Filed 9/28/15 Tabares v. EquiTrust Life Ins. Co. CA2/7

Appendix attached

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication 

or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

DANIEL TABARES et al., 

Plaintiffs and Appellants,

v.

EQUITRUST LIFE INSURANCE 

COMPANY,

Defendant and Respondent.

 B254409

 (Los Angeles County

 Super. Ct. No. BC390195)

APPEAL from orders of the Superior Court of Los Angeles County, Anthony J. 

Mohr and Lee Smalley Edmon, Judges. Affirmed.

Law Offices of Robert S. Gerstein, Robert S. Gerstein; Gianelli & Morris, and

Robert S. Gianelli, for Plaintiffs and Appellants.

Amy R. Bach and Daniel R. Wade for United Policyholders as Amicus Curiae on 

behalf of Plaintiffs and Appellants. 

Reed Smith, Margaret M. Grignon, Robert D. Phillips, Jr., James C. Martin, 

Zareh A. Jaltorossian, Kathy J. Huang and Thomas A. Evans, for Defendant and 

Respondent.

_________________________
2

This class action was filed in 2008 by purchasers of EquiTrust Life Insurance 

Company’s deferred equity-indexed annuities. Named plaintiffs Daniel and Rhodora 

Tabares, Judy L. Taylor, Elizabeth Young and Judith Gilbert appeal from orders granting 

EquiTrust’s motion for summary adjudication of their contract claims, denying class 

certification of their claim under the unfair competition law (Bus. & Prof. Code, § 17200

et seq.) (UCL) and denying their request to add Young and Gilbert as class 

representatives on the cause of action for declaratory relief. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

1. The Financial Products Sold Here

The EquiTrust annuity products challenged in this action include the MarketValue 

Index, the MarketPower Bonus Index, the MarketBooster Index and the MarketTen 

Bonus Index. All are equity-indexed annuities, meaning that some portion of the 

premium may be allocated to one or more accounts that link the crediting of interest to 

the performance of the Standard & Poor’s 500 stock index. Annuity purchasers may also 

allocate premiums to a fixed rate account, which credits interest to the annuity according 

to a preset fixed rate reset at the beginning of each year. EquiTrust sets a new renewal 

rate each year depending on a number of factors, although the annuity contracts identify a 

guaranteed minimum interest rate below which the fixed rate will never fall. Equityindexed accounts include “index caps,” which cap the interest rate a purchaser can 

accrue. Initial index caps are fixed for the first year of each annuity but are reset monthly 

or annually depending on the account selected by the purchaser. As with the fixed rate 

accounts, renewal index caps are calculated based on a number of cost factors and may 

not fall below a guaranteed minimum during the life of the contract. The contracts 

specify that at no point may the interest rate be a negative figure, even if the equity index 

suffers a loss (negative growth). Thus, when a purchaser allocates premiums to an 

equity-indexed account, the account is contractually guaranteed a return between zero 

percent and the index cap. 

Three of the four annuity contracts also provided bonuses tied to the amount of 

premiums paid into the annuities. The contracts defined “Premium Bonus” as “the 
3

amount, if any, equal to the Premium (the amount deposited by the purchaser within the 

relevant time period, usually one year) multiplied by the Premium Bonus Percentage 

shown in the Contract Data Page.” Premium bonuses were added to the premiums to 

increase the total Accumulation Value (defined as the premiums paid as augmented by 

any premium bonuses, plus interest credited and less any withdrawals) of the annuity. As 

EquiTrust admits, it treats the bonuses it pays as a fixed cost factored into its calculation 

of the initial rate and the index caps. Based on these contracted rates, which are usually 

lower than the rates provided in a non-bonus product, EquiTrust recoups the cost of the 

bonus over time. 

EquiTrust sold its annuity products through independent sales agents compensated 

by commissions that were calculated as a percentage of the premiums paid into the 

annuity contracts sold. Commissions were not deducted directly from purchasers’

premium funds but, like premium bonuses, were considered fixed costs and were factored 

into the initial rates and caps. 

Annuities carry an early withdrawal penalty known as a surrender charge. A 

surrender charge is calculated as a percentage of the Accumulation Value that decreases 

over time, typically 10 to 12 years, sometimes as long as 15 years. The longer an annuity 

holder waits to withdraw his or her funds, the smaller the withdrawal penalty becomes; 

when the annuity reaches maturity, the surrender charge disappears. Until then, with 

limited exceptions, an annuity holder only has access to the Cash Surrender Value of the 

annuity.1 Under the terms of the contracts, the Cash Surrender Value is the greater of 

either (1) the Accumulation Value less a surrender charge multiplied by a Market Value 

Adjustment (MVA), a figure derived from a preset formula linked to the starting and 

 

1

EquiTrust’s annuity contracts allow a holder to make annual withdrawals (“partial 

surrenders”) of up to 10 percent of the full Accumulation Value. Moreover, if the 

annuity holder dies, the contracts specify that the full Accumulation Value is payable to 

the annuitant’s beneficiary. 
4

current value of United States Treasury bonds,

2

or (2) a Minimum Guaranteed Contract 

Value, which is calculated as a percentage of the premiums actually paid, excluding any 

premium bonuses and withdrawals.

The cover page of the annuities sold by EquiTrust contained a number of advisory 

statements, including the following “important notice to owners age 60 or older”: “This 

contract may be returned within 30 days from the date you received it for a full refund by 

returning it to the insurance company or agent who sold you this contract. After 30 days, 

cancellation may result in a substantial penalty, known as a surrender charge. The 

surrender charges associated with this contract can be found on the contract data page.” 

Also on the cover sheet, below the EquiTrust signatures, was the following caution: 

“Cash surrender values may increase or decreased based on the equity index and market 

value adjustment features of this contract. . . .” The contract data page in turn disclosed

the premium paid, the premium bonus percentage and amount, the minimum interest rate 

applicable to the plan, the duration of the MVA in years and the applicable percentage of 

the surrender charge over time. A cover sheet from one of the EquiTrust annuities is 

reproduced as an appendix to this opinion.

2. The Named Plaintiffs

The named plaintiffs purchased different EquiTrust annuities. According to 

Daniel and Rhodora Tabares, they were approached by defendant Joseph Sackey at their 

worksite, the Los Angeles County Metropolitan Transportation Authority (MTA). 

Sackey held himself out as a financial planner and annuity specialist who had assisted 

more than 100 MTA retirees find profitable investments for their government pensions. 

