Court Opinion

ID: 9622714
Source: CourtListenerOpinion
Date Created: 2023-08-22 06:22:27.774006+00
Date Added: 2024-06-11T17:36:44.639519
License: Public Domain

MOSK, J.
I dissent.
Royal Globe (1979-1988), may it Rest in Peace.1 During its life it served the people of California well, particularly the victims of unfair and deceptive practices. The majority have now replaced Royal Globe with a “Royal *314Bonanza” for insurance carriers, i.e., total immunity for unfair and deceptive practices committed on innocent claimants. They have exalted principal over principle. It will be interesting to observe whether this judicial largesse causes insurance premiums to decrease or insurance profits to increase.
In the trial court, defendant demurred and at no time there or in the Court of Appeal raised any question about the continued vitality of Royal Globe. Indeed its demurrer was offered, and sustained, on grounds consistent with the underlying premise of Royal Globe. We granted review in this matter for the sole purpose of clearing up detrital issues on which Courts of Appeal have differed. The insurance industry asked for a loaf of bread. The majority, with remarkable magnanimity, give it the whole bakery.
Instead of concentrating on the issues raised and argued throughout these and other pending proceedings, the majority have chosen to avoid fundamental answers by permanently eliminating the question. In most cases, of course, it would make our task relatively uncomplicated if we could evade interpreting the law with finality by simply changing the law. On the other hand, making our job easier is no justification for totally destroying a cause of action authorized by statute, approved by decisions of this court and of Courts of Appeal, and acquiesced in by the Legislature for nearly a decade. The judicial activism of the majority seriously impairs the orderly administration of justice.
In making their opinion inapplicable to this and all pending cases, the majority in effect render a mere advisory opinion. While they suggest this approach is adopted out of a sense of compassion for victims who have lawsuits pending, that compassion apparently does not extend to future victims of unfair and deceptive acts who may suffer the same or greater damage. Thus the reality is that the majority are merely applying a thin sugar coat to their cyanide pill.
The majority contend that sections 790.03 and 790.09 of the Insurance Code do not create a private cause of action. In view of their expurgated quotation of section 790.03 in footnote 2 of the majority opinion, that conclusion might arguably follow. Unfortunately the majority omit other parts of the same section that clearly implicate the duty of insurance carriers not merely to their insured, but also to claimants. One who objectively reads the following will receive an entirely different outlook: “§ 790.03. The following are hereby defined as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance.
*315“(h) Knowingly committing or performing with such frequency as to indicate a general business practice any of the following unfair claims settlement practices: [U] (1) Misrepresenting to claimants pertinent facts or insurance policy provisions relating to any coverages at issue.
“(2) Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies.
“(3) Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies.
“(4) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss requirements have been completed and submitted by the insured.
“(5) Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear.
“(8) Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of, the insured, his representative, agent, or broker.
“(9) Failing, after payment of a claim, to inform insureds or beneficiaries, upon request by them, of the coverage under which payment has been made.
“(10) Making known to insureds or claimants a practice of the insurer of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration.
“(11) Delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either, to submit a preliminary claim report, and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information.
“(12) Failing to settle claims promptly, where liability has become apparent, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.
“(13) Failing to provide promptly a reasonable explanation of the basis relied on in the insurance policy, in relation to the facts or applicable law, for the denial of a claim or for the offer of a compromise settlement.
*316“(14) Directly advising a claimant not to obtain the services of an attorney.
“(15) Misleading a claimant as to the applicable statute of limitations.” (Italics added.)
Note particularly that throughout the foregoing clauses reference is made to claims and claimants, and in clauses (8), (9), (10) and (11) a distinction is clearly made between the insured and claims or claimants. Thus it is fatuous to assert that the legislative intent was merely to provide redress for the insured but not for third party claimants when any of the statutorily prohibited acts are committed.
