Filed 6/16/23 Chang v. Farmers Insurance Company CA2/7

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

WILD CHANG et al.,

Plaintiffs and Appellants,

v.

FARMERS INSURANCE 

COMPANY, INC. et al.,

Defendants and Respondents.

 B321411

 (Los Angeles County

 Super. Ct. No. BC650876)

APPEAL from a judgment of the Superior Court of 

Los Angeles County. Teresa A. Beaudet, Judge. Affirmed.

Wild Chang, in pro. per., Kenneth Lo, in pro. per., 

Wild Chang, Jr., in pro. per., for Plaintiffs and Appellants. 

Woolls Peer Dollinger & Scher, Gregory B. Scher and 

H. Douglas Galt for Defendant and Respondent Farmers 

Insurance Company, Inc.

_______________________
2

INTRODUCTION

Plaintiffs Wild Chang and Kenneth Lo were insured under 

a policy issued by defendant Fire Insurance Exchange. Plaintiffs 

submitted a claim under the policy, which plaintiffs allege was 

handled in bad faith. Plaintiffs Chang, Lo, and Wild Chang, Jr. 

(Chang Jr.), sued Farmers Insurance Company, Inc. (Farmers),

Fire Insurance Exchange, and agent Stacy Chern for breach of 

contract, breach of the implied covenant of good faith and fair 

dealing, fraud, and other related causes of action. The trial court 

sustained Farmers’ demurrer to the third amended complaint 

without leave to amend and entered a judgment of dismissal in 

Farmers’ favor. We affirm. 

FACTUAL AND PROCEDURAL HISTORY

These consolidated actions arise out of an insurance claim 

that plaintiffs Chang and Lo submitted for losses caused by a 

house fire on December 16, 2014. On February 16, 2017, Chang 

and Lo filed their original complaint against Farmers, Fire 

Insurance Exchange, Stacy Chern Insurance Agency, and Stacy 

Chern.

On August 21, 2017, Chang and Lo filed a second amended 

complaint that substituted Farmers Insurance Group of 

Companies for Farmers. On January 26, 2018, plaintiffs 

voluntarily dismissed the action with prejudice as to Farmers 

Insurance Group of Companies.

On January 28, 2021, plaintiffs Chang, Lo, and Chang Jr. 

filed a second action against Farmers, Fire Insurance Exchange, 

Stacy Chern, and defense counsel Woolls Peer Dollinger & Scher 
3

(Woolls Peer). The actions were consolidated and the operative 

third amended complaint was deemed filed on July 22, 2021.

In the third amended complaint, plaintiffs allege Farmers 

and Fire Insurance Exchange, acting in bad faith, made a grossly 

deficient settlement offer for the claim plaintiffs submitted for 

their fire loss. Plaintiffs also allege Farmers, Fire Insurance 

Exchange, and Chern engaged in a fraudulent scheme to “convert 

the ‘insurance’” plaintiffs allegedly purchased from Farmers “into

a mere ‘self-owned membership’ in an unincorporated association, 

i.e., [Fire Insurance Exchange] . . . in order to insulate [Farmers] 

and its agents from all of the legal liabilities arising from the 

deceptive and non-conforming insurance sold to [p]laintiffs.”

The declarations page attached to the third amended 

complaint shows the policy was issued by Fire Insurance 

Exchange. Plaintiffs allege they never agreed to subscribe to Fire 

Insurance Exchange or to obtain coverage from that entity. 

Among other things, they never signed a subscription agreement. 

Instead, they understood they would be insured by Farmers. 

Plaintiffs attach a document entitled “Evidence of Property 

Insurance” that identified the “company” as “Farmers Insurance.”

Under the “coverage information” section, plaintiffs are directed 

to “remit payment to[] Farmers Insurance.” Plaintiffs allege that

this is a legally binding contract and that they relied on the fact 

Farmers Insurance is identified as the insurer in paying the 

premiums. Plaintiffs attach numerous documents bearing the 

logo of Farmers Insurance Group of Companies or using the term 

“Farmers” in connection with the insurance purchased by 

plaintiffs.

Plaintiffs allege that Farmers acted as the “principal/agent” 

of other defendants, including Fire Insurance Exchange, and that 
4

Fire Insurance Exchange “act[ed] as a ‘veil’” so that Farmers 

could limit its liability. The coverage plaintiffs purchased from 

Farmers was provided by Fire Insurance Exchange to “insulate 

[Farmers] and its agents from all the legal liabilities arising from 

the deceptive and non-conforming insurance sold to [p]laintiffs.”

