 7, 2013. On May9, 2013, the Commissionerfiled a notice of appeal. DISCUSSION Standard of review and the parties’ additional arguments on appeal The parties do not contest that neither the trial court nor we are required to give deference to an administrative agency’s interpretation of the scope of its own authority.8 (Western States Petroleum Assn. v. Board ofEqualization (2013) 57 Cal.4th 401, 415 (“when an implementing regulation is challenged on the ground that it is ‘in conflict with the statute’ [citation] or does not ‘lay within the lawmaking authority delegated by the Legislature’ {citation], the issue ofstatutory construction is a question of law on which a court exercises independent judgment”]; 20th Century Ins. Co. v. Garamendi (1994) 8 Cal.4th 216, 271 [“That is to say, whether Proposition 103 authorizes the Insurance Commissionerto adopt rate regulations to implementthe initiative is indeed examined independently.”]; Batt v. City and County ofSan Francisco, supra, 184 Cal.App.4th at p. 170 [“Such an inquiry obviously requires examinationofthe statute and the regulation(s), and that examination would be de novo becauseit entails what we have called, ‘the quintessential judicial function.’”].) 8 At trial, the Associations disclaimed any attack on the Regulation on the basis of lack of necessity. 18 On appeal, the parties generally make the same arguments that they made before the trial court. We will not repeat those here. We summarize only the new matters. Both the Commissioner and the amici curiae? contend that the trial court “conflated” the terms “accurate” and “misleading” because the focus of the Regulationis completeness and not exactness. The Regulation addresses the problem that arises when a replacementcost estimate does not includeall reasonable components necessary to rebuild a home. If a consumerrelies on such an estimate in selecting a policy limit, the consumerrisks being underinsured. The fact that estimates are not always accurate does not negate the need for an insurer to communicate a complete estimate. Accordingly, the Commissionerarguesthat, just because an estimate is not always accurate, does not mean it cannot be misleading. In support of this position, he citesFord Dealers, supra, 32 Cal.3d 347, The Commissionerfaulted the trial judge for making section 790.06 a substitute for rulemaking processes. Instead, section 790.06 is an enforcementtool against an individual insurer and not an across-the-board regulation of the insurance industry. The trial judge also ignored section 790.05.!9 Irrespective of the existence of the Regulation, 9 The United Policyholders, Scripps Ranch Civic Association, and Rancho Bernardo Community Council filed an amici brief in support of the Commissioner. 10 Section 790.05 provides: “Whenever the commissionershall have reason to believe that a person has been engagedoris engagingin this state in any unfair method of competition or any unfair or deceptive act or practice defined in Section 790.03, and that a proceeding by the commissioner in respect thereto would beto the interest of the public, he or she shall issue and serve upon that person an order to show cause containing a statement ofthe charges in that respect, a statement of that person’s potentialliability under Section 790.035, and a notice of a hearing thereon to be held at a time and place fixed therein, which shall not be less than 30 daysafter the service thereof, for the purpose of determining whether the commissioner should issue an orderto that person to, pay the penalty imposed by Section 790.035, and to cease and desist those methods,acts, or practices or any of them. “If the charges or any of them are found to bejustified the commissionershall issue and causeto be served uponthatperson an order requiring that person to pay the 19 section 790.05 sets forth the procedures before an administrative law judge for bringing a noncompliance proceeding against a licensee alleged to have engagedin an unfair and deceptive practice prohibited by section 790.03, including “misleading” statements under section 790.03, subdivision (b). The Associations supported thetrial court’s reasoning. They reiterated that the UIPAis unique, and for that reason Calfarm, Payne, and FordDealersare not instructive because they involvedeither a different kind ofinsurance, administrative proceeding, or statute. In addition, the Associations arguedthe legislative history of section 790.10, when it was addedin 1971 to the UIPA,indicates that the Legislature did not intend that section 790.10 be a vehicle for the Commissioner to regulate insurance practices under cover of disseminating misleading statements undersection 790.03, subdivision (b). As originally drafted, section 790.10 would have used the word “implement,” a broader grant ofpoweraccording to the Associations; instead, the Legislature used the narrower term “administer,” as the statute currently reads. (Stats. 