Court Opinion

ID: 9536475
Source: CourtListenerOpinion
Date Created: 2023-08-07 07:00:25.404248+00
Date Added: 2024-06-11T14:54:31.690599
License: Public Domain

BROUSSARD, J.
I dissent. Proposition 103, in Insurance Code section 1861.03, subdivision (c),1 limits the right of an automobile insurer to refuse to renew policies. The only question directly before us is whether that section applies to an insurer who has applied for permission to withdraw, but whose application has not yet been approved by the commissioner. We should uphold the commissioner’s ruling that until the insurer’s application *105is approved and its certificate of authority cancelled, the insurer remains an insurer admitted to do business in California, and is subject to all the laws governing such insurers—including section 1861.03, subdivision (c).2
The majority opinion, however, does not limit itself to the narrow issue on which the commissioner’s decision was based—whether an insurer is relieved of its statutory duty to renew simply by submitting an application to withdraw, before the commissioner has approved the application. Instead, it also addresses a distinct and much broader question: whether an insured’s right to renew, with the original insurer or a reinsurer, remains in effect after the commissioner has approved the insurer’s application. That broader question, however, was not before the commissioner and should not be decided in this proceeding. Even if we assume that Proposition 103’s protection of an insured’s right to renew evaporates once the commissioner has approved the insurer’s application to withdraw, that assumption would not affect the validity of the commissioner’s decision that the insurer may not unilaterally repudiate any of its statutory obligations before the commissioner has approved the application.
The majority contend that the voters who enacted Proposition 103 intended that an insurance company which had merely applied to withdraw from California, and had not yet received permission to do so, would be exempt from the renewal requirement of section 1861.03, subdivision (c). In advancing this assertion, the majority opinion does not rely on the language of section 1861.03, subdivision (c), since that provision contains no words suggesting that it, unlike other regulatory laws, including the rest of Proposition 103, does not apply to a company that has requested permission to withdraw. Instead, it relies on a different part of Proposition 103, section 1861.11, and on language from our decision in Calfarm, supra, 48 Cal.3d 805.
In Calfarm we observed that section 1861.11 “recognizes the possibility that insurers may withdraw from some insurance markets” (48 Cal.3d 805, 831) by authorizing the commissioner, in event of substantial withdrawals, to establish a market assistance plan or joint underwriting authority.3 Since requiring withdrawn insurers to renew policies would reduce the need for a *106market assistance plan or joint underwriting authority, the majority infer that the renewal provision was not intended to impose that requirement.
This argument may support the majority’s assertion that when an insurer has received permission to withdraw it is no longer required to renew policies, a question which we are not required to decide today, but it undermines their assertion that a company which has merely applied to withdraw is relieved of its statutory duty to renew. Market assistance plans and joint underwriting authorities require advance planning. If the commissioner could count on a period of time between the insurer’s application to withdraw and its refusal to renew policies, she could determine whether such measures are necessary to assure continued coverage and put them into effect. But if, as the majority hold, the insurer can file its application and immediately send its nonrenewal notices, both the commissioner and the policyholders can be taken by surprise, and some may be left without protection before the commissioner can act.
The basic purpose of Proposition 103, seen in the setting in which it was adopted, indicates that its renewal provision should apply during the withdrawal process. The express purpose of the initiative is to ensure that “insurance is fair, available, and affordable for all Californians.” (Calfarm, supra, 48 Cal.3d at p. 813.) We relied on that statement of purpose in Calfarm to uphold the constitutionality of applying section 1861.03, subdivision (c), to existing policies. Applying the renewal provision to existing policies served an important public interest, we said, because “the drafters and the voters were evidently concerned that the enactment of Proposition 103 might cause some insurers not to renew some or all of their existing policies, an action which would undermine Proposition 103’s goal of making insurance ‘available’ for all Californians.” (Calfarm, supra, 48 Cal.3d at p. 831.) If one purpose of the nonrenewal provision is to protect against the danger of large-scale nonrenewals incident to the enactment of Proposition 103, that purpose is subverted by permitting insurers, upon enactment of Proposition 103, to refuse to renew policies before receiving permission to withdraw.
Yet this is exactly what the Travelers Indemnity Company (hereafter Travelers) did. The day after Proposition 103 was enacted Travelers began sending notices of nonrenewal to its policyholders. There was considerable uncertainty in the insurance market and many insurers were not accepting new customers. If the commissioner’s investigation later disclosed that Travelers had not complied with the requirements of the withdrawal statutes—or if Travelers later changed its mind and decided not to withdraw, as did several other companies—Travelers’ unilateral repudiation of the *107renewal obligation would have left many insureds without coverage during the interim period.