In May 2006 Sackey convinced Daniel, a 23-year employee of the MTA, to retire early 

and roll his entire government pension of more than $395,000 into a MarketValue Index

 

2

The MVA, which is expressed in the contract as a mathematical formula, adjusts 

the policy’s cash surrender value based on fluctuations in interest rates between purchase 

and surrender. According to EquiTrust, the MVA compensates EquiTrust for the cost of 

liquidating long-term investments when a policy holder prematurely surrenders all or part 

of his or her annuity. The MVA can cause either an increase or decrease in the otherwise 

applicable surrender charge and is a common feature of indexed annuities.
5

annuity issued by EquiTrust. Based on Sackey’s representations, Daniel understood he 

would begin to receive monthly interest payments of $2,500 shortly after issuance of the 

annuity. Contrary to that representation, the annuity purchased by Daniel did not provide 

for commencement of distribution payments until 2061 when Daniel would be more than 

100 years old. Further, instead of the high returns promised by Sackey, the annuity bore 

a minimum guaranteed interest rate ranging from 1.5 to 2 percent, and only 87.5 percent 

of Daniel’s investment was guaranteed from loss. Any withdrawals from the annuity 

within the first 10 years of purchase were subject to substantial surrender charges of up to 

12 percent. Daniel was never shown a sample contract before the sale. He never 

incurred a surrender charge or MVA.

Judy Taylor purchased a MarketPower Bonus Index annuity from an independent 

agent in 2008. She was shown a sales brochure and signed a disclosure statement but 

was not provided with a sample contract before the sale. She never incurred a surrender 

charge or MVA.

Elizabeth Young, who was added as a named plaintiff in the fourth amended 

complaint, purchased a MarketPower Bonus Index annuity in 2006. She surrendered her 

annuity in 2007. Judith Gilbert, added as a named plaintiff in the fifth amended 

complaint, purchased a MarketTen Bonus annuity in 2008. Although she incurred some 

surrender charges when she surrendered her annuity in 2012, this loss was offset in part 

by application of the MVA, which decreased the surrender charge as a result of the steep 

declines in the market after she purchased the annuity. 

3. The Class Certification Proceedings

Plaintiffs filed their initial class action complaint in May 2008 and third amended 

complaint in September 2009. The third amended complaint alleged that abuses in the 

sale of deferred annuities, typified by unlawful and deceptive sales tactics, had become a 

growing problem in California. According to plaintiffs, EquiTrust improperly shifted the 

cost of paying its agents’ commissions to annuity holders by reducing the annuity’s 

credited earnings; shifted the cost of paying a promised 10 percent bonus on some 

annuities to the holders by reducing the annuity’s credited earnings; disguised a 
6

significant portion of its surrender charge penalty by applying the MVA to hedge losses 

on interest rates; and failed to identify the MVA as a surrender charge on the cover page 

of annuities sold to seniors (age 60 or older), as required by Insurance Code 

section 10127.13 (section 10127.13).

Plaintiffs moved for certification of two classes in December 2009: (1) all 

California residents who had purchased one of four specified deferred annuity insurance 

contracts from EquiTrust; and (2) all California residents over the age of 60 who had 

purchased one of the four annuities. On August 2, 2010 the court granted certification on 

two claims: (1) the contract cause of action on the theory EquiTrust had breached the 

covenant of good faith and fair dealing by manipulating renewal rates and caps to recoup 

the costs of commissions and bonuses; and (2) the declaratory relief cause of action for 

the second (senior) class based on the alleged violation of section 10127.13. The court 

denied certification of the fraud and UCL causes of action as to both classes on the 

ground there was no evidence either Tabares or Taylor, the only two named plaintiffs at 

this point, had actually relied on misrepresentations made by EquiTrust and thus lacked 

standing under the UCL. With respect to Taylor, the court also found she was an 

inadequate class representative because of discrepancies between her deposition 

testimony and her signed declaration: Taylor remembered virtually nothing about the 

provisions of the annuity she had purchased or disclosures made to her about its 

provisions. Because Taylor was at the time the only named plaintiff aged 60 or older, the 

senior class was left without a named class representative. 

In response to the certification order plaintiffs filed a motion seeking clarification 

or reconsideration with respect to the issue of reliance for the UCL claim and for leave to 

add a new class representative for the senior class. On January 26, 2011 the court denied 

the request for reconsideration on the reliance standard. The court emphasized that the 

alleged omission of information could not be shown because none of the proposed class 

representatives had reviewed the contracts. The court indicated it would reconsider 
7

whether reliance was required for the “unlawful” prong of the UCL and directed the 

plaintiffs to provide a list of possible replacement class representatives.3

In response to the January 26, 2011 order plaintiffs filed a brief arguing reliance 

should not be required for a claim under the unlawful prong of the UCL based on 

EquiTrust’s alleged violation of section 10127.13. Because this section is a remedial 

statute, the plaintiffs argued, noncompliance alone should establish a violation. As 

plaintiffs explained, inserting a reliance requirement in this setting would subvert the 

purpose of the law and encourage rather than “‘suppress the mischief at which [the 

statute] is directed.’” (Rand v. American Nat. Ins. Co. (N.D.Cal. 2010) 717 F.Supp.2d 

948, 957 (Rand).) The court rejected the argument, concluding the Supreme Court’s 

decisions in In re Tobacco II Cases (2009) 46 Cal.4th 298 (Tobacco II) and Kwikset 

Corp. v. Superior Court (2011) 51 Cal.4th 310 (Kwikset) require a showing of reliance to 

state a claim under the unlawful prong of the UCL.

Plaintiffs continued their efforts to identify a class representative for the senior 

class by filing a fourth amended complaint, which added Young as a plaintiff and senior 

class representative for the breach of contract and UCL classes. They again sought to 

amend the complaint to add Gilbert as a senior class representative. The court agreed to 

add both Young and Gilbert as representatives for the breach of the implied covenant 

claim but refused to add them as class representatives for the declaratory relief claim 

because they had previously surrendered their policies. The court also denied plaintiffs’ 

request for reconsideration of the reliance requirement on the unlawful prong of the UCL

in light of an intervening decision from this district, Medrazo v. Honda of North 

Hollywood (2012) 205 Cal.App.4th 1 (Medrazo), which held reliance was not an element 

of the claim.

In February 2013 EquiTrust moved for summary adjudication of the certified 

claims for breach of contract and breach of the implied covenant of good faith and fair 

 

3

Pursuant to this order the parties stipulated to a notice that was sent to senior 

policy holders seeking additional class representatives. 
8

dealing. EquiTrust asserted the claim, however it was characterized, failed because the 

plaintiffs could not demonstrate an underlying breach of contract.

In May 2013, pending the hearing on the motion for summary adjudication,

plaintiffs filed a renewed motion to certify their fraud and UCL causes of action and to 

clarify the previous class certification order as to whether the court had certified a claim 

for breach of the express promise to provide a bonus. After a hearing on October 28, 

2013 the court entered an order denying the request to certify the fraud and UCL claims 

with Gilbert as a representative. The court concluded that, absent a change in 

circumstances, plaintiffs were barred from renewing their previous motion for 

certification of claims originally denied (see Safaie v. Jacuzzi Whirlpool Bath, Inc. (2011) 

192 Cal.App.4th 1160, 1172) and their failure to seek leave to add Gilbert as a 

representative on these claims at the time she was added as a representative for the

implied covenant class was fatal. The court also refused to allow plaintiffs “to expand 

the scope of the certified class” by proceeding on the theory that the bonus promised by 

EquiTrust (but recouped by the initial contract rates) was a breach of contract. The court 

ruled that claim had been waived by the failure to raise it in the first motion for 

certification. 