But, assert the majority as did the defendants unsuccessfully in Royal Globe, a pattern of unfair business practices must be shown, not a single deceptive act. The language of subdivision (h) is somewhat ambiguous in this respect: it prohibits “Knowingly committing or performing with such frequency as to indicate a general business practice” any of the unfair claims settlement practices set forth. It is unclear whether the words “with such frequency as to indicate a general business practice” were intended to modify both the terms “Knowingly committing” and “performing.” The most logical reading, however, is that the quoted language provides two alternate methods by which the prohibited acts may be shown, i.e., a violation of the subdivision occurs if the prohibited acts are knowingly committed on one occasion or, if knowledge cannot be established, then it will suffice if the acts are performed with such frequency as to indicate a general business practice. This interpretation of the section was adopted by a commentator in reviewing certain amendments to subdivision (h) in 1975. (Review of Selected 1975 California Legislation (1976) 7 Pacific L.J. 237, 484.)
It also bears noting that while some of the clauses of the subdivision use the plural—“claimants”—a number deliberately refer in the singular to “a claim” (9), “c claim” and “a compromise settlement” (13), “a claimant” (14), and “misleading a claimant” (15).
It is inconceivable that the Legislature intended that a litigant would be required to show that the insurer committed the acts prohibited by subdivision (h) “with such frequency as to indicate a general business practice.” There would be no rational reason why an insured or a third party claimant injured by an insurer’s unfair conduct, knowingly performed, should be required to demonstrate that the insurer had frequently been guilty of the same type of misconduct involving other victims in the past. The insurance department may have a policy to require repeated misconduct as the basis for its enforcement of subdivision (h). But while repetition of prohibited acts may be relevant to the duty of the Insurance Commissioner to issue a *317cease and desist order, to an aggrieved private litigant who can demonstrate that the insurer acted deliberately, the frequency of the insurer’s misconduct and its application to other victims are irrelevant. (Accord, Delos v. Farmers Insurance Group (1979) 93 Cal.App.3d 642, 653 [155 Cal.Rptr. 843].)
Curiously, the majority find it necessary to caution the insurance industry not to commit the unfair practices proscribed by the Insurance Code, and they politely invite the Insurance Commissioner to “continue” to enforce the laws. However, the majority fail to demonstrate that such enforcement has ever existed. Since 1959 when sections 790 and following of the Insurance Code were adopted, 62 volumes of California Reports and 297 volumes of California Appellate Reports have been published. In those 359 volumes there are more than 300,000 pages. On not one page of one volume is a single case reported in which the Insurance Commissioner has taken disciplinary action against a carrier for “unfair and deceptive acts or practices in the business of insurance” involving a claimant. Not one case in 29 years.
In the absence of demonstrable enforcement by the Insurance Commissioner, it is understandable that claimants seek to litigate their own rights rather than to rely on Big Brother. And I am convinced now, as I was when Royal Globe was decided, that the Legislature intended they may do so.
The majority try desperately to minimize the fact that there has been legislative approval of Royal Globe. Despite the inflammatory and impertinent descriptions of our decision by the defendant and amici—“convoluted reasoning,” “illogical,” “flawed analysis” and “made of whole cloth”—the case has survived Herculean efforts of the insurance industry to legislatively overrule it.
With full knowledge of Royal Globe and its construction of the relevant Insurance Code sections, for nine years the Legislature has refused to enact bills designed to overrule, modify or limit the decision and its statutory interpretation. First there was Senate Bill No. 483 (1979 Reg. Sess.), initially introduced on March 1, 1979, to amend the general provisions of Insurance Code section 31. On May 9, 1979—five weeks after our decision in Royal Globe-—the bill was amended to change section 790.03. The amended bill provided: “. . . (i) Notwithstanding the provisions of Section 790.09, a violation of subdivision (h) shall not create civil liability against any insurer by an insured, third party claimant, or any person other than the commissioner pursuant to the authority provided in Sections 790.05 and 790.06. [j|] Sec. 2. It is the intent of this act to overrule the holding in Royal Globe Insurance Company v. Superior Court (_ 3rd _) which established a *318cause of action by a third party claimant or insured based upon a violation of subdivision (h) of Section 790.03.” (2 Sen. J. (1979 Reg. Sess.) p. 3071.)