Furthermore, Travelers attached two conditions to its application to withdraw. Its letter of November 7, 1988, enclosing the application to withdraw, expressly reserved the right to withdraw the application if Proposition 103 either did not become law or was declared invalid in whole or in part. Then on November 9, 1988, without waiting to see if the second condition was fulfilled, Travelers began sending notices of nonrenewal. If a company can refuse to renew policies after submitting a conditional application to withdraw, or one which reserves a right to recall the application, Proposition 103’s protection against nonrenewal has a gaping hole.4
But the pernicious effect of the majority position is not limited to its effect on persons insured by Travelers or other companies which sought to withdraw from California immediately after the enactment of Proposition 103. As of the date of this opinion, more than one year later, the Insurance Commissioner still has not fixed rates under that measure. When she does so, according to the majority, there is nothing to prevent an insurer, or many insurers, from filing an application to withdraw from California, and immediately sending their policyholders a notice of nonrenewal. Indeed, there is nothing to prevent a company today from submitting an application to withdraw while reserving the right to recall that application if it is satisfied with future rate decisions, and then sending its nonrenewal notices without waiting for that rate decision. Thus, the majority’s construction of section 1861.03, subdivision (c), diminishes the assurance of continued coverage which Proposition 103 was intended to provide (see Calfarm, supra, 48 Cal.3d 805, 827) and leaves policyholders constantly vulnerable to the threat of nonrenewal.
The majority also rely on our statement in Calfarm that “Proposition 103 does not prevent an insurer from discontinuing its California business.”5 (48 Cal.3d 805, 831.) An insurer “discontinues” its business, they reason, by cancelling policies or letting them expire, so an insurer required to renew policies cannot “discontinue” its California business. They conclude that therefore Proposition 103 does not require a withdrawing insurer to renew policies.
But this reasoning says nothing about whether an insurer can refuse to renew policies when it has applied to withdraw, or must wait until it has *108received the commissioner’s approval and can actually begin the process of withdrawing. On that point the key language from Calfarm is that which acknowledges that section 1861.03, subdivision (c), was “designed to give policyholders a measure of assurance that their coverage would continue, and to prevent widespread refusals to renew in response to the initiative’s enactment.” (48 Cal.3d 805, 827.) Recognizing that this purpose obviously would not be served by permitting a company to obtain an exemption from the statutory requirement simply by filing an application to withdraw, the majority can only respond that by “a measure of assurance” we did not mean “complete or absolute protection.” (Maj. opn., ante, at p. 98, fn. 16.) But surely between an interpretation of section 1861.03, subdivision (c) which extends greater protection, and one which deprives the policyholder of that protection, both the purpose of Proposition 103 and the tenor of our opinion in Calfarm require the more expansive interpretation.
The majority, however, go on to claim not only that Proposition 103 does not prevent a company from discontinuing its California business, which is what we said in Calfarm, but that it does not fundamentally alter the way in which it discontinues that business. But that assertion is clearly incorrect, as the majority opinion demonstrates.
Before Proposition 103, an insurer could “run off” its automobile business by cancelling policies subject to cancellation, and letting its other policies expire. Having in this manner terminated its automobile policies, its remaining liabilities to be reinsured would be few and the commissioner’s burden in determining what liabilities remained would be light. (Maj. opn., ante, at p. 100.) The company could begin this process before applying to withdraw and, in fact, would have to do so in order to make sure that most of its policies expired before the commissioner ruled.
Even under the majority view, however, Proposition 103 fundamentally alters this process by preventing an automobile insurer from refusing to renew a policy until the insurer has applied to withdraw. If the approval process is “simple and expeditious” (maj. opn., ante, at p. 92), when the insurer receives that approval most of its policies will still be in force, and subject to a reinsurance requirement. Thus, the insurer will still be compelled to reinsure most of its policies. In such a case, the timing of the withdrawal process is not very different under the majority view and the dissent—but is substantially different from the practice prior to Proposition 103. It is in the case where the commissioner disapproves the withdrawal application that the majority and dissenting views would have very different results. But the majority do not take that case into account in their analysis.
In sum, both majority and dissent agree that Proposition 103 fundamentally alters the way in which an automobile insurer can discontinue its *109California business. Previously, it could “run off” its business at any time, by simply refusing to renew policies as they expired; now there is a critical date before which the insurer cannot legally refuse to renew. The only question is which date is critical—that of the application to withdraw, or of its approval. Since, as we shall explain, the language and purpose of the withdrawal statutes make it clear that the granting of permission to withdraw—not the request for that act—is the legally, significant event, that date should define the insurer’s duties.