Nonetheless, in an order issued December 16, 2013 the court considered and 

rejected both contractual theories, concluding the distinction between the express breach 

of contract claim and the breach of the implied covenant was irrelevant. The bonus 

conferred by the contract was defined as a credit to the Accumulation Value, and, as 

plaintiffs conceded, EquiTrust had duly credited each of the eligible accounts with the 

amount specified in the contracts. As to plaintiffs’ theory EquiTrust breached the implied 

covenant by manipulating rates to recover the costs of the bonuses and commissions, the 

contract afforded EquiTrust the power to reset particular rates; and plaintiffs were unable 

to assert EquiTrust’s rate setting was either unfair or had violated the terms of the 

contracts at issue. The bonuses and commissions were fixed, and amortized costs 

recouped in the initial rates and caps had been fully disclosed to, and accepted by, 

plaintiffs. 
9

At a status conference on January 28, 2014, plaintiffs asked the court to decertify 

their cause of action for declaratory relief for lack of an adequate class representative,

leaving the breach of contract claim as the only certified cause of action. 

CONTENTIONS

Plaintiffs contend the trial court erred as a matter of law (1) by concluding 

EquiTrust had not breached the annuity contracts or violated the implied covenant of 

good faith and fair dealing by setting rates at levels that negated its promise of bonuses 

and imposing the burden of high commissions on policyholders; and (2) by refusing to 

certify the UCL “unlawful” prong claim based on the class representatives’ failure to 

demonstrate reliance. Further, plaintiffs contend the court abused its discretion by 

refusing to allow a former annuity holder who had surrendered her contract to serve as 

the class representative for the declaratory relief claim.

DISCUSSION

1. Summary Adjudication Was Properly Granted on the Breach of Contract and 

Implied Covenant Claims

a. Plaintiffs’ breach of contract claim is reviewable

EquiTrust initially contends plaintiffs have failed to properly present any claim 

based on an express breach of contract because that claim was never certified for class 

action treatment and plaintiffs limited the issues in their notice of appeal to certified 

claims under the “death knell” doctrine. (See In re Baycol Cases I & II (2011) 51 Cal.4th 

751, 757.) As EquiTrust points out, the court’s April 2, 2010 certification order restricted

the class contract claim to the theory that EquiTrust had breached the covenant of good 

faith and fair dealing by manipulating its rates over the life of the contract to recoup the 

bonuses credited to the annuity holders and the high commission rates paid to the selling 

agents. After the motion for summary adjudication was filed, plaintiffs sought to clarify 

the court’s order had encompassed a claim for express breach of contract, a request the 

court denied as untimely. EquiTrust asserts plaintiffs did not challenge that ruling in this 

appeal. 
10

While it is true the court ruled the request to certify an express breach of contract 

claim was untimely, EquiTrust’s notice of motion for summary adjudication identified 

both causes of action, one for breach of contract and one for breach of the implied 

covenant of good faith and fair dealing. The notice asserted both causes of action had 

been certified by the court in its order of August 2, 2010. The court’s order granting 

EquiTrust’s motion for summary adjudication also addressed both causes of action, 

concluding the undisputed evidence established EquiTrust had performed its contractual 

obligations; the bargained-for limits on EquiTrust’s discretion had been implemented; 

and EquiTrust had exercised the discretion conferred by the contract within the scope of 

those limits. Plaintiffs appealed from this order, as well as the order denying clarification 

and the order denying certification. 

Notices of appeal, of course, are required to be liberally construed. (Cal. Rules of 

Court, rule 8.100(a)(2).) Because the parties have had an opportunity to fully brief this 

issue and in view of our obligation to review de novo the trial court’s interpretation of the 

contract for either claim, we exercise our discretion to consider whether summary 

adjudication was properly granted on the breach of contract claim, despite EquiTrust’s 

contention it was not properly certified. (See, e.g., Canaan v. Abdelnour (1985) 40 Cal.3d 

703, 722, fn. 17 [whether to apply rule of forfeiture for failure to properly raise an issue 

“‘is largely a question of the appellate court’s discretion’”], overruled on other grounds in 

Edelstein v. City and County of San Francisco (2002) 29 Cal.4th 164, 183; Japan Line, 

Ltd. v. County of Los Angeles (1977) 20 Cal.3d 180, 184-185 [appellate court may 

consider issue despite “obvious impropriety” in a party’s appellate procedure, provided 

the parties have had an opportunity to brief the question], revd. on other grounds (1979) 

441 U.S. 434 [99 S.Ct. 1813, 60 L.Ed.2d 336]; Greenlake Capital, LLC v. Bingo 

Investments, LLC (2010) 185 Cal.App.4th 731, 740, fn. 6 [“whether the letter agreement 

itself is susceptible to severance analysis is a question of law we may properly consider 

for the first time on appeal”]; Sheller v. Superior Court (2008) 158 Cal.App.4th 1697, 

1709 [parties permitted to raise new issues on appeal involving question of law; 
11

“application of the forfeiture rule is not automatic; appellate courts have discretion to 

excuse such forfeiture”].)

b. Standards of contract interpretation

The fundamental goal of contract interpretation is to give effect to the mutual 

intention of the parties as it existed at the time they entered into the contract. (Hartford 

Casualty Ins. Co. v. Swift Distribution, Inc. (2014) 59 Cal.4th 277, 288; Bank of the West 

v. Superior Court (1992) 2 Cal.4th 1254, 1264; see Civ. Code, § 1636.) That intent is 

interpreted according to objective, rather than subjective, criteria. (Wolf v. Walt Disney 

Pictures & Television (2008) 162 Cal.App.4th 1107, 1126 (Wolf ).) When the contract is 

clear and explicit, the parties’ intent is determined solely by reference to the language of 

the agreement. (See Civ. Code, §§ 1638 [“language of a contract is to govern its 

interpretation, if the language is clear and explicit, and does not involve an absurdity”]; 

1639 [“[w]hen a contract is reduced to writing, the intention of the parties is to be 

ascertained from the writing alone, if possible”].) The words are to be understood “in 

their ordinary and popular sense” (Civ. Code, § 1644), and the “whole of [the] contract is 

to be taken together, so as to give effect to every part, if reasonably practicable, each 

clause helping to interpret the other.” (Civ. Code, § 1641.)