Plaintiffs further allege Fire Insurance Exchange is “only

responsible for the administration of ‘membership’ affairs for the 

members . . . [b]ut, in fact, [Farmers] is the real entity that has 

financial gains through staffing, managing and controlling the 

affairs of [Fire Insurance Exchange].” Plaintiffs also allege Stacy 

Chern acted as an agent of Farmers, not Fire Insurance 

Exchange.

Plaintiffs allege that, after the fire, defendants failed to 

properly investigate the damage caused by the fire, failed to 

provide temporary housing as required by the policy, and failed to 

provide adequate compensation for the claim. Plaintiffs also 

allege defendants threatened to terminate the policy at a time 

they knew plaintiffs could not obtain coverage elsewhere. 

Defendants took more than a year to complete their investigation 

and finally issued a check for the grossly deficient amount of 

$19,925.91, even though estimates for repairs exceeded $150,000. 

Plaintiffs allege the offer to pay $19,925.91 was made in bad 

faith. Plaintiffs rejected the offer, deciding instead to sue. 

Plaintiffs also allege that stress from the experience caused 

Chang to suffer a stroke, the aftermath of which his minor son, 

Chang Jr., witnessed.

Plaintiffs purport to assert causes of action for fraud, 

breach of the covenant of good faith and fair dealing, breach of 

contract, unfair business practices, professional negligence, and 
5

intentional and negligent infliction of emotional distress against 

all defendants.

Farmers (along with other defendants) demurred to the 

third amended complaint.1 Farmers argued the claims for breach 

of contract, bad faith, and unfair competition failed as against 

Farmers because Farmers was not a party to the insurance 

contract; the claim for fraud failed because plaintiffs did not 

allege the elements of fraud with sufficient particularity and did 

not allege causation or damages; and the claims for negligence

and negligent infliction of emotional distress failed because

Farmers did not owe plaintiffs any duty and Chang Jr. could not 

recover as a bystander. Farmers requested that the court take 

judicial notice of, among other things, plaintiffs’ motion for leave 

to file a third amended complaint and exhibits thereto; the 

company profile for Fire Insurance Exchange from the California 

Department of Insurance website; and the license status 

information for agent Stacy Chern from that website. The trial 

court granted the request for judicial notice. 

In opposition to the demurrer as to Farmers, plaintiffs 

argued the claims for breach of contract, bad faith, professional 

negligence, intentional infliction of emotional distress, and unfair 

competition were sufficiently alleged because plaintiffs 

contracted with Farmers, as shown by the evidence of property 

insurance and other documents, and all defendants acted in 

concert with each other in bad faith to deprive plaintiffs of the 

benefits of the contract; the claim for fraud was sufficiently 

alleged because plaintiffs were told they were buying an 

1 Fire Insurance Exchange did not demur to the breach of 

contract or the breach of the covenant of good faith and fair 

dealing claims. 
6

insurance policy from Farmers but received a subscription 

agreement from Fire Insurance Exchange; and the claim for 

negligent infliction of emotional distress was sufficiently alleged 

because Chang Jr. suffered emotional distress when he witnessed 

the aftermath of his father’s stroke, which had been caused by 

Farmers’ bad faith. Plaintiffs requested that the court take 

judicial notice of various court filings, including declarations that 

Fire Insurance Exchange had filed in support of an anti-SLAPP 

motion, and other documents purportedly related to the purchase 

of insurance. The court took judicial notice of the fact the 

declarations and certain other documents had been filed but 

declined to take judicial notice of the truth of the matters 

asserted therein. The court otherwise denied the request. 

The court sustained Farmers’ demurrer in its entirety and 

entered a judgment of dismissal as to Farmers. The court 

concluded the fraud claim failed because it had not been alleged 

with sufficient particularity; the claims for breach of contract,

bad faith, intentional infliction of emotional distress, and unfair 

competition failed because Farmers was not a party to insurance 

contract; the professional negligence claim failed because 

Farmers owed no duty to plaintiffs; and the negligent infliction of 

emotional distress claim failed because Chang Jr. had not alleged 

the elements of a claim based on a bystander theory. The court 

denied leave to amend.