1971, ch. 975, § 1, p. 1887.) The Associations contend that this was confirmed when the Legislature amended section penalty imposed by Section 790.035 and to cease and desist from engaging in those methods,acts, or practices found to be unfair or deceptive. “The hearing shall be conducted in accordance with the Administrative Procedure Act, Chapter 5 (commencingat Section 11500) of Part 1 of Division 3 ofTitle 2 of the GovernmentCode, except that the hearings may be conducted by an administrative law judge in the administrative law bureau when the proceedings involve a common question of law or fact with another proceeding arising under other Insurance Code sections that may be conducted by administrative law bureau administrative law judges. The commissioner and the appointed administrative law judge shall haveall the powers granted under the Administrative Procedure Act. “The person shall be entitled to have the proceedings and the order reviewed by means of any remedy provided by Section 12940 of this code or by the Administrative Procedure Act.” 11 A copy of Assembly Bill No. 1353 (1971 Reg. Sess.) as amendedJuly 9, 1971, is attached as exhibit B to the Associations’ request for judicial notice filed on April 7, 2014, which request we granted on February 20, 2015. 20 790.06 in 2000 to “address[]} the authority of the Insurance Commissioner when the Commissioner has reason to believe an unfair or deceptive practice has occurredthat is not one specifically defined in Insurance Code Section 790.03” by requiring any order to show cause issued under section 790.06 to “contain a statementofthe acts or practices ~ alleged to be unfair or deceptive.” (Stats. 2000, ch. 280, § 1, p. 2475.)12 Read as a whole, the UIPA did not give the Commissioner authority to promulgate ‘the Regulation The Commissioner has only the authority conferred on him by the Legislature. (Payne, supra, 16 Cal.3d at p. 656 [The commissioner, ofcourse, has no powerto vary or enlarge the terms of an enabling statute [citation], or to issue regulations which conflict with this or any other statute.”].) We deducethat authority from the language of the statute itself by applying familiar maximsof statutory construction. In doing so, we give the languageits plain meaning. (Day v. City ofFontana (2001) 25 Cal.4th 268, 272.) We credit all language in a statute lest we render portions of the statute surplusage. “Moreover,it is equally well settled that fundamentalrules of statutory construction require ascertainmentof the legislative intent ‘so as to effectuate the purposeofthe law [and] “everystatute should be construed with reference to the whole system of law of whichit is a part so that all may be harmonizedand haveeffect.” [Citation.] If possible, significance should be given to every word, phrase, sentence and part of an act in pursuanceofthe legislative purpose. [Citation.]’” (Kaiser Steel Corp.v. County ofSolano (1979) 90 Cal.App.3d 662, 667.) To the extent a statute addresses one subject but not another, we assume that choice wasdeliberate underthe principle of “fe]xpressio unius est exclusio alterius. The expression of somethings in a statute necessarily means the exclusion ofother things not expressed.” (Gikas v. Zolin (1993) 6 Cal.4th 841, 852.) 12 A copyofthe Analysis of Senate Bill No. 1500 (1999-2000 Reg.Sess.) by the Senate Committee on Insurance, as amended March 28, 2000, is attached as exhibit C to the Associations’ request for judicial notice filed on April 7, 2014, which request we granted on February 20, 2015. 21 The Commissioner’s reliance on section 790.10 does not sufficiently credit other portions of the UIPA andis not consistent with the structure of the UIPA The Commissioneris correct that the purpose ofthe UIPAis to regulate insurance practices “in the public interest.” That is what section 790 does whenit refers to “the Act of Congress of March 9, 1945.” That act (15 U.S.C. § 1011) states in pertinent part that “the continued regulation .. . by the several States of the business of insuranceis in the public interest.” To the extent the Commissionercites Calfarm, supra, 48 Cal.3d 805, for the proposition that it may promulgate Regulations that serve the public interest, Calfarm does not