Court Opinion

ID: 9746493
Source: CourtListenerOpinion
Date Created: 2023-08-27 14:18:57.995529+00
Date Added: 2024-06-11T07:25:13.880899
License: Public Domain

WOODS, J., Concurring and Dissenting.
I concur in the majority’s affirmance of the trial court’s rulings in favor of Staples, Inc. with respect to Wayne’s second cause of action, alleging the pricing of Staples’s “declared value coverage” is unconscionable and violates the Consumers Legal Remedies Act, Civil Code section 1750 et seq., and his third cause of action, *485alleging Staples’s order form for its declared value coverage is deceptive and violates Business and Professions Code section 17500 et seq. for the reasons given by the majority. However, I respectfully disagree with the majority’s conclusion that Wayne’s first cause of action in his putative class action complaint, alleging Staples engaged in the sale of inland marine insurance without a license is an unlawful business practice in violation of Business and Professions Code section 17200.1 concede that a private plaintiff may bring an action under section 17200 for violations of licensing provisions of the Insurance Code as held in Stevens v. Superior Court (1999) 75 Cal.App.4th 594 [89 Cal.Rptr.3d 370], but I find no reason to sidestep the well established “principal-object-and-purpose test” in determining whether Staples was engaged in the sale of insurance.
Staples’s core contention on appeal centers around its assertion that California follows the “principal object and purpose” test in determining whether a transaction falls under the California Insurance Code and the regulations applicable thereto. Staples maintains that while all insurance contracts allocate risk for mishaps, not all contracts allocating risk are governed by laws regulating insurance. Staples cites the decision of our high court in Title Ins. Co. v. State Bd. of Equalization (1992) 4 Cal.4th 715, 726, 727 [14 Cal.Rptr.2d 822, 842 P.2d 121], for its contention that only those contracts that are primarily for the purpose of allocating risk are characterized as insurance contracts, subject to stringent insurance regulations. I find the instruction given by our high court in Title Ins. Co. pertaining to the principal object and purpose test to be clear and unambiguous. Our high court states at pages 726 and 727 as follows:
“The underwriting agreement does not appear to be a contract of insurance for two reasons. First, it does not appear to distribute the risk of liability for claims among similarly situated persons. Under the contract, the underwritten title company agrees to indemnify the insurer for a portion of its liability. There is no indication that the underwriting agreements distribute the risk among similarly situated title insurers.
“Second, ‘the mere fact that a contract contains these two elements [shifting and distribution of risk of loss] does not necessarily mean that the agreement constitutes an insurance contract for purposes of statutory regulation.’ (Truta v. Avis Rent a Car System, Inc. (1987) 193 Cal.App.3d 802, 812 [238 Cal.Rptr. 806] [Truta].) Rather than simply look to whether the contract involves an assumption of a risk, we will instead ask ‘ “whether that [assumption of risk] or something else to which it is related in the particular plan is its principal object and purpose.” ’ (Transportation Guar. Co. v. Jellins (1946) 29 Cal.2d 242, 249 [174 P.2d 625] [Jellins]; see also 12 Appleman, Insurance Law and Practice (1981) § 7002, p. 14.)
*486“Following this reasoning, California courts have held that arrangements similar to those in this case were not illegal contracts of insurance. For instance, a car rental agreement containing an element of insurance was not an illegal contract of insurance because the insurance element was peripheral to the main purpose of the contract. (Truta, supra, 193 Cal.App.3d at p. 814.) Likewise, a truck maintenance contract in which the contractor agreed to insure the vehicles for the owner with an authorized insurance company was held to be not an illegal contract because the main purpose of the contract was to supply labor. (Jellins, supra, 29 Cal.2d at pp. 249, 252-253.) Further, a medical services corporation that provided medical services to low-income patients who paid monthly membership dues did not engage in the business of insurance illegally, because the principal purpose or object of the operation was service rather than indemnity. (California Physicians’ Service v. Garrison (1946) 28 Cal.2d 790, 809-810 [172 P.2d 4].)
“Based on this analysis, we conclude that the underwriting agreements are not illegal contracts of insurance. Their main function is not to require the underwritten title company to provide insurance, either to the title insurer or to the insured, but instead to require the underwritten title company to perform a title search and examination carefully and diligently as well as to carry out the formalities involved in the issuance of a title insurance policy. The indemnification provisions are secondary to the main object and purpose of the underwriting agreements. In fact, the agreements to indemnify appear to be designed, at least in part, to give the underwritten title companies an incentive to perform their title search in a nonnegligent manner, as the title companies are in the best position to eliminate possible risk. Therefore, the title company is not involved in the illegal practice of insurance even if an underwritten title company is deemed to have provided indemnification in connection with the main purpose of its contract with the title insurer.” (Title Ins. Co. v. State Bd. of Equalization, supra, 4 Cal.4th at pp. 726-727.)
Staples places further reliance on a recent decision from Division 8 of this court holding that a contract with risk-shifting principles is not subject to California insurance regulations if the principal object of the contract is something other than insurance. In Automotive Funding Group, Inc. v. Garamendi (2003) 114 Cal.App.4th 846 [7 Cal.Rptr.3d 912] (AFG), AFG was in the business of buying installment sales contracts from used car dealers and making loans to the car buyers. As a condition of the loan, the buyer had to protect AFG’s lien on the car, either by obtaining insurance for physical damage to or theft of the car, or by participating in AFG’s loss damage waiver program wherein the buyer had to report to AFG whenever the car sustained damage of more than $500. AFG used licensed insurance adjusters to determine whether the car was repairable. The court concluded that “[w]e *487do not believe that the LDW represents the principal object of AFG’s transation. . . . [f] Neither the terms nor the conditions of the LDW suggest an insurance policy.” (114 Cal.App.4th at p. 855.)
I find Staples’s contentions to be persuasive that insurance was merely peripheral to the main object of shipping packages in this instance and the trial court was correct in refusing to instruct the jury on the California Insurance Code and regulations.
If I were in the majority, I would affirm the decision of the trial court in its entirety.
Respondent’s petition for review by the Supreme Court was denied March 15, 2006, S141078. George, C. J., did not participate therein.