Farmers timely appealed. 
7

DISCUSSION

A. Standard of Review

A demurrer tests the legal sufficiency of the factual 

allegations in a complaint. “In reviewing an order sustaining a 

demurrer, we examine the operative complaint de novo to 

determine whether it alleges facts sufficient to state a cause of

action under any legal theory. [Citation.] Where the demurrer 

was sustained without leave to amend, we consider whether the 

plaintiff could cure the defect by an amendment.” (T.H. v. 

Novartis Pharmaceuticals Corp. (2017) 4 Cal.5th 145, 162; 

accord, Centinela Freeman Emergency Medical Associates v. 

Health Net of California, Inc. (2016) 1 Cal.5th 994, 1010.) 

We assume the truth of the properly pleaded factual 

allegations and matters of which judicial notice has been taken. 

(Lee v. Hanley (2015) 61 Cal.4th 1225, 1230; Evans v. City of 

Berkeley (2006) 38 Cal.4th 1, 20; Schifando v. City of Los Angeles

(2003) 31 Cal.4th 1074, 1081 (Schifando); see Code Civ. Proc., 

§ 430.30, subd. (a).) We liberally construe the pleading with a 

view to substantial justice between the parties. (Code Civ. Proc., 

§ 452; Schifando, at p. 1081.) “However, the assumption of truth 

does not apply to contentions, deductions, or conclusions of law 

and fact. [Citations.] Furthermore, any allegations that are 

contrary to the law or to a fact of which judicial notice may be 

taken will be treated as a nullity.” (C.R. v. Tenet Healthcare 

Corp. (2009) 169 Cal.App.4th 1094, 1102.) “‘While the 

“allegations [of a complaint] must be accepted as true for 

purposes of demurrer,” the “facts appearing in exhibits attached 

to the complaint will also be accepted as true and, if contrary to 

the allegations in the pleading, will be given precedence.”’” 
8

(Moran v. Prime Healthcare Management, Inc. (2016)

3 Cal.App.5th 1131, 1145-1146; accord, Ivanoff v. Bank of 

America, N.A. (2017) 9 Cal.App.5th 719, 726.)

We review the trial court’s decision to deny leave to amend 

for an abuse of discretion. A trial court abuses its discretion by 

sustaining a demurrer without leave to amend where “‘there is a 

reasonable possibility that the defect can be cured by 

amendment.’” (Loeffler v. Target Corp. (2014) 58 Cal.4th 1081, 

1100; accord, City of Dinuba v. County of Tulare (2007) 41 Cal.4th 

859, 865.) “‘The plaintiff has the burden of proving that [an] 

amendment would cure the legal defect, and may [even] meet this 

burden [for the first time] on appeal.’” (Sierra Palms 

Homeowners Assn. v. Metro Gold Line Foothill Extension 

Construction Authority (2018) 19 Cal.App.5th 1127, 1132; accord, 

Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 971.)

B. The Trial Court Did Not Err in Sustaining Farmers’

Demurrers

1. Breach of contract and breach of the implied covenant 

of good faith and fair dealing

To establish a cause of action for breach of contract, the 

plaintiff must plead and prove (1) the existence of a contract, 

(2) the plaintiff's performance or excuse for nonperformance, 

(3) the defendant’s breach, and (4) resulting damages to the 

plaintiff. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 

811, 821; Maxwell v. Dolezal (2014) 231 Cal.App.4th 93, 97-98.) 

“California law recognizes in every contract, including insurance 

policies, an implied covenant of good faith and fair dealing. 

[Citations.] In the insurance context the implied covenant 

requires the insurer to refrain from injuring its insured’s right to 
9

receive the benefits of the insurance agreement.” (Brehm v. 21st

Century Ins. Co. (2008) 166 Cal.App.4th 1225, 1235.) 

The trial court sustained Farmers’ demurrers to the breach 

of contract and breach of implied covenant of good faith and fair 

dealing causes of action on the ground that Farmers was not a 

party to the insurance contract. The declaration page attached

as an exhibit to the third amended complaint shows the coverage 

was provided by defendant Fire Insurance Exchange. 