illuminate whatis already in the UIPA.15 The languageofthe UIPA reveals the Legislature’s intentto set forth in the statute what unfair or deceptive trade practices are prohibited, and not delegate that function to the Commissioner. Thus, section 790.02 states, “No person shall engagein this State in any trade practice whichis defined in this article as, or determined pursuantto this article to be, an unfair method of competition or an unfair or deceptive act or practice in the business of insurance.” (Italics added.) — In section 790.03, the Legislature has defined “as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance” numerousacts or: practices, including, amongotheracts or practices, making false statements “as to the dividendsor share ofsurplus previously paid on similar policies” (subd. (a)); entering into a boycott (subd.(c)); making “any false statement of financial condition of an insurer with intent to deceive” (subd. (d)); “willfully omitting to makea true entry of any material fact pertaining to the business of the insurer in any book . . . of the insurer” (subd. (e)); unfairly discriminating “between individuals of the same class and equal expectation oflife” in life insurance rates (subd. (f)(1)); representing that oneis a memberofthe California Insurance Guarantee Association or insured against insolvency 13 Calfarm is otherwise not on point. There, the Supreme Court invalidated two provisions of Proposition 103 regarding insurancerates (§ 1861.01 et seq.) as unconstitutional. (48 Cal.3d at pp. 815-816.) 22 (subd. (g)); and “[k]nowingly” committing one or more of sixteen “unfair claims settlement practices”set forth in subdivision (h). These are in addition to section 790.03, subdivision (b), at issue here, as to disseminating a “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.” In addition, section 790.036, subdivision (a) provides that advertising insurance that the insurer doesnotsellis also “an unfair and deceptive act or practice.” There is no similar provisionin the UIPA regarding the content and format of replacementcosts estimates. This demonstrates that the Legislature was deliberate in choosing what conductto brandin sections 790.03 and 790.036 as “unfair and deceptive.” Applying the legislative maxim of expressio unius est exclusio alterius, we can infer that the absence of a provision regarding replacement cost estimates was a deliberate choice. Thus, 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 underthe guise of deeming nonconforming estimates misleading under section 790.03, subdivision(b). Ourconclusion is bolstered by those provisions in the UIPA actually denominating the Commissioner’s powers. These focus on the Commissioner’s power (1) to enforce existing prohibitions in the UIPA (§§ 790.035, 790.04, 790.05, 790.07,14 790.08); (2) to bring enforcement proceedings against a person the Commissioner has “reason to believe”is engaging “in any method of competition or in any act or practice ... not defined in Section 790.03 ... that... is unfair or deceptive” (§ 790.06); and (3) to “promulgate reasonable rules and regulations” to administer the act (§ 790.10). Read together, these provisions demonstrate thatthe Legislature did not give the Commissioner power to define by regulation acts or conduct not otherwise deemedunfair or deceptivein the statute. 14 Section 790.07 regardsviolations of a cease and desist order issued pursuantto section 790.05 or a court order issued pursuantto section 790.06. 23 Thus, section 790.04 gives the Commissioner “power to examine and investigate into the affairs of every person engaged in the business of insurance .. . in order to determine whether such person has been or is engaged in any unfair method of competition or in any unfair or deceptive act or practice prohibited by Section 790.03 or determined pursuantto this article to be an unfair method of competition or an unfair or deceptive practice in the business of insurance.” (Italics added.) Section 790.05 sets forth an enforcement process when the Commissioner has “reason to believe that a person has been engaged... in any unfair method of competition or any unfair or deceptive act or practice defined in Section 790.03, and that a proceeding by the commissioner in respect thereto would beto the interest of the public.” That process includes an order to showcause hearing after the Commissioner has served that person with a statement of the charges and the person’s potential liability under section 790.035. The hearing is conducted under the auspicesofthe Administrative Procedure Act (APA) (Gov. Code, § 11500 et seq.), and any resulting order is reviewable by a court as provided by Insurance Codesection 12940 or the APA. The Commissioner’s remedies include civil penalties as provided in section 790.035, subdivision (a),!5 and a cease and desist order. The Commissioner’s argument that incomplete replacementcost estimates are within the ambit of “untrue, deceptive, or misleading” statements in section 790.03, subdivision (b) proves too much. If that were the case, there would be no need for the Regulation because, as the Commissionerpoints out, he would already have had the meansin section 790.05 to assess penalties and issue a cease and desist order against a 15 Section 790.035, subdivision (a) provides: “Any person who engagesin any unfair method of competition or any unfair or deceptive act or practice defined in Section 790.03 is liable to the state for a civil penalty to be fixed by the commissioner, not to exceed five thousand dollars ($5,000) for each act, or, if the act or practice was willful, a civil penalty not to exceed ten thousand dollars ($10,000) for each act. The commissionershall have the discretion to establish what constitutes an act. However, whenthe issuance, amendment, or servicing of a policy or endorsementis inadvertent, all ofthose acts shall be a single act for the purposeofthis section.” 24 licensee the Commissioner believed had given a lowball or incomplete estimatein selling homeownerinsurance. The Commissioner’s reliance on section 790.10 also appears circular. As set forth in the preceding discussion, section 790.03 lists specific insurance industry conduct that the Legislature has deemed unfair and deceptive. Replacementcost estimates are not includedin that list. The Commissioner arguesthat, because he believes replacement cost estimates not following the Regulation’s format and content rules are automatically “misleading” under section 790.03, subdivision (b), he has authority to regulate such estimates under his powers of administration in section 790.10. This interpretation of the UIPA is not only circular, it also renders section 790.06 superfluous. Put differently, under the Commissioner’s interpretation ofits authority under the UIPA, he would never have to resort to the procedures in section 790.06 regarding practices not “defined” in 790.03 because the Commissioner could always argue that conduct not meeting standards in a regulation promulgated under the cover of the Commissioner’s power to administer under section 790.10 would be “misleading.” This is precisely what the Commissioner has donehere. Section 790.06 provides for more multifaceted procedural processes than required by section 790.05 before any conductidentified by the Commissionernot within 790.03 can be sanctioned. Thus, in addition to an order to show cause hearing under the APA,if the conduct is found to be “unfair or deceptive,” the Commissioneris required to issue a written report “so declaring.” Ifthe conduct has not been discontinued, the Commissioner may, through the Attorney General, petition the superior court to enjoin the conduct. Unlike a proceeding undersection 790.05, the Commissioner cannot enjoin the purportedly unfair or deceptive conduct without a court order. Under the heading of“Powers vested in commissioner,” section 790.08 provides in pertinentpart that “[t]he powers vested in the commissionerin this article shall be additional to” the penalties and other remedies “authorized by law with respect to the methods,acts and practices hereby declared to be unfair or deceptive.” (Italics added.) 25 Thus, section 790.08 emphasizesthat the enforcement role of the Commissioneris tethered to acts and practices “hereby declared to be unfair or deceptive,” to wit, defined or determined in the UIPA. The Commissionerplaces great reliance on Ford Dealers, supra, 32 Cal.3d 347,in arguing that omitting information can be misleading and the Commissioner has . “discretion”to fill in the “details” as to what is misleading under section 790.03 even if the particular insurance act or practice is not listed in section 790.03. In Ford Dealers, the Supreme Court heldthat the director of the Department of Motor Vehicles (DMV) had the authority to promulgate a regulation requiring, among other things, licensed automobile dealers to disclose certain added-on delivery and preparation charges where the enabling statute, Vehicle Code section 11713, subdivision (a), made unlawful the dissemination of “any statement which is untrue or misleading and which is known,or whichby the exercise of reasonable care should be known,to be untrue or misleading.” Like 790.03, subdivision (b), at issue before us, Vehicle Code section 11713, subdivision (a) is followed by subdivisions identifying other prohibited practices. These include advertising using fonts and a format other than those specified in the statute (subd. (b)); failing to withdraw an advertisement for a vehicle within 48 hoursafter the vehicle has been sold (subd. (c)); not having the required bond (subd.