Edd King v. National General Insurance Company

Background

Edd King, Dierdre King, and Sheila Lee brought a proposed class action alleging that National General Insurance Company, Integon National Insurance Company, Integon Preferred Insurance Company, MIC General Insurance Corporation, and Personal Express Insurance Company violated California Insurance Code section 1861.16(b). That statute requires an insurer’s agent or representative to offer, and the insurer to sell, a good-driver-discount policy from an insurer within the same common-ownership, common-management, or common-control group that offers the lowest rates for the relevant coverage.

The plaintiffs sought certification of claims under California’s Unfair Competition Law and for breach of the implied covenant of good faith and fair dealing. The court ordered supplemental briefing on statutory questions relevant to whether the three proposed class representatives had Article III standing, including the meaning of “control group,” the cross-offer duty, affinity-group policies, comparable coverage, and potential joint liability.

Standing and statutory rulings

Lee’s agent-or-broker issue. Lee bought an Integon Preferred policy through Omni Safe Insurance Agency. The court explained that a broker generally acts as an intermediary for the insured, while an agent represents the insurer. Plaintiffs did not provide enough evidence that Omni Safe was an actual agent. The policy’s reference to Omni Safe under “Your Agent” and Lee’s uncertain deposition testimony also did not establish that Omni Safe was an ostensible agent—someone the insurer caused a third party reasonably to believe was its agent. The court therefore found that Lee had not established standing, leaving the Kings as the remaining proposed class representatives.

Meaning of “control group.” The court held that section 1861.16(b) unambiguously defines a control group as insurers having common ownership or operating in California under common management or common control. The court rejected defendants’ argument that insurers must also be acting together on ratemaking, underwriting, or similar matters.

For the Kings’ June 2013 purchase, the court found that the plaintiffs offered sufficient evidence for a reasonable juror to determine that PEIC and the other defendants were in the same control group between April 19, 2013, and April 1, 2014. The court relied particularly on evidence concerning the insurers’ shared National Association of Insurance Commissioners group code, while limiting expert testimony that attempted to make legal conclusions about the meaning of that code.

Affinity-group policies. The court held that section 1861.16(b) requires cross-offering an affinity-group policy when a good driver is eligible for it, but does not require cross-offering a policy for which the driver is ineligible. The Kings did not provide enough evidence that they were eligible for MIC’s lower-rate policy. Their evidence concerning the policy’s “Other Employee Groups” language did not show that the policy was open to all employees or that the Kings belonged to an eligible group. The Kings therefore lacked standing concerning their June 2012 policy purchase.

Comparable coverage. The court held that the Lowest Rates Rule applies to the basic automobile coverage types identified in California Insurance Code section 660(a): liability, physical-damage, and collision coverage. Ancillary benefits, such as rental reimbursement, do not change the coverage subject to the rule. Because the lower-rate PEIC policy otherwise appeared to match the NGIC policy purchased by the Kings and differed only in rental-reimbursement terms, the plaintiffs provided enough evidence for a reasonable juror to find that defendants had a duty to cross-offer the PEIC policy in June 2013.

The court did not decide whether the Lowest Rates Rule applies when policies have different coverage limits or deductibles. It also did not resolve all questions about how the cross-offer duty must operate, leaving those issues for possible renewed class-certification briefing.

Joint liability. The court held that insurers in a control group are not automatically liable for one another’s violations of section 1861.16(b) under a concerted-action theory merely because they share common ownership, management, or control. The statute does not itself explain how liability is divided, and common control alone does not establish the concerted conduct or other relationship needed for joint liability.

Injunctive relief. The plaintiffs did not establish standing to seek an injunction. They no longer had active insurance policies with defendants and offered only hypothetical statements that they might buy insurance from defendants in the future. Their statements that they would have bought lower-priced policies in the past were retrospective and did not show an actual or imminent threat of repeated injury.

Other rulings and disposition

The court took judicial notice of the parties’ legislative-history and state-agency-record exhibits. Sequoia’s motions to strike were denied as moot. Defendants’ motion to strike the expert testimony of Scott Brown, Larry LaStofka, Joel Laucher, and Jeffrey Nash was granted in part and denied in part. Plaintiffs’ motion to strike Benjamin Nelson’s testimony was denied, and their motion to strike Paul Braithwaite’s declaration was denied as moot.

The court denied the pending class-certification motion without prejudice, allowing plaintiffs to refile it to address developments in the case. The court vacated all existing deadlines and ordered the parties to meet and confer and submit proposed new briefing and case schedules. The order also noted that summary judgment had been granted in favor of Sequoia, but this order did not address the parties’ arguments concerning Sequoia because Sequoia was no longer a defendant.