Although parol evidence is inadmissible to vary or contradict the clear and 

unambiguous terms of a written, integrated contract (Code Civ. Proc., § 1856, subd. (a); 

Wolf, supra, 162 Cal.App.4th at p. 1126), extrinsic evidence is admissible to interpret the 

agreement when a material term is ambiguous. (City of Hope National Medical Center v. 

Genentech, Inc. (2008) 43 Cal.4th 375, 395; see Pacific Gas & Electric Co. v. G.W. 

Thomas Drayage & Rigging Co. (1968) 69 Cal.2d 33, 39-40 [if extrinsic evidence reveals 

that apparently clear language in the contract is susceptible to more than one reasonable 

interpretation, it may be used to determine contracting parties’ intent]; Code Civ. Proc., 

§ 1856, subd. (g) [extrinsic evidence admissible to interpret terms of ambiguous 

agreement].) Whether an ambiguity exists is a question of law, subject to independent 

review on appeal. (Wolf v. Superior Court (2004) 114 Cal.App.4th 1343, 1351; Winet v. 

Price (1992) 4 Cal.App.4th 1159, 1165.)
12

As we explained in Wolf, supra, 162 Cal.App.4th 1107, when the meaning of 

words used in a contract is disputed, the trial court engages in a three-step process: “First, 

it provisionally receives any proffered extrinsic evidence that is relevant to prove a 

meaning to which the language of the instrument is reasonably susceptible. [Citations.] 

If, in light of the extrinsic evidence, the language is reasonably susceptible to the 

interpretation urged, the extrinsic evidence is then admitted to aid the court in its role in 

interpreting the contract. [Citations.] When there is no material conflict in the extrinsic 

evidence, the trial court interprets the contract as a matter of law. [Citations.] This is true 

even when conflicting inferences may be drawn from the undisputed extrinsic evidence 

[citations] or [when] extrinsic evidence renders the contract terms susceptible to more than 

one reasonable interpretation. [Citations.] If, however, there is a conflict in the extrinsic 

evidence, the factual conflict is to be resolved by the jury.” (Wolf, at pp. 1126-1127,

fn. omitted; see Garcia v. Truck Ins. Exchange (1984) 36 Cal.3d 426, 439 [“[i]t is solely a 

judicial function to interpret a written contract unless the interpretation turns upon the 

credibility of extrinsic evidence, even when conflicting inferences may be drawn from 

uncontroverted evidence”]; Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, 527 [same].)

c. Plaintiffs failed to establish a breach of contract by EquiTrust

Plaintiffs’ breach of contract argument is straightforward: They contend the word 

“bonus” should be understood in its “ordinary and popular sense.” (Civ. Code, § 1644; 

see Reilly v. Inquest Technology, Inc. (2013) 218 Cal.App.4th 536, 554.) Plaintiffs were 

promised a bonus they did not receive because the so-called bonus payments were 

recouped by EquiTrust through lower index credits on those annuities. In other words, 

the higher the bonus percentage, the lower the return over time. At minimum, they argue, 

the term “bonus” is ambiguous, and a triable issue of material fact that cannot be resolved 

on summary judgment exists as to whether EquiTrust breached the terms of the annuity 

contracts. 

As the trial court pointed out, however, Civil Code section 1644 contains a crucial 

caveat: “The words of a contract are to be understood in their ordinary and popular 

sense, rather than according to their strict legal meaning; unless used by the parties in a 
13

technical sense . . . in which case the latter must be followed.’” (Italics added.) The 

court observed, “the question is not, as Plaintiffs suggest, whether EquiTrust provided 

class members with ‘a true bonus’ as a layperson would understand it, but whether 

EquiTrust provided a ‘Premium Bonus’ as defined in the contract.” As defined, the court 

concluded, there is no ambiguity in the contract and thus no basis for the admission of 

extrinsic evidence as to the contract’s meaning.

This ruling was correct. The integrated contract identifies a premium bonus that is 

defined only with reference to the annuity’s Accumulation Value. The purchasers received 

the premium bonuses promised in the contracts. That the individual annuities varied in 

ultimate credit accumulation based on whether a particular annuity included an upfront 

premium bonus or lower credits over time does not constitute a breach of contract; to the 

contrary, the rates were disclosed, as was the range of discretion afforded to EquiTrust by 

the contract. The perception by some purchasers they would receive a 10 percent bonus 

(with no cost to them or tradeoff in the promised return credits) reflects more than anything 

the lack of sophistication of those purchasers and their vulnerability to misleading sales 

tactics. It does not, however, give rise to a contract claim and, indeed, is inadmissible to 

vary the express language of the contract. (See Wolf, supra, 162 Cal.App.4th at pp. 1126-

1127; see also Cirzoveto v. AIG Annuity Ins. Co. (W.D.Tenn. 2009) 625 F.Supp.2d 623, 

627 [granting summary judgment to insurer on breach of contract claim based on promise 

of “bonus”; terms of policy were clear and unambiguous]; Phillips v. American 

International Group, Inc. (S.D.N.Y. 2007) 498 F.Supp.2d 690, 694-695 [rejecting 

contention word “bonus” barred insurer from altering interest rates to recoup bonus so 

long as rates complied with minimum rates contained in contract].) 

The extrinsic evidence cited by the plaintiffs, moreover, does not in any way 

support a contention the contract’s use of the word “bonus” was reasonably susceptible to 

the meaning they propose. Noel Abkemeier, who helped design the annuity for an 

actuarial company retained by EquiTrust, essentially testified the bonus products were 

designed with intrinsically lower rates in order to recover the upfront costs of the bonus: 
14

“There’s a tradeoff over a time horizon.”4 This testimony is inherently consistent with 

the language of the contract. (Cf. Eller v. EquiTrust Life Ins. Co. (9th Cir. 2015) 

778 F.3d 1089, 1093 (Eller) [finding no duty to disclose to purchaser that annuity “may 

provide lower index credits than might have been available in an alternative product 

without the bonus feature”].)5

Accordingly, summary adjudication in favor of EquiTrust on the plaintiffs’ breach 

of contract claim was proper.

d. There was no breach of the implied covenant of good faith and fair dealing

as a matter of law

California law recognizes in every contract, including insurance policies, an 

implied covenant of good faith and fair dealing. (Wilson v. 21st Century Ins. Co. (2007) 

42 Cal.4th 713, 720; Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 575.) In the 

insurance context the implied covenant requires the insurer to refrain from injuring its 

 

4

EquiTrust objected to this testimony as inadmissible, and the court sustained the 

objection. Plaintiffs did not appeal the ruling. Nonetheless, it is relevant to our de novo 

determination of ambiguity. (See Cline v. Homuth (2015) 235 Cal.App.4th 699, 705-706 

[“‘[E]ven if the trial court personally finds the document not to be ambiguous, it should 

preliminarily consider all credible evidence to ascertain the intent of the parties. “The 

test of whether parol evidence is admissible to construe an ambiguity is not whether the 

language appears to the court to be unambiguous, but whether the evidence presented is 

relevant to prove a meaning to which the language is ‘reasonably susceptible.’”’”]; 

accord, Wolf, supra, 162 Cal.App.4th at pp. 1126-1127.)