(e)) and “established place of business” (subd.(f)); including licensing or transferoftitle fees which are not dueto the state (subd. (g)); and employing an unlicensed salesperson (subd. (h)). Vehicle Code section 11713, subdivision (a) also makes unlawful the dissemination of a misleading statement as “part of a plan . . . with the intent not to sell any vehicle or service so advertised at the price stated therein, or as so advertised.”16 In upholding the regulation, the Supreme Court reasoned that an “administrative agencyis not limited to the exact provisionsofa statute in adopting regulations to 16 In addition, division 5, chapter4, article 1 of the Vehicle Code, of which section 11713 is a part, contains a myriadofother statutory obligations pertaining to automobile sales and dealers. (Veh. Code, §§ 11700-11740.) 26 enforce its mandate,” and the absence of any specific statutory provision regarding the subject of the regulation did not mean that the agency did not have authority to promulgate it. (Ford Dealers, supra, 32 Cal.3d at p. 362.) Notably absent from the statutory regime at issue in Ford Dealers wereprovisions distinguishing between procedures to be employed regarding acts or practices defined by thestatute to be unfair and deceptive, and those acts or practices not so defined in the statute, but nonetheless believed by the administrative agency to be similarly unfair and deceptive.17 We do not doubt that the Legislature could have delegated to the Commissionerthe kind of broad © authority conferred on the DMVin Ford Dealers; it did not do so in the UJPA. Payne, supra, 16 Cal.3d 651, offers no more support for the Commissioner’s position. There, the Supreme Court upheld the Commissioner’s authority to limit the amount of compensation paid to agents in the sale of credit life and credit disability insurance. In Payne, the Supreme Court primarily addressed the necessity of the regulation—finding that the administrative record supported the Commissioner. As noted ante, the Associations have not attacked the Regulation on necessity grounds. The Payne court observed that understatutes governing credit insurance, the Legislature evidencedits intent to “grant the commissioner broad discretion to determine what reasonablerules and regulationsinthe area of credit insurance are necessary to promote the public welfare.” (Payne, supra, 16 Cal.3d at p. 656.) The Commissioner had authority to promulgate the regulation because the credit insurance statutes gavethe Commissioner power undersection 779.21 to adopt regulations “‘as may be necessary to carry out the provisionsof[the article relating to credit insurance],’” and under section 779.9 to disapprove a credit insurance form if it contains provisionsthat are “‘unjust, 17 The Vehicle Codeprovisionsat issue in Ford Dealers, supra, 32 Cal.3d 347, also contain different enforcement procedures from those in the UIPA. For example, Vehicle Code section 11726 provides for a civil action for damages,attorney fees, and injunctive relief for any licensee “suffering pecuniary loss because of any willful failure byany other licensee to comply with any provision of Article 1 ....” There is no analogousprovision in the UIPA. 27 unfair, inequitable, misleading, deceptive .. . or are contrary to any provision of the Insurance Code or ofany rule or regulation promulgated thereunder.’” (Payne, at p. 656,italics added.) Once again, these statutes governing credit insurance do not contain the same languageor fit into the samestatutory context as section 790.03 does in the UIPA. Accordingly, Payneis of limited value to the present analysis—to discern whether in giving the Commissioner powerto administer the UIPA in section 790.10, the Legislature intended to give the Commissioner powerto define content and formatrules for replacement cost estimates and render them “misleading” undersection 790.03, subdivision (b) just because the estimates did not follow those rules.!8 Thelegislative evolution of the UIPA as well as other sections in the Insurance Code support the conclusion that the Commissioner was without authority to promulgate the Regulation The UIPAasoriginally enacted in 1959 (Stats. 