Fire Insurance Exchange is a reciprocal insurer, also 

known as an interinsurance exchange, governed by Insurance

Code section 1280 et seq. (Tran v. Farmers Group, Inc. (2002) 

104 Cal.App.4th 1202, 1210 (Tran).) “An interinsurance 

exchange is an unincorporated business organization made up of 

subscribers and managed by an attorney-in-fact. The exchange is 

the insurer and the subscribers are the insureds. The subscribers 

execute powers of attorney appointing the attorney-in-fact to act 

on their behalf. The attorney-in-fact executes the exchange’s 

insurance contracts.” (Ibid.; see Ins. Code, §§ 1303, 1305; Lee v. 

Interinsurance Exchange (1996) 50 Cal.App.4th 694, 702-704 

[describing history of reciprocal insurance and structure of 

interinsurance exchanges]; Delos v. Farmers Group, Inc. (1979) 

93 Cal.App.3d 642, 651 (Delos) [discussing managerial role of 

attorney-in-fact].) “The written instrument, in which [the] 

contract of insurance is set forth, is the policy.” (Ins. Code, 

§ 380.)

Generally, causes of action for breach of contract and for 

breach of the implied covenant of good faith and fair dealing will 

lie only against the insurer. (Gruenberg v. Aetna Insurance Co.

(1973) 9 Cal.3d 566, 576.) However, under certain circumstances,

the attorney-in-fact for a reciprocal insurer may be held liable for 
10

breach of the covenant of good faith and fair dealing. (Tran, 

supra, 104 Cal.App.4th at pp. 1218-1219; Delos, supra, 

93 Cal.App.3d at p. 652.)

Courts have come to varying conclusions about when a

reciprocal insurer’s attorney-in-fact can be held liable for bad 

faith. In Delos, supra, 93 Cal.App.3d at p. 652, the court held 

that the attorney-in-fact of a reciprocal insurer could be held 

liable for bad faith regardless whether the attorney-in-fact was 

an alter ego of the exchange, concluding: “If we were to . . . 

adhere to the general rule that ‘bad faith’ liability may be

imposed only against a party to an insurance contract, we would 

not only permit the insurer to insulate itself from liability by the 

simple technique of forming a management company, but we 

would also deprive a plaintiff from redress against the party 

primarily responsible for damages.” (Ibid.)

By contrast, in Tran, supra, 104 Cal.App.4th at pp. 1218-

1219, the court concluded “the attorney-in-fact of a reciprocal 

insurer is not liable for breach of the covenant of good faith and

fair dealing merely because of its status as the insurer’s 

managerial agent.” The court held the attorney-in-fact could be 

held liable only where the plaintiff proves the attorney-in-fact is 

the alter ego of the reciprocal insurer or where the “single 

enterprise” doctrine applies. (Id. at p. 1218 [declining to follow 

Delos, supra, 93 Cal.App.3d at p. 652].)

“Two conditions are generally required for application of 

the doctrine to two related corporations: (1) such a unity of 

interest and ownership that the separate corporate personalities 

are merged, so that one corporation is a mere adjunct of another 

or the two companies form a single enterprise; and (2) an 

inequitable result if the acts in question are treated as those of 
11

one corporation alone.” (Tran, supra, 104 Cal.App.4th at 

p. 1219.)

In Tran, the plaintiff sued the attorneys-in-fact for two 

reciprocal insurance exchanges for bad faith. The trial court 

granted summary judgment in favor of the attorneys-in-fact on 

the bad faith claims because they were not parties to the 

insurance contracts. The Court of Appeal reversed, concluding 

the plaintiff had raised a triable issue on the two alter ego 

elements quoted above.

2

As to the first element, the court stated the defendants had 

made “no claim that the unity of interest requirement is not met 

in this case.”

3 (Tran, supra, 104 Cal.App.4th at p. 1219.) As to 

the second, the court rejected the defendants’ contention that “no 

inequity would flow from restricting Tran to pursuing her claims 

against the exchanges . . . [because] there [was] no showing the 

exchanges have inadequate assets to meet any judgment [the 

insured] might recover, including punitive damages.” (Ibid.) The 

court concluded the mere fact the exchange was adequately 

capitalized was insufficient to negate the inequity element of an 

2 One of the defendants in Tran and Delos was Farmers 

Group, Inc. The defendant here is Farmers Insurance Company, 

Inc., a different entity. 