5

In Eller, supra, 778 F.3d 1089 plaintiff Harrington alleged EquiTrust’s marketing 

of its MarketPower Bonus Index annuity violated the Racketeer Influenced and Corrupt 

Organizations Act (18 U.S.C. § 1962(c) (RICO)), as well as Arizona law. In rejecting the 

RICO claim, the court stated: “[I]t is uncontested here that EquiTrust delivered precisely 

what it promised. The 10% bonus was accurately described in the Annuity materials and 

properly credited to Harrington’s account. The bonus increased Harrington’s 

accumulation value without requiring him to deposit additional funds, allowing him to 

withdraw more money without penalty than otherwise would have been possible. The 

promise of a ‘bonus’ was thus not, as Harrington claims, illusory. [Citation.] Nor is it 

clear that Harrington would have been better off absent the bonus feature. If the index 

credits were regularly low, Harrington’s investment would outperform a non-bonus 

annuity that provided the possibility of higher credits. The district court thus correctly 

concluded that use of the term ‘bonus’ was not fraudulent.” (Eller, at pp. 1093-1094, 

fn. omitted.)
15

insured’s right to receive the benefits of the insurance agreement. (Egan v. Mutual of 

Omaha Ins. Co. (1979) 24 Cal.3d 809, 818.) “[T]he covenant is implied as a supplement 

to the express contractual covenants, to prevent a contracting party from engaging in 

conduct that frustrates the other party’s rights to the benefits of the agreement.” (Waller 

v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 36; see Carma Developers (Cal.), Inc. 

v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 372 [“the covenant 

requires the party holding such [discretionary] power to exercise it ‘for any purpose 

within the reasonable contemplation of the parties at the time of formation—to capture 

opportunities that were preserved upon entering the contract interpreted objectively’”].) 

As a general rule, as the trial court recognized, there can be no breach of the 

implied covenant of good faith and fair dealing if no benefits are due under the policy or 

contract: “[T]he covenant is based on the contractual relationship between the insured and 

the insurer. . . . Absent that contractual right [to policy benefits], the implied covenant has 

nothing upon which to act as a supplement, and ‘should not be endowed with an existence 

independent of its contractual underpinnings.’” (Waller v. Truck Ins. Exchange, Inc., 

supra, 11 Cal.4th at p. 36; accord, Brandwein v. Butler (2013) 218 Cal.App.4th 1485, 

1514-1515; Brehm v. 21st Century Ins. Co. (2008) 166 Cal.App.4th 1225, 1235-1237; 

Progressive West Ins. Co. v. Superior Court (2005) 135 Cal.App.4th 263, 279.)6 “[T]he 

implied covenant will only be recognized to further the contract’s purpose; it will not be 

read into a contract to prohibit a party from doing that which is expressly permitted by the 

agreement itself.” (Wolf, supra, 162 Cal.App.4th at p. 1120.) “Thus, although it has been 

said the implied covenant finds ‘particular application in situations where one party is 

invested with a discretionary power affecting the rights of another’ [citations], if the 

express purpose of the contract is to grant unfettered discretion, and the contract is 

 

6 Breach of a specific provision of the contract, however, is not a necessary 

prerequisite to a claim for breach of the implied covenant of good faith and fair dealing. 

(See Carma Developers (Cal.), Inc. v. Marathon Development California, Inc, supra,

2 Cal.4th at p. 373; Brehm v. 21st Century Ins. Co., supra, 166 Cal.App.4th at pp. 1235-

1236.)
16

otherwise supported by adequate consideration, then the conduct is, by definition, within 

the reasonable expectation of the parties and ‘can never violate an implied covenant of 

good faith and fair dealing.’” (Id. at pp. 1120-1121; see also Third Story Music, Inc. v. 

Waits (1995) 41 Cal.App.4th 798, 808 [“courts are not at liberty to imply a covenant 

directly at odds with a contract’s express grant of discretionary power except in those 

relatively rare instances when reading the provision literally would, contrary to the 

parties’ clear intention, result in an unenforceable, illusory agreement”].) 

Relying on this court’s decision in April Enterprises, Inc. v. KTTV (1983)

147 Cal.App.3d 805, the plaintiffs contend EquiTrust’s discretion was not unfettered and 

its failure to ensure that credited returns fulfilled their reasonable expectations of the 

benefit of the bonuses they were promised breached the covenant of good faith and fair 

dealing. In April Enterprises plaintiff, a ventriloquist, entered into a contract with a 

television station to produce a television show based on the characters he had created. 

The contract gave both parties the right to enter into syndication deals with third parties, 

with half the profits going to the other party. Under the contract, however, the station 

owned the show videotapes and was authorized to erase the tapes of each show six 

months after initial broadcast. (Id. at p. 814.) Some years after the contract was signed, 

the station erased the only copies of the programs; and the ventriloquist sued. Reversing 

a nonsuit judgment in favor of the station, this court held, because the contract contained 

conflicting terms, the station’s discretion to erase the tapes had to be construed as limited 

by the covenant of good faith and fair dealing to allow erasure only when future 

syndication was not feasible. (Id. at pp. 816-817.)

As EquiTrust argues, April Enterprises is not apposite because the annuity 

contracts do not contain unclear or conflicting terms. The contracts specify the initial 

premium bonuses and guaranteed minimums bargained for by plaintiffs. There is no 

evidence EquiTrust violated these terms or subsequently manipulated renewal rates to 

deprive annuitants of credits due under the initial terms of the contracts. The evidence 

instead supports the conclusion the trial court reached, that is, EquiTrust complied with 

the rates specified in the contracts and exercised its discretion to set renewal rates and 
17

caps consistently with those terms. In this respect, the credited returns were calculated 

within the parameters of the costs to EquiTrust of each annuity; for those annuities 

conferring a premium bonus—at a higher initial cost to the insurer—EquiTrust was 

required to hedge, or protect, its investment exposure by offering lower initial caps that 

adversely affected credit accumulation for the purchaser. Nothing in the contracts 

prohibited this approach; indeed, the contracts expressly contemplated this distinction in 

rates and, ultimately, credited returns.

Again, the wrong complained of by plaintiffs, the inducement to purchase the 

annuity contracts with the promise of a bonus that, in practice, does not accumulate to the 

ultimate good of the purchaser, sounds in actionable misrepresentation. (See Eller, 

supra, 778 F.3d at p. 1093.) It does not support a cause of action for breach of contract 

or the implied covenant of good faith and fair dealing when the insurer provides all that is 

promised by the contract. 