1959, ch. 1737, § 1, p. 4187) did not includeall the acts and practices currently deemed unfair and deceptive in section 790.03. It also did not include section 790.10. That section first appeared in the UIPA in 1971. (Stats. 1971, ch. 975, § 1, p. 1887.) When the Legislature was considering AssemblyBill No. 1353, which proposedto add section 790.10, the Assembly Committee on Finance and Insurance’s summary includedthe following statement: “This bill gives the Insurance Commissionerthe 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 18 We note that Justice Mosk dissented in Payne, arguing that there was “nodirect legislative authority justifying an enforceable order” other than “two very general authorizations of power.” (Payne, supra, 16 Cal.3dat p. 659 (dis. opn. of Mosk,J.).) Indeed, Justice Moskasserted that the majority opinion was contrary to the Supreme Court’s “converse conclusion”in Pac. Tel. & Tel. Co. v. Public Utilities Com. (1950) 34 Cal.2d 822 under an even more broadly worded enabling statute applied to a Public Utilities Commission regulation regarding paymentsfor services provided by a telephone company’s parent companythat could be passed on to consumers. (Payne,at p. 660.) 28 having to wait for the Legislatureto act at a later date.” (Assem. Com. on Finance and Insurance, summary of Assem.Bill No. 1353 (1971 Reg. Sess.) p. 1.)19 Oninitial review, this statement oflegislative purpose would support the Commissioner’s interpretation of his authority to promulgate the Regulation defining noncomplying replacementcost estimates as “misleading” statements under section 790.03. However, the Legislature’s subsequent additions to section 790.03 are not consistent with this view. We observethat section 790.03, subdivision (h), regarding unfair claims settlement practices, was added to the UIPA in 1972. (Stats. 1972, ch. 725, § 1, p. 1314.) Section 790.03, subdivision (h) covers categories ofclaims settlement practices that could have been regulated under the Commissioner’s interpretation of his authority under sections 790.03 and 790.10 without amendingthestatute. Considersection 790.03, subdivision (h)(1), regarding “[mJisrepresenting to claimants pertinent facts or insurance policy provisions relating to any coverages at issue,” as one such example. Similarly, in 1975, the Legislature added definitions (14) and (15) to subdivision (h) of section 790.03, respectively regarding “advising a claimantnot to obtain the services of an attorney” and “[mlisleading a claimant as to the applicable statute oflimitations.” (Stats. 1975, ch. 790, § 1, p. 1812.) Under the Commissioner’s view ofhis authority, the Commissioner could have defined these practices in a regulation and then denominated them as misleading undersection 790.03, subdivision (b) without waiting for enabling legislation. Indeed, in response to complaints about underinsurance regarding the same wildfires that ultimately led to promulgation of the Regulation, the Legislature in 2005 amended section 2051.5 (Stats. 2005, ch. 447, § 3, p. 3608) and added section 1749.85 19 On our motion,wetake judicial notice of this summaryandtheotherlegislative reports and analyses discussed in this opinion. 29 (Stats. 2005, ch. 447, § 2, p. 3608).20 As notedearlier, section 2051.5, subdivision (a) defines replacement cost. The 2005 amendments to subdivision (b)(2) of section 2051.5 expandedalternative living expense paymentsin the event of a state of emergency. Section 1749.85, subdivision (a) tasked the curriculum committee to make recommendationsontraining broker-agents on “proper methods of estimating the replacement valueofstructures, and of explaining the various levels of coverage under a homeowners’ insurance policy.” Weobservethat section 1749.85, subdivision(c) states that nothing in “[t]his section” shall be construed to prevent “licensed appraisers, contractors and architects from estimating replacement value ofa structure,”but that if they do, subdivision (d) authorizes the Departmentof Insurance to adopt a regulation “establish[ing] standards for the calculation” of such estimates. Not even the Commissionerarguesthat section 1749.85, subdivision (d) authorized the Commissioner to promulgate the Regulation, but at trial the Commissionerasserted that the latter statute supported subdivision (k) of the Regulation regarding, amongother things, training of broker-agents. Although neither section 2051.5 nor 1749.85 is part of the UIPA, the Legislature could have acted at the time of these 2005 amendments to legislate the form and content of replacementcost estimates, given consumer complaints about underinsurance, of which the Legislature was well aware, butit did not do so. Similarly, section 10101, which was addedto the Insurance Code in 1992, requires residential property insurers to provide written disclosures in the format specified in section 10102. (Stats. 