3 The court stated: “An interinsurance exchange is ‘owned’

by the subscribers, not by the attorney-in-fact. However, given 

that the subscribers are required to appoint the attorney-in-fact 

as managerial agent, the ‘ownership’ element of the alter ego 

doctrine is not applicable in this context.” (Tran, supra,

104 Cal.App.4th at p. 1219, fn. 7; see also Troyk v. Farmers 

Group, Inc. (2009) 171 Cal.App.4th 1305, 1341-43 [attorney-infact can be held liable as an alter ego even though there is no 

shared ownership].)
12

alter ego claim in this context, holding: “When a reciprocal 

insurer functions as a mere instrumentality of an attorney-in-fact 

in the conduct of a unified insurance business, it would be 

inequitable to permit the attorney-in-fact to escape liability for 

breach of the covenant of good faith and fair dealing.”

4 (Id. at

p. 1220.)

We need not decide whether to follow Delos or Tran 

because exhibits attached to the third amended complaint show 

that Farmers is not Fire Insurance Exchange’s attorney-in-fact. 

Although plaintiffs allege “[Farmers] is the real entity that has

financial gains through staffing, managing and controlling the 

affairs of [Fire Insurance Exchange],” exhibits attached to the 

third amended complaint show that Fire Insurance Exchange’s 

attorney-in-fact is Fire Underwriters Association. “‘While the 

“allegations [of a complaint] must be accepted as true for 

purposes of demurrer,” the “facts appearing in exhibits attached 

to the complaint will also be accepted as true and, if contrary to 

the allegations in the pleading, will be given precedence.”’” 

(Moran v. Prime Healthcare Management, Inc., supra,

3 Cal.App.5th at pp. 1145-1146.) We accept the representations 

in the exhibits that Fire Underwriters Association is the 

attorney-in-fact. Plaintiffs have not alleged any relationship 

between Farmers and Fire Underwriters Association to support a 

4 In concluding a triable issue had been raised, the court 

stated: “[Defendants] were managerial agents without whom the 

exchanges could not transact their business. Farmers Group, 

apparently acting through Truck Underwriters Association in 

some instances, made the critical decisions regarding Tran’s 

policy for her and for the exchanges, manipulating the exchanges 

as parts of a single enterprise.” (Tran, supra, 104 Cal.App.4th at 

p. 1220.)
13

conclusion that Farmers should be treated as Fire Insurance 

Exchange’s attorney-in-fact.

Nor have plaintiffs sufficiently alleged that Farmers could 

otherwise be held liable as an alter ego of Fire Insurance 

Exchange on some basis other than as an attorney-in-fact. 

Plaintiffs have not sufficiently alleged a unity of interest between 

Farmers and Fire Insurance Exchange and have not sufficiently 

alleged facts showing the separate existence of the entities would 

sanction a fraud or promote injustice. The bare allegation that 

Farmers issued the policy through Fire Insurance Exchange “to 

insulate [Farmers] and its agents from all of the legal liabilities”

is not sufficient to state a claim based on alter ego theory. 

Plaintiffs argue they have adequately alleged they had a 

contract with Farmers because Farmers’ agent provided them 

with a document entitled “Evidence of Property Insurance” that

lists “Farmers Insurance” as the “company” and directs plaintiffs 

to remit their premium payment to “Farmers Insurance.”

Plaintiffs argue the document is a binder as defined in Insurance

Code section 382.5.5 (See Chicago Title Ins. Co. v. AMZ Ins. 

Services, Inc. (2010) 188 Cal.App.4th 401, 423 [document entitled 

“Evidence of Property Insurance” was a binder under

section 382.5].) 

A binder “temporarily obligates the insurer to provide”

insurance coverage described in the binder “pending issuance of 

the insurance policy.” (Ins. Code, § 382.5, subd. (a); accord, 

Chicago Title Ins. Co. v. AMZ Ins. Services, Inc., supra, 

5 The evidence of property insurance does not qualify as a 

certificate of insurance under Insurance Code section 384,

subdivision (a). The document does not contain the language 

required in that section to constitute a certificate of insurance. 
14

188 Cal.App.4th at p. 423.) “[A] binder shall be valid for [a] 

period . . . not exceeding 90 days from the date of execution of the 

binder . . . No binder shall remain valid on or after the date the 

insurance policy is issued with respect to which the binder was 

given.” (Ins. Code, § 382.5, subd. (c).) 

Here, even if we were to assume the document was a 

binder, it would not provide coverage for the loss at issue here

because the loss occurred more than 90 days after it was issued. 