2. The Trial Court Did Not Err in Refusing To Certify Plaintiffs’ UCL Unlawful 

Prong Cause of Action

a. Plaintiffs have adequately preserved this issue on appeal

EquiTrust contends plaintiffs have forfeited the issue whether the trial court erred 

as a matter of law in refusing to certify the UCL cause of action due to an absence of 

reliance because they failed to propose an alternative class representative after Taylor

was found to be inadequate. (See Lafferty v. Wells Fargo Bank (2013) 213 Cal.App.4th 

545, 571-572 [failure to address alternative grounds for ruling forfeits appellate challenge 

to ruling].) Plaintiffs respond they repeatedly challenged the trial court’s ruling that 

reliance was required and proposal of another class representative who could not 

demonstrate reliance would have been futile. (See Phillips v. Sprint PCS (2012) 

209 Cal.App.4th 758, 773 [“‘[w]aiver should not be found on the basis of a party’s failure 

to undertake a futile act’”].)

The record does not support the finding of forfeiture requested by EquiTrust. 

Plaintiffs advised EquiTrust and the court at the time they sought leave to file the fourth 

amended complaint that the newly proposed class representatives would not be able to 
18

testify they had relied on EquiTrust’s alleged violation of section 10127.13, “as 

delineated by the Court at the July 6, 2011 hearing.” The court never altered its position 

that a showing of reliance was required to state a claim under the UCL’s unlawful prong. 

Consequently, no alternative class representatives were proposed for that particular class. 

Amendments to add proper class representatives are routinely permitted. For 

example, in Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235 the Supreme 

Court rejected defendants’ argument plaintiffs should not be permitted to name a new 

class representative when the failure to do so in the initial complaint was not a mistake. 

As the Court stated, “No such rule exists. To the contrary, courts have permitted 

plaintiffs who have been determined to lack standing, or who have lost standing after the 

complaint was filed, to substitute as plaintiffs the true real parties in interest. [Citations.] 

Amendments for this purpose are liberally allowed.” (Id. at p. 243; accord, Troyk v. 

Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1351, fn. 35 (Troyk); CashCall, Inc. 

v. Superior Court (2008) 159 Cal.App.4th 273, 288.) We see no reason why this general 

rule does not apply in this instance.

b. The MVA notice on the policies did not comply with section 10127.13

Plaintiffs premise their remaining claims on the contention the MVA was not 

properly disclosed as a surrender charge on the cover page of the annuities sold by 

EquiTrust to persons age 60 or older in violation of section 10127.13. At the time these 

policies were sold, section 10127.13 provided: “All individual life insurance policies and 

individual annuity contracts for senior citizens that contain a surrender charge period 

shall either disclose the surrender period and all associated penalties in 12-point bold 

print on the cover sheet of the policy or disclose the location of the surrender information 

in bold 12-point print on the cover page of the policy, or printed on a sticker that is 

affixed to the cover page or to the policy jacket. . . .” (Stats. 1994, ch. 984, § 4, p. 5732.)7

 

7

Former section 10127.13 was repealed effective July 1, 2015 and replaced with a 

new section 10127.13, which provides: “(a) All individual life insurance policies and 

individual annuity contracts for senior citizens that contain a charge upon surrender, 

partial surrender, excess withdrawal, or penalties upon surrender shall contain a notice 
19

The existence of surrender charges is disclosed on the cover page of the annuities 

sold by EquiTrust and, as permitted by section 10127.13, described in full on the 

“Contract Date Page” found after the annuity’s table of contents. In addition to this 

notice, each policy contains a second advisory in a separate paragraph on the cover page. 

The notice states, in bold capital letters set in what appears to be a 10-point font, “CASH 

SURRENDER VALUES MAY INCREASE OR DECREASE BASED ON THE

EQUITY INDEX AND MARKET VALUE ADJUSTMENT FEATURES OF THIS 

CONTRACT.” The cover page does not identify the MVA as a surrender charge or 

disclose how the MVA operates. Indeed, EquiTrust acknowledges it did not consider the 

MVA to be a surrender charge and did not attempt to comply with section 10127.13 in 

posting this notice. (See Eller, supra, 778 F.3d at p. 1094 [the MVA is designed to take 

into account “the capital gains or losses resulting from the sale of securities needed to 

fund early withdrawal or surrender requests”].) Nevertheless, EquiTrust contends it 

substantially complied with the purpose and mandate of section 10127.13.

The sole published decision addressing whether a notice of surrender charges on 

the cover of an indexed annuity policy must disclose the policy’s MVA is Rand, supra, 

717 F.Supp.2d 948. There, an 86-year-old woman purchased two separate annuities from 

the same company, neither of which would mature until 2025, when she reached the age 

of 106. (Id. at p. 950.) Three years later her conservator surrendered one of the policies,

8

and a surrender charge and MVA were assessed, reducing the amount returned. (Ibid.) 

 

disclosing the location of the charge, the charge time period, the charge information, and 

any associated penalty information, in bold 12-point print on the front of the policy jacket 

or on the cover page of the policy. [¶] (b) A policy shall have just one cover page. If 

the notice required by this section and the statutorily required right to examine notice are 

both on the cover page, as opposed to the front cover of the policy jacket, they shall 

appear on the same page. [¶] (c) General references to ‘policy’ in this section refer to 

both life insurance policies and annuity contracts. [¶] (d) This section shall become 

operative on July 1, 2015.” Plaintiffs’ request that we take judicial notice of two items 

from the legislative history of the current version of section 10127.13 is granted.

8 Upon Rand’s death, the second policy paid a death benefit to her beneficiary, the 

proceeds of which were also reduced by a surrender charge.
20

Rand’s estate sued, alleging the defendant insurer had violated the UCL in part by failing 

to comply with section 10127.13. According to Rand, the MVA, which was not 

mentioned on the cover page of the policy but was described instead in a section of the 

policy entitled “Premiums and Cash Value Strategies,” should have been disclosed on the 

cover page as a penalty associated with surrender of the policy. (Id. at pp. 953-954.)

The district court agreed, finding that “Section 10127.13 is not limited to those 

penalties that [the insurer] chooses to label as a ‘surrender charge.’ . . . Rather than 

simply requiring disclosure of ‘all surrender charges,’ the statute requires disclosure of 

‘all’ ‘penalties’ ‘associated’ with the surrender period, which is broader than simply 

requiring disclosure of surrender charges. . . . The MVA operates as a penalty because it 

reduces or forfeits a portion of the [policy] account value in connection with any early 

surrender that exceeds the penalty-free amount. The MVA . . . is ‘associated’ with the 

surrender period because the MVA applies only during the surrender period stated in the 

contract.” (Rand, supra, 717 F.Supp.2d at p. 956.) 