After a subsequent amendment, Senate Bill No. 483 passed the Senate by a six-vote margin on June 1, 1979, and was referred to the Assembly. On September 11, 1979, the bill was rejected by the Ways and Means Committee, and on November 30, 1980, was transferred from the Assembly without further action. (Sen. Final Hist. (1979 Reg. Sess.) p. 305.) The proposal ultimately died. Thus the Legislature was not merely silent after Royal Globe, but refused to pass a bill expressly overruling it. In the circumstances this represents affirmative legislative approval and confirmation of the Royal Globe decision far beyond mere inattention. (People v. Hallner (1954) 43 Cal.2d 715, 719 [277 P.2d 393].)
In 1983 the Legislature actually amended section 790.03 without addressing or changing subdivision (h) or the Royal Globe holding. In adopting legislation, the Legislature is presumed to know of existing domestic judicial decisions and to enact and amend statutes in light of such decisions that have a direct bearing on them. (Estate of Banerjee (1978) 21 Cal.3d 527, 537 [147 Cal.Rptr. 157, 580 P.2d 657].) The failure of the Legislature to change the law in a particular respect, when the general subject is before it and changes in other respects are made, is indicative of an intent to leave the law as it stands in the aspects not amended. (Estate of McDill (1975) 14 Cal.3d 831, 837-838 [122 Cal.Rptr. 754, 537 P.2d 874]; Bailey v. Superior Court (1977) 19 Cal.3d 970, 977-978, fn. 10 [140 Cal.Rptr. 669, 568 P.2d 394]; People v. Olsen (1984) 36 Cal.3d 638, 647, fn. 19 [205 Cal.Rptr. 492, 685 P.2d 52].) The majority’s futile effort to avoid the foregoing case law stands the concept of legislative intent on its head.
Notwithstanding defendant’s apparent desire to escape accountability for bad faith insurance practices, Royal Globe is the law, has not been changed, modified or amended by legislative action in the ensuing nine years, and has directly implemented the clear legislative intent to eradicate, and hold insurance companies accountable for, unfair insurance claims practices.
Despite legislative acquiescence, defendant and now the majority attempt to give an impression that Royal Globe was some kind of aberration, wholly unprecedented and unanticipated. Nothing could be farther from the fact. At least three cases preceding Royal Globe held that the Insurance Code provisions authorized action by claimants and not exclusively by the state’s administrative agency.
The first case was Greenberg v. Equitable Life Assur. Society (1973) 34 Cal.App.3d 994 [110 Cal.Rptr. 470]. The court, in an opinion by Justice Thompson and concurred in by Justices Wood and Lillie, held that the Insurance Code “contemplates a private suit to impose civil liability *319irrespective of governmental action against the insurer for violation” of code provisions. The court added that “The fair construction is that the person to whom the civil liability runs may enforce it by an appropriate action.” (Id. at p. 1001.) Any other construction, the court held, “would overturn by implication the rule of Crisci v. Security Ins. Co. [1967] 66 Cal.2d 425 [58 Cal.Rptr. 13, 426 P.2d 173].” (Id. at p. 1001, fn. 5.) A petition for hearing in this court was unanimously denied.
A second case adopting the identical reasoning was Shernoff v. Superior Court (1975) 44 Cal.App.3d 406 [118 Cal.Rptr. 680], by Justice Fleming with Justices Compton and Beach concurring. The court pointed out that the “commissioner’s disciplinary authority is limited to restraint of future illegal conduct by real parties in interest, and he possesses no authority to enter money judgments for past injuries.” (Id. at p. 409.) The court relied on section 790.09, which clearly declares that no cease and desist order absolves an insurance carrier from civil liability.
The third case, written by Justice Kaufman for himself and Justices Tamura and McDaniel, was Homestead Supplies, Inc. v. Executive Life Ins. Co. (1978) 81 Cal.App.3d 978 [147 Cal.Rptr. 22]. The court held that the Insurance Code sections “define and prohibit insurers from engaging in unfair methods of competition and unfair and deceptive acts or practices in the business of insurance. They are directed at insurers, not insureds. Indeed, the nature of the conduct proscribed indicates clearly that at least one of the statutory purposes is protection of the public. (See § 790.03.) In fact, it has been held that section 790.09 contemplates civil liability to members of the consuming public injured by an insurer’s violation of sections 790.02 and 790.03.” (Id. at p.992.)