1992, ch. 1089, § 1, p. 5031.) Section 10102, subdivision(a), which was addedto the Insurance Code in 2010—the same year in which the Regulation was promulgated—sets forth the contentofthe required disclosure, including informing 20 The authorofthe legislation commented on the many complaints about“the underinsurance problem”andthat “[b]etter and continuedtraining of personnel in how to estimate the replacementcost of a homeistherefore critical.” (Sen. Banking, Finance and Insurance Committee, Rep. on Sen. Bill No. 2 (2005-2006 Reg. Sess.) as amended Mar. 29, 2005, p. 7.) 30 e6ethe consumerthat the coverage “‘should be high enough so you can rebuild your home,’” itemizing the kind of rebuilding costs a consumershouldanticipate, and warning the consumerto obtain insurancein a sufficient amountto cover those costs. (Stats. 2010, ch. 589, § 2, No. 9 West’s Cal. Legis. Service, p. 3024.) Section 10103, subdivision (a)(2) furtherprovidesthat no residential property insurance “may be issued or renewed” unlessit recites “‘[t]he limit of liability for this structure (Coverage A) is based on an estimate of the cost to rebuild your home, including an approximate cost for labor and materials in your area, and specific information that you have provided about your home.’” (Stats. 2006, ch. 137, § 2, p. 1779.) The Legislature could have gone onto define the content and format of replacement cost estimates. It could have added incomplete replacement cost estimates to the list of unfair and deceptive practices in the UIPA. Weinfer that these omissions were deliberate, and that underthe guise of “filling in the details,” the Commissioner therefore could not do what the Legislature has chosen not to do. By our opinion today, we are not suggesting that the Legislature could not regulate the form and content of replacement cost estimatesifit chooses to do so. Weare also not suggesting that the Commissioner could not use the administrative and court processes in section 790.06 to seek a determination that replacementcost estimates not including certain information are unfair and deceptive. Nor are we limiting the Commissioner’s authority under section 790.05 to bring an enforcement action against a licensee who has lowballed or otherwise given an incomplete replacement cost estimate. Our ruling today is limited to one conclusion—that the UIPAhasnotas of yet given the Commissioner authority to regulate the content and format of replacement cost estimates. Because we conclude that the Commissionerdid not have the authority to promulgate the Regulation, we do notreach the Associations’ other arguments. DISPOSITION The judgmentis affirmed. CERTIFIED FOR PUBLICATION. BENDIX,J.* We concur: CHANEY,Acting P. J. JOHNSON,J. * Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 ofthe California Constitution. 32 DECLARATION OF SERVICE Case Name: ASSOCIATION OF CALIFORNIA INSURANCE COMPANIESand PERSONAL INSURANCE FEDERATION OF CALIFORNIAv. DAVE JONESinhis capacity as Commissioner of the California Department of Insurance Case No.: B248622 I declare: I am employedin the Office of the Attorney General, which is 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 not a 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 with that 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 May 18, 2015, I served the attached PETITION FOR REVIEWbyplacing a true copy thereof enclosed in a sealed envelopein the internal mail system of the Office of the Attorney General at 300 South Spring Street, Suite 1702, Los Angeles, CA 90013, addressed as follows: Gene Livingston, Esq. Clerk, Los Angeles County Superior Court Greenberg Traurig LLP Honorable Gregory W. Alarcon 1201 "K" Street, Suite 1100 Department 36 Sacramento, California 95814 111 North Hill Street (Attorneysfor Plaintiffs and Respondents) Los Angeles, California 90012 Clerk, Court of Appeal Second Appellate District, Division One. ~ 300 South Spring Street, 2* Floor Los Angeles, California 90013 (Hand-Delivered) I declare under penalty of perjury under the lawsof the State of California the foregoingis true and correct andthat this. declaration was executed on May 18, 2015, at Los Angeles, California. Kathi Palacios b “Pilar 4 eT . { Declarant Signature ~ LA201 1600848