The document was issued on April 29, 2014, with an effective 

date of May 5, 2014. Assuming it was a binder, it was valid for a 

maximum period of 90 days, until August 3, 2014, at the latest. 

(See Ins. Code, § 382.5, subd. (c).) The fire occurred on

December 16, 2014. 

Further, the insurance contract issued by Fire Insurance 

Exchange superseded the purported binder. Both the binder and 

declarations page attached to the third amended complaint list 

the same policy number, so it is clear both documents concern the 

same contract. The declarations page states: “This Declarations 

page is part of your policy. It supersedes and controls anything 

to the contrary.” The declarations page makes clear the insurer 

is Fire Insurance Exchange and not “Farmers Insurance.”

Plaintiffs have no claim against Farmers for breach of contract or 

breach of the covenant of fair dealing based on the fact that 

“Farmers Insurance” is the “company” identified in the purported 

binder.

6

6 Farmers argues the policy was already in place at the time 

the document entitled “Evidence of Property Insurance” was 

issued, and therefore the document could not be a binder. In 

support of the argument, Farmers identified a declaration page 

attached to plaintiffs’ motion for leave to amend reflecting a 
15

In sum, the trial court properly sustained Farmers’

demurrers to causes of action for breach of contract and breach of 

the covenant of good faith and fair dealing. Plaintiffs have not 

identified any additional facts they would allege against Farmers 

that would cure the deficiencies in the claims. The trial court

thus did not abuse its discretion in denying leave to amend. 

2. Fraud 

To state a cause of action for fraud, a plaintiff must plead 

the following elements: (1) misrepresentation, (2) knowledge of 

falsity, (3) intent to defraud, (4) justifiable reliance, and 

(5) resulting damage. (Charnay v. Cobert (2006) 145 Cal.App.4th 

170, 184.) “[F]raud must be pled specifically; general and 

conclusory allegations do not suffice.” (Lazar v. Superior Court

(1996) 12 Cal.4th 631, 645.)

Plaintiffs allege Farmers engaged in a fraudulent scheme 

to “convert the ‘insurance’ plaintiffs allegedly purchased from 

Farmers into a mere ‘self-owned membership’ in an 

unincorporated association, i.e., [Fire Insurance Exchange] . . . in 

order to insulate [Farmers] and its agents from all of the legal 

liabilities arising from the deceptive and non-conforming 

insurance sold to [p]laintiffs.” Although the allegations are not 

entirely clear, plaintiffs appear to contend Farmers and its 

purported agent Stacy Chern represented plaintiffs would be 

insured by Farmers, but instead of an insurance policy issued by 

policy period from January 30, 2014 to January 30, 2015. The 

document contains the notation, “Transaction type: Offer of 

renewal.” The court cannot determine from the face of the 

document whether the declaration page reflects a consummated 

contract or an offer. 
16

Farmers they received a subscription agreement with Fire 

Insurance Exchange. 

This claim fails because, among other things, plaintiffs 

have not alleged the purported misrepresentations caused any 

damage. The trial court took judicial notice of documents from

the website of the Department of Insurance showing that Fire 

Insurance Exchange is duly authorized by the department to 

issue insurance contracts to California insureds. The exhibits 

attached to the third amended complaint show that the coverage 

in the insurance contract issued by Fire Insurance Exchange 

matched the coverage set forth in the purported binder. 

Plaintiffs do not allege that Fire Insurance Exchange would not 

be able to satisfy any judgment or that plaintiffs were otherwise 

damaged by being insured by Fire Insurance Exchange as 

opposed to any other entity affiliated with the Farmers Insurance 

Group of Companies. Plaintiffs have not identified any 

additional facts they would allege to show the purported 

misrepresentations caused damage if leave to amend were 

granted. 

Accordingly, the trial court did not err in sustaining 

Farmer’s demurrer to this cause of action and did not abuse its 

discretion in denying leave to amend. 

3. Unfair business practices

The trial court also sustained the demurrer to plaintiffs’ 

claims under the unfair competition law (UCL) (Bus. & Prof. 

Code, § 17200 et seq.) Plaintiffs mention this claim only in 

passing in their appellate briefs and provide no argument or 

authority for why the trial court erred in sustaining the demurrer 

to this cause of action. Plaintiffs have thus forfeited any 
17

argument as to this claim. (Dinslage v. City and County of San

Francisco (2016) 5 Cal.App.5th 368, 377, fn. 3.) In any event, the 

trial court correctly ruled that plaintiffs have not sufficiently 

alleged a UCL claim against Farmers.