While the Rand holding appears to be correct, EquiTrust’s annuity cover page is 

fundamentally different from the one considered in that case. Here, the cover page of the 

policies contained an advisory expressly warning purchasers that “cash surrender values 

may increase or decrease based on the equity index and the market value adjustment 

features of this contract.” (Italics added.) This language advises a purchaser that the 

MVA may operate as a penalty upon surrender of the policy. The cover page of the 

policy in Rand contained no such information.

Plaintiffs argue that, as a remedial statute, section 10127.13 must be adhered to 

strictly and that substantial compliance is insufficient when a statute mandates disclosure 

of consumer information. Indeed, the Rand court rejected the insurer’s argument it had 

substantially complied with section 10127.13: “‘[T]he doctrine of substantial compliance 

does not apply at all when a statute’s requirements are mandatory, instead of merely 

directory.’” (Rand, supra, 717 F.Supp.2d at p. 961, quoting Troyk, supra, 

171 Cal.App.4th at p. 1333.) In Troyk the Court of Appeal similarly rejected an insurer’s 

argument it had substantially complied with the disclosure obligations of Insurance Code 
21

section 381, which requires an insurance policy to state the premium charged for 

insurance coverage. As the Troyk court explained, “‘“Substantial compliance, as the 

phrase is used in the decisions, means actual compliance in respect to the substance 

essential to every reasonable objective of the statute.” [Citation.] Where there is 

compliance as to all matters of substance[,] technical deviations are not to be given the 

stature of noncompliance. [Citation.] Substance prevails over form. When the plaintiff 

embarks [on a course of substantial compliance], every reasonable objective of [the 

statute at issue] has been satisfied.’ [Citation.] ‘Thus, the doctrine gives effect to our 

preference for substance over form, but it does not allow for an excuse to literal 

noncompliance in every situation.’ [Citation.] Furthermore, the doctrine of substantial 

compliance does not apply at all when a statute’s requirements are mandatory, instead of 

merely directory. [Citations.] A mandatory statute ‘is one that is essential to the 

promotion of the overall statutory design and thus does not permit substantial 

compliance.’” (Troyk, at pp. 1332-1333.) “Were insurers allowed, by substantial 

compliance or otherwise, to state all or part of a premium in documents other than a 

policy, those underlying purposes of section 381, subdivision (f), would not be promoted. 

Because section 381, subdivision (f)’s disclosure requirement is essential to the overall 

promotion of the statutory design, we conclude that statute’s disclosure requirement is 

mandatory.” (Id. at p. 1333.) 

Like the premium disclosure requirement at issue in Troyk, we agree that 

disclosure of the MVA’s potential impact on surrender charges is “essential to the overall 

promotion of the statutory design,” that is, to alert seniors to the adverse consequences of 

surrendering their policies before maturity, and is thus mandatory within the meaning of 

Troyk. While section 10127.13’s purpose has been substantially accomplished by the 

disclosure of the potential effect of the MVA on the cover of the policy in eminently 

readable form (see Costa v. Superior Court (2006) 37 Cal.4th 986, 1026 [“courts have 

taken a realistic and practical view of the consequence of relatively minor statutory 

lapses, refusing, for example, to withhold a measure from the ballot because of the 

theoretical possibility that a smaller type size in a title might have affected potential 
22

signers when the actual type size utilized was not unduly small and was clearly 

readable”]; Assembly v. Deukmejian (1982) 30 Cal.3d 638, 652 [“technical deficiencies in 

referendum and initiative petitions will not invalidate the petitions if they are in 

‘substantial compliance’ with statutory and constitutional requirements”]), the failure to 

present the notice in the mandated 12-point font is not its only defect. As might be 

expected in light of EquiTrust’s assertion the MVA does not constitute a true surrender 

charge, the notice does not advise a senior purchaser of those circumstances in which the 

MVA will impose a surrender penalty or identify where in the policy that information 

may be found, as required by section 10127.13. In fact, very little information is 

provided in the policy other than the formula used to calculate the MVA, which is set 

forth in the general definitions (rather than on the contract data page) and is identified as 

(1 + s) / (1 + c + 0.005)n/12, where s is the starting Treasury Rate, c is the Treasury Rate 

for the remaining period at withdrawal or surrender and n is the number of complete 

months until the end of the surrender period. 

EquiTrust points out that this algebraic formula is unlikely to mean anything to the 

average—or even educated—purchaser, and disclosure of the formula’s effect is more 

than sufficient. This argument is belied, however, by EquiTrust’s own description of the 

MVA in disclosures provided to agents to review with purchasers at the point of sale. The 

information contained in EquiTrust’s single-page disclosure identifies the MVA formula 

as [(1 + s) / (1 + c + 0.005)] n/12- 1 (emphasis added; the - 1 is omitted in the policy’s 

version of the formula)9and gives detailed examples of its operation, including instances 

in which it would increase the surrender charge. This information could have been 

included on the contract data page, and the mandate of the statute would have been met. 

 

9

The discrepancy between the two versions of the formula is not explained in the 

record; but EquiTrust filed a post-argument letter brief demonstrating the two different 

formulas, when properly understood and applied, yield identical results. Plainly, 

however, the discrepancy undermines any argument the policy cover page complies with 

section 10127.13’s statutory mandate.
23

c. Plaintiffs failed to satisfy the standing requirement applicable to their UCL 

cause of action

The UCL prohibits, and provides civil remedies for, unfair competition, which it 

defines as “any unlawful, unfair or fraudulent business act or practice.” (Bus. & Prof. 

Code, § 17200.) In 2004 California voters “materially curtailed the universe of those 

who may enforce” the UCL by enacting Proposition 64. (Kwikset, supra, 51 Cal.4th at 

p. 320.) Proposition 64 limited private standing under the UCL to any “‘“person who has 

suffered injury in fact and has lost money or property”’ as a result of unfair competition.”

(Kwikset, at pp. 20-321., quoting Bus. & Prof. Code, § 17204.) “‘The phrase “as a result 

of’ in its plain and ordinary sense means “caused by” and requires a showing of causal

connection or reliance. . . .’” (Id. at p. 326.) Thus, in order to pursue a claim under the 

UCL, a plaintiff must “(1) establish a loss or deprivation of money or property sufficient 

to qualify as injury in fact, i.e., economic injury, and (2) show that the economic injury 

was the result of, i.e., caused by, the unfair business practice . . . that is the gravamen of 

the claim.” (Kwikset, at p. 322; accord, Sarun v. Dignity Health (2014) 232 Cal.App.4th 

1159, 1166.) 

The question presented here is whether, absent an allegation she read the policy 

cover page, any of the senior plaintiffs could represent the proposed class on the claim 

EquiTrust’s policy violated the requirements of section 10127.13.10 The trial court 

concluded they could not. We agree.