In addition to the foregoing, Schlauch v. Hartford Accident & Indemnity Co. (1983) 146 Cal.App.3d 926, 934 [194 Cal.Rptr. 658], held Royal Globe to apply retroactively, “since insurers were statutorily prohibited from engaging in these unfair practices, they can claim no reliance upon the lack of legal authority for third party damage suits. In short, insurance carriers had fair warning that their conduct was prohibited. . . . Since the decision in Royal Globe did not impose a new duty upon insurers, but only provided a different means of enforcement, [it] should have been foreseen. . . .” (Italics added.) Indeed, as pointed out in Bodenhamer v. Superior Court (1986) 178 Cal.App.3d 180 [223 Cal.Rptr. 486], there is nothing “novel or incongruous” in subjecting an insurance business to more than one avenue of responsibility. ■
Thus it is clear that Royal Globe was preordained. Certainly it is indefensible for defendant and the majority to assert the opinion was unprecedent*320ed when manifestly it followed the rule established in at least three earlier well-reasoned appellate decisions. I must assume that the majority, though they are curiously silent about it, mean to also overrrule Greenberg, supra, 34 Cal.App.3d 994, Shernoff, supra, 44 Cal.App.3d 406, and Homestead Supplies, supra, 81 Cal.App.3d 978, and thus to repudiate the statutory interpretation by nine distinguished Court of Appeal justices.
Subsequent to Royal Globe, Courts of Appeal have had remarkably little difficulty in interpreting and applying it as authority. See, e.g., Justice Kaufman’s opinion in Nationwide Ins. Co. v. Superior Court (1982) 128 Cal.App.3d 711 [180 Cal.Rptr. 464]; Justice Eagleson’s opinion in Heninger v. Foremost Ins. Co. (1985) 175 Cal.App.3d 830 [221 Cal.Rptr. 303]; and the following, among many other cases: Sych v. Insurance Co. of North America (1985) 173 Cal.App.3d 321 [220 Cal.Rptr. 692]; Vega v. Western Employers Ins. Co. (1985) 170 Cal.App.3d 922 [216 Cal.Rptr. 592]; Afuso v. United States Fid. & Guar. Co. (1985) 169 Cal.App.3d 859 [215 Cal.Rptr. 490]; Smith v. Interinsurance Exchange (1985) 167 Cal.App.3d 301 [213 Cal.Rptr. 138]; Williams v. Transport Indemnity Co. (1984) 157 Cal.App.3d 953 [203 Cal.Rptr. 868]; Trujillo v. Yosemite-Great Falls Ins. Co. (1984) 153 Cal.App.3d 26 [200 Cal.Rptr. 26]; Rodriguez v. Fireman’s Fund Ins. Co. (1983) 142 Cal.App.3d 46 [190 Cal.Rptr. 705], All of these well-considered cases are now to be eliminated sub silentio.
Finally, the majority use considerable ink to inform us that other states have reached a conclusion contrary to that of Royal Globe. This is wholly irrelevant. California courts alone have the responsibility of interpreting the laws adopted by the California Legislature, and they cannot be deterred from that duty by what other states have done or failed to do under laws enacted by their legislative bodies.
The insurance industry, with a lavish public relations and media campaign, has failed to persuade the people of California that it should be immune from responsibility for unfair and deceptive acts. Up to now no court has so held. The industry, with the service of dozens of lobbyists, failed to persuade the Legislature that the statute was improperly imposing liability for unfair and deceptive acts. Now, regrettably, the insurance industry has succeeded in persuading justices of this court that it is entitled to immunity from the same type of responsibility required of every other business and individual that commit deceptive practices.
*321The question, unanswered by the majority because it is unanswerable, is why this one industry is entitled to be above the law that applies to every other segment of society. I do not believe it should be, or is. Therefore I dissent.
Broussard, J., concurred.
Appellant’s petition for a rehearing was denied October 13, 1988. Mosk, J., and Broussard, J., were of the opinion that the petition should be granted.
The effective date of this order and the date our decision in this cause becomes final is October 17, 1988.

 Royal Globe Ins. Co. v. Superior Court (1979) 23 Cal.3d 880 [153 Cal.Rptr. 842, 592 P.2d 329].