Unfair competition under the UCL means “any unlawful, 

unfair, or fraudulent business act or practice and unfair, 

deceptive, untrue, or misleading advertising.” “Written in the 

disjunctive, Business and Professions Code section 17200 

establishes ‘“three varieties of unfair competition—acts or 

practices which are unlawful, or unfair, or fraudulent.”’” 

(Ivanoff v. Bank of America, N.A., supra, 9 Cal.App.5th at p. 730, 

quoting Cel-Tech Communications, Inc. v. Los Angeles Cellular

Telephone Co. (1999) 20 Cal.4th 163, 180; accord, Kasky v. Nike, 

Inc. (2002) 27 Cal.4th 939, 949.) A plaintiff making a claim 

under the UCL must plead that the defendant engaged in a 

business practice that was either “unlawful (i.e., is forbidden by 

law), unfair (i.e., harm to victim outweighs any benefit) or 

fraudulent (i.e., is likely to deceive members of the public).”

(Albillo v. Intermodal Container Services, Inc. (2003) 

114 Cal.App.4th 190, 206.) 

A UCL claim against an insurer may be based on 

allegations of bad faith claims handling practices. (Zhang v. 

Superior Court (2013) 57 Cal.4th 364, 383.) A plaintiff may also

assert a UCL claim against the attorney-in-fact of a reciprocal 

insurance exchange when the unfair, unlawful, or fraudulent acts 

fell within the scope of the power of attorney. (Troyk v. Farmers 

Group, Inc. (2009) 171 Cal.App.4th 1305, 1337 [“because

[Farmers Group, Inc.], as [Farmers Insurance Exchange’s]

managing agent, was directly involved in the drafting and 

execution of the class members’ policies, it must at least share 
18

with [Farmers Insurance Exchange] responsibility for the UCL 

unlawful business practice resulting from [Farmer Insurance 

Exchange’s] violation” of a specified statute]; R&B Auto Center, 

Inc. v. Farmers Group, Inc. (2006) 140 Cal.App.4th 327 [a 

reciprocal insurance exchange’s attorney-in-fact can be held 

liable for unfair, unlawful or fraudulent acts under the UCL or 

for breach of fiduciary duty arising out of claims handling if the 

attorney-in-fact assumed responsibility for claims handling in the 

power of attorney].)

Plaintiffs allege that defendants, including Farmers,

violated the UCL by (1) engaging in the fraudulent bait-andswitch and issuing a policy underwritten by Fire Insurance 

Exchange instead of Farmers Insurance; and (2) failing to adjust 

their claim promptly and in good faith. As to the UCL claim 

based on the alleged bait and switch, plaintiffs have not alleged 

they “suffered injury in fact” or “lost money or property as a 

result of the [alleged] unfair competition.” (See Bus. & Prof. 

Code, § 17204 [setting forth standing requirements for a UCL 

claim].) Thus, plaintiffs lack standing as to this claim. 

As to the UCL claim based on bad faith claims handling, 

the basis for plaintiffs’ allegations that Farmers was involved in 

the claims handling process is unclear. As previously discussed, 

any allegation to the effect that Farmers was Fire Insurance 

Exchange’s attorney-in-fact or managing agent is contradicted by 

the exhibits showing that Fire Underwriters Association is the 

attorney-in-fact.7

7 Plaintiffs allege in a conclusory fashion that Farmers acted 

as Fire Insurance Exchange’s agent, and state that Jeremy Gump 

“from Farmers Insurance” was involved in investigating the 

claim. Plaintiffs provide no argument or authority to support the 
19

Plaintiffs have not identified any additional facts they 

could allege to save this claim. The trial court properly sustained 

the demurrer to the unfair business practices claim as to Farmers 

without leave to amend. 

4. Professional negligence

To state a cause of action for professional negligence, a 

plaintiff must allege the following elements: “(1) the duty of the 

professional to use such skill, prudence, and diligence as other 

members of his profession commonly possess and exercise; (2) a 

breach of that duty; (3) a proximate causal connection between 

the negligent conduct and the resulting injury; and (4) actual loss 

or damage resulting from the professional’s negligence.” (Paul v. 