 

10 In Tobacco II, supra, 46 Cal.4th 298 the Supreme Court addressed the impact of

Proposition 64’s standing requirement on UCL class actions. Tobacco II involved a class 

action brought by smokers against the tobacco companies alleging the companies’

marketing and advertising violated the UCL. After Proposition 64 was enacted, the trial 

court decertified the class, finding that each absent class member was now required to 

show they suffered an injury in fact as a result of the alleged unfair competition. (Id. at

p. 306.) Reversing the decertification order, the Supreme Court held that Proposition 64 

“was not intended to, and does not, impose [Business and Professions Code] section 

17204’s standing requirements on absent class members in a UCL class action where 

class requirements have otherwise been found to exist.” (Id. at p. 324.) Thus, “relief 

under the UCL is available [to absent class members] without individualized proof of 

deception, reliance and injury” so long as the class representative meets Proposition 64 
24

In Tobacco II the Court emphasized that its “discussion of causation in this case is 

limited to such cases where, as here, a UCL action is based on a fraud theory involving 

false advertising and misrepresentations to consumers. . . . There are doubtless many 

types of unfair business practices in which the concept of reliance, as discussed here, has 

no application.” (Tobacco II, supra, 46 Cal.4th at p. 325, fn. 17.) In Kwikset, supra, 

51 Cal.4th 310 the Court extended the reasoning of Tobacco II to claims brought under the 

unlawful prong when the alleged unlawful conduct is that the defendant engaged in 

misrepresentations and deception. (Kwikset, at p. 326, fn. 9, citing Durell v. Sharp 

Healthcare (2010) 183 Cal.App.4th 1350, 1363; accord, Hale v. Sharp Healthcare (2010) 

183 Cal.App.4th 1373, 1385.) As the Durell court explained, “[a] consumer’s burden of 

pleading causation in a UCL action should hinge on the nature of the alleged wrongdoing 

rather than the specific prong of the UCL the consumer invokes.” (Durell, at p. 1363.)

Plaintiffs contend that neither Tobacco II nor Kwikset requires a showing of 

reliance here and urge us to follow the decision in Medrazo, supra, 205 Cal.App.4th 1. 

There, the plaintiff sued a motorcycle dealer under the UCL, alleging it had violated 

provisions of the Vehicle Code forbidding the sale of motorcycles without hanger tags 

providing specified pricing information. (Medrazo, at pp. 4-5.) Although the pricing 

information was ultimately disclosed to the purchaser once she decided to buy the 

motorcycle, the motorcycle she bought had not been outfitted with the required tag. (Id. at 

pp. 7-8.) The trial court concluded the plaintiff lacked standing to sue under the unlawful 

prong because she failed to demonstrate she had relied on the tag in making the decision 

to purchase the motorcycle. (Id. at p. 9.) 

Division Four of this court reversed. The court concluded the plaintiff had 

suffered “a concrete, particularized, and actual invasion of an interest legally protected by 

[the Vehicle Code], i.e., the disclosure—before a decision to purchase a specific 

motorcycle is made —of the MSRP and any dealer-added charges for all new 

 

standing requirements. (Id. at p. 320, see also Medrazo, supra, 205 Cal.App.4th at p. 11 

[“[w]hen the private action is brought as a class action, only the named plaintiff is 

required to meet this standing requirement”].)
25

motorcycles offered for sale.” (Medrazo, supra, 205 Cal.App.4th at p. 13.) As the court 

observed, the statute was “‘designed to provide . . . motorcycle buyers with information 

that is necessary to make a wise purchase.’” (Ibid.) The absence of the tag deprived the 

purchaser of information the Legislature had deemed necessary for an informed 

purchasing decision. 

Although Medrazo has been criticized for reaching beyond the four corners of 

Tobacco II and Kwikset (see, e.g., Kane v. Chobani, Inc. (N.D. Cal. 2014) 973 F.Supp.2d 

1120, 1131), we believe it was correctly decided based on the specific facts presented, 

which constituted one of the “types of unfair business practices in which the concept of 

reliance. . . has no application” envisioned by the Supreme Court in Tobacco II. (See 

Tobacco II, supra, 46 Cal.4th at p. 325, fn. 17.) Medrazo’s injury was caused by the 

absence of the tag, and she had no opportunity to review the information a tag would 

have conveyed before she decided to buy that particular motorcycle. As plaintiffs have 

argued, inserting a reliance requirement in this setting would have subverted the purpose 

of the law and encourage rather than “‘suppress the mischief at which [the statute] is 

directed.’” (Rand, supra, 717 F.Supp.2d at p. 957.)

The same situation does not exist here, however. In what is almost the reverse of 

the facts in Medrazo, the plaintiffs here were shown a comprehensive notice disclosing 

the existence and operation of the MVA before they made the decision to purchase an 

EquiTrust annuity. After the purchase was completed, each received a copy of the 

policy, which contained the defective cover page advising she had 30 days to rescind. 

Not one of the plaintiffs was able to assert she had reviewed the cover page when given 

the opportunity. In this instance the absence of the necessary information was irrelevant 

to the decision to purchase the selected policy. These facts more closely resemble those 

in Durell, supra, 183 Cal.App.4th 1350 in which the court affirmed dismissal of the 

plaintiff’s UCL claim when the plaintiff could not allege he had ever visited the 

defendant’s website and read the alleged misrepresentation. (Durell, at p. 1363; see also 

Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 523 [rejecting UCL 

standing of plaintiff whose foreclosure was not triggered by alleged unlawful acts].) As 
26

one court succinctly stated, “[a] plaintiff fails to satisfy the causation prong of the statute 

if he or she would have suffered ‘the same harm whether or not a defendant complied 

with the law.’” (Daro v. Superior Court (2007) 151 Cal.App.4th 1079, 1099.) Plaintiffs 

have failed this crucial test.

In reaching this conclusion, we do not condone marketing tactics that appear to 

have generated sales of indexed annuities to unsuitable clients. Nonetheless, the trial 

court did not err in finding plaintiffs’ failure to allege they had reviewed the defective 

notices barred their claim under the UCL.

3. The Declaratory Relief Cause of Action Also Fails

Declaratory relief is available to “[a]ny person interested under a written 

instrument . . . who desires a declaration of his or her rights or duties with respect to 

another, or in respect to, in, over or upon property . . . in cases of actual controversy 

relating to the legal rights and duties of the respective parties. . . .” (Code Civ. Proc., 

§ 1060; Maguire v. Hibernia S. & L. Soc. (1944) 23 Cal.2d 719, 728 [“[a] complaint for 

declaratory relief is legally sufficient if it sets forth facts showing the existence of an 

actual controversy relating to the legal rights and duties of the respective parties under a 

written instrument and requests that these rights and duties be adjudged by the court”]; 

accord, Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 615.) In light of 

our conclusion EquiTrust did not breach the provisions of its policies, there is no actual 

controversy warranting our intervention.

DISPOSITION

The orders of the trial court are affirmed. EquiTrust is to recover its costs on 

appeal.

PERLUSS, P. J. 

We concur:

ZELON, J. SEGAL, J.
27