Edd King v. National General Insurance Company

Background

Edd King, Dierdre King, Elmo Sheen, and Sheila Lee brought a proposed class action against National General Insurance Company, Integon National Insurance Company, Integon Preferred Insurance Company, MIC General Insurance Corporation, Personal Express Insurance Company, and Sequoia Insurance Company. They alleged that the defendants unlawfully overcharged them and other proposed class members for private passenger automobile insurance in violation of California law.

California law requires insurers to offer qualified drivers a good-driver-discount policy at a rate at least 20 percent below the rate otherwise charged for the same coverage. California Insurance Code section 1861.16(b), called the “Lowest Rates Rule” by the California Department of Insurance, requires an agent or representative working for insurers under common ownership, management, or control to offer a qualified driver a policy from the insurer in that group offering the lowest rates, unless an exemption applies.

The plaintiffs alleged that they qualified as good drivers and that Sequoia and Personal Express had lower-priced policies available when the plaintiffs purchased their insurance, but those policies were not offered. After earlier rulings on the pleadings, the claims remaining against Sequoia were: (1) unlawful and unfair business practices under California’s Unfair Competition Law; (2) breach of the implied promise of good faith and fair dealing; and (3) declaratory and injunctive relief. The opinion notes that the plaintiffs abandoned their claim for injunctive relief against Sequoia in their opposition brief.

Summary-Judgment Standard

Summary judgment is appropriate when the evidence shows no genuine dispute about a fact that could affect the result and the moving party is entitled to judgment under the law. Once the moving party meets its burden, the opposing party must identify specific evidence showing a real factual dispute; it cannot rely only on the allegations in the complaint.

Request for Judicial Notice and Evidentiary Objections

The plaintiffs asked the court to take judicial notice of four exhibits, including corporate, insurance-market, and regulatory documents. The court found those exhibits immaterial because it did not rely on them in deciding the motion. It therefore denied the request and Sequoia’s objections to that request as moot.

Sequoia also objected to parts of the plaintiffs’ evidence. The court did not decide whether that evidence was admissible because, even assuming it could be admitted, none of it created a genuine dispute of material fact.

Unfair Competition Law

The plaintiffs’ Unfair Competition Law claim proceeded under both the “unlawful” and “unfair” prongs. The unlawful prong makes violations of other laws actionable under the Unfair Competition Law. The plaintiffs based this part of their claim on alleged violations of California Insurance Code section 1861.16(b).

The court rejected the plaintiffs’ argument that Sequoia was jointly liable for the National General defendants’ alleged failure to offer the lowest rates simply because Sequoia was part of the same control group. The court explained that its earlier order had held only that the plaintiffs’ allegations were sufficient at the pleading stage under a theory that the defendants acted together to conceal the cross-offer requirement from their agents and representatives. It had not held that control-group membership alone created joint liability for each company’s alleged statutory violations.

At the summary-judgment stage, the plaintiffs did not develop the concealment-and-concert theory alleged in their complaint. Instead, they relied on a general claim of joint liability. The court found that the plaintiffs offered no legal support for that theory.

The court also found that the plaintiffs’ evidence did not identify unlawful conduct by Sequoia. The deposition testimony came from witnesses who had not worked for Sequoia or otherwise lacked knowledge of Sequoia’s practices. Sequoia’s interrogatory responses stated that it was not part of a control group and therefore was not subject to cross-company offers; the court found that those responses did not constitute evidence that Sequoia had engaged in unlawful conduct. Intercompany agreements and a seller disclosure letter showed, at most, common agency, shared agents or representatives, and shared management or operational functions. They did not show that Sequoia or its agents failed to offer the lowest good-driver rates.

Because the plaintiffs lacked both evidence of unlawful conduct by Sequoia and support for their joint-liability theory, the court granted summary judgment on the unlawful-business-practice claim.

The court reached the same result on the unfair-business-practice claim. The plaintiffs argued that Sequoia’s alleged uniform failure to offer lower rates violated public policy and harmed them, but they cited no evidence that Sequoia had uniformly failed to make those offers. The court therefore granted summary judgment on the unfair prong as well.

Implied Promise of Good Faith and Fair Dealing

California law generally requires each contracting party to act in good faith and deal fairly in performing and enforcing the contract. Sequoia argued that it could not be liable because it was not and had never been a party to any of the plaintiffs’ insurance contracts.

The plaintiffs argued that a non-signatory could be liable under a joint-liability theory, but they did not assert or explain a recognized joint venture, agency, or alter-ego relationship between Sequoia and the other defendants. The court found no genuine issue of material fact for trial and granted summary judgment to Sequoia on this claim.

Declaratory Relief

The plaintiffs sought declarations concerning alleged overcharges, the failure to repay overcharged premiums, alleged violations of their insurance agreements or applicable law, and damages and remedies. The court found that this claim was entirely derivative of the Unfair Competition Law and implied-covenant claims, which depended on an underlying violation of section 1861.16(b). Because the plaintiffs had not established such a violation by Sequoia, the court granted summary judgment on the declaratory-relief claim.

Disposition

The court granted Sequoia’s motion for summary judgment. It directed the clerk to enter judgment in favor of Sequoia and dismiss Sequoia as a defendant in the case. Judge Donna M. Ryu signed the order on December 22, 2023.