Patton (2015) 235 Cal.App.4th 1088, 1095, quotation marks 

omitted.) 

“‘The threshold element of a cause of action for negligence 

is the existence of a duty to use due care toward an interest of 

another that enjoys legal protection against unintentional 

invasion.’” (Giacometti v. Aulla, LLC (2010) 187 Cal.App.4th 

1133, 1137 (Giacometti), quoting Bily v. Arthur Young & Co.

(1992) 3 Cal.4th 370, 397.) “Where there is no legal duty, the 

issue of professional negligence cannot be pled because with the 

absence of a breach of duty, an essential element of the cause of 

action for professional negligence is missing.” (Major Clients 

Agency v. Diemer (1998) 67 Cal.App.4th 1116, 1132.)

conclusion that a plaintiff may assert a claim for violation of the 

UCL against an agent of an insurer (other than an exchange’s 

attorney-in-fact), and plaintiffs do not contend on appeal that 

they have stated a valid UCL claim because Farmers acted as an 

agent of Fire Insurance Exchange. 
20

Here, plaintiffs have not adequately alleged that Farmers 

owed them any duty. While an attorney-in-fact of a reciprocal 

insurance exchange owes limited fiduciary duties to insureds 

(Tran, supra, 104 Cal.App.4th at pp. 1213-1215), again the 

exhibits attached to the third amended complaint show that 

Farmers is not the attorney-in-fact. Plaintiffs also appear to

allege that Farmers acted as Fire Insurance Exchange’s agent in 

investigating and otherwise responding to plaintiffs’ claim, but 

Farmers owed no duty to plaintiffs in acting in that role. (See 

Sanchez v. Lindsey Morden Claims Services, Inc., supra, 

72 Cal.App.4th at pp. 254-255 [agents of insurers involved in the 

claims handling process owe no duty to insureds and are not 

liable to insureds for economic loss].)

The trial court properly sustained the demurrer to this 

cause of action without leave to amend. 

5. Emotional distress

Plaintiffs appear to base their claim for emotional distress 

on two different theories. First, they contend Farmers is liable 

for intentional infliction of emotional distress because it “failed to 

adjust and pay the full value of [p]laintiffs’ claim.” This claim 

fails because, as discussed, Farmers was not the insurer or the 

attorney-in-fact and owed no duty to plaintiffs with respect to the 

handling or payment of the claim. 

Second, plaintiff Chang Jr.8 appears to contend Farmers is 

liable for negligent infliction of emotional distress because 

Farmers’ actions caused Chang to suffer a stroke, and Chang Jr. 

suffered emotional distress when he could not wake his father. 

8 Chang Jr. is not an insured on the policy. 
21

This theory fails for many reasons. Farmers cannot be held liable 

for any adverse effects flowing from alleged deficiencies in the 

claims handling process because it owed no duties to plaintiffs. 

Moreover, even if Farmers did have a duty to the policyholders

and even if plaintiffs had adequately alleged Farmers’ actions

caused Chang to suffer a stroke, Chang Jr. would still not have a 

claim for negligent infliction of emotional distress. “[A] plaintiff 

may recover damages for emotional distress caused by observing 

the negligently inflicted injury of a third person if, but only if, 

said plaintiff: (1) is closely related to the injury victim; (2) is

present at the scene of the injury-producing event at the time it 

occurs and is then aware that it is causing injury to the victim; 

and (3) as a result suffers serious emotional distress.” (Thing v. 

La Chusa (1989) 48 Cal.3d 644, 667-668.) Here, the alleged 

“injury-producing event[s]” are Farmers’ alleged actions with 

respect to the claims. Chang Jr. does not allege that he was 

present for those events or that Farmers’ actions

contemporaneously caused the stroke. Further, Chang Jr. does 

not allege that while he was witnessing any act by Farmers he

simultaneously knew the acts were causing his father to have a 

stroke. Chang Jr. has no claim against Farmers based on a 

bystander theory. 

The trial court properly sustained the demurrer to this 

claim without leave to amend. 
22

DISPOSITION

The judgment is affirmed. Farmers shall recover its costs 

on appeal.

ESCALANTE, J.*

We concur:

SEGAL, Acting P. J.

FEUER, J.

* Judge of the Los Angeles County Superior Court, assigned 

by the Chief Justice pursuant to article VI, section 6 of the 

California Constitution.