We begin our explanation by reviewing the statutes relating to the withdrawal of insurers. Section 1070 provides that “[a]ny insurer, upon payment of the fees and costs therefor and surrender to the commissioner of its certificate of authority, may apply to withdraw from this State . . . .” (Italics added.) Section 1071.5 provides that: “Every insurer which withdraws as an insurer, or is required to withdraw as an insurer, from this State shall, prior to such withdrawal, discharge its liabilities to residents of this State. In the case of its policies insuring residents of this State it shall cause the primary liabilities under such policies to be reinsured and assumed by another admitted insurer. In the case of such policies as are subject to cancellation by the insurer, it may cancel such policies pursuant to the terms thereof in lieu of such reinsurance and assumption.” (Italics added.) Finally, section 1072 provides that: “The commissioner shall make ... an examination of the books and records of the insurer. If, upon such examination, he finds that the insurer has no outstanding liabilities to residents of this State and no policies in favor of the residents of this State uncancelled or the primary liabilities under which have not been reinsured and assumed by another admitted insurer, as required by Section 1071.5, he shall cancel the insurer’s certificates of authority, if unexpired, and he shall permit the insurer to withdraw. The commissioner may, in his discretion, waive any or all of the above requirements if, after such examination, he finds it to be in a solvent condition . . . .” (Italics added.)
Looking first to the language of these provisions, we note that the term “withdrawal,” as used in these sections, refers to actions by the insurer done after the commissioner has cancelled the company’s certificate of authority. Thus the initial surrender of the certificate is described not as “withdrawal,” but as part of an application to withdraw. After applying, but before the actual withdrawal, the insurer is required to take action to assure that its obligations to California residents are discharged or protected. Finally, when the commissioner verifies that residents are protected, she cancels the certificate “and . . . shall permit the insurer to withdraw.” (§ 1072.) The wording of these provisions makes it clear that up to the time when the *110certificate is cancelled, the insurer is not a “withdrawing insurer,”6 but one which remains an admitted insurer.
Looking next to the purpose of these provisions, we find a clear legislative policy to protect California residents against any loss occasioned by the insurer’s withdrawal. (Baer v. Associated Life Ins. Co. (1988) 202 Cal.App.3d 117, 123 [248 Cal.Rptr. 236].) Under these statutes, it is the insurer’s duty, before withdrawing, either to discharge or to secure all obligations to California residents, and the commissioner’s duty to make sure this has been done before she approves the application to withdraw. The insurer may terminate its obligations to the insureds by cancelling the contract, when that is permitted under section 661; other obligations to the insureds or third parties may be terminated by payment. An insurer, however, may (and almost inevitably will) have contracts which cannot be cancelled, and obligations which are contingent and not yet matured. With respect to these obligations, it must reinsure, thus assuring that there will remain an admitted insurer responsible for the obligations to California residents. (See § 1071.5.) The Insurance Commissioner may waive compliance with the requirements of section 1071.5 only if she finds the insurer is solvent, and thus that withdrawal will not imperil the performance owed by the insurer.
The commissioner decides whether to approve an application to withdraw only after examining the outstanding liabilities, the reinsurance and assumption agreement, and the solvency of the insurer. The examination process may be lengthy and detailed, as the commissioner claims, or simple and expeditious, as the majority assert (maj. opn., ante, at p. 92), depending on the circumstances of the case. If the liabilities are few, the reinsurance agreement comprehensive, and the reinsurer’s ability to perform unquestioned, the process may indeed be brief. If, on the other hand, liabilities are uncertain or extensive, the reinsurance agreement limited in scope, and the reinsurer’s solvency or status questionable, one could expect a lengthy proceeding which might lead to denial of approval. An even lengthier proceeding might occur if an insurer of doubtful solvency applied to withdraw without a reinsurance agreement.
In sum, the purpose and function of the withdrawal statutes (§§ 1070-1072) is to empower the commissioner to protect California residents—both those who purchase insurance, and those who have claims on insurance *111policies—by making sure that obligations owed California residents are either discharged or secured before the insurer begins the process of withdrawing from the state.7 As remedial statutes enacted to protect the public, these provisions should be liberally construed (see Bunner v. Imperial Ins. Co. (1986) 181 Cal.App.3d 14, 21 [225 Cal.Rptr. 912]; Brown v. Huntington Beach etc. Sch. Dist. (1971) 15 Cal.App.3d 640, 647 [93 Cal.Rptr. 417]), with a view to giving the commissioner the authority and discretion necessary to safeguard the public welfare. (See Calfarm, supra, 48 Cal.3d 805, 824.)
The majority opinion, however, does not treat these statutes as important protective legislation, enacted to safeguard the public interest. To the contrary, the opinion seems to consider the statutory procedures as pointless formalities. If a company applies to withdraw, the majority expect the commissioner to say “yes,” and to say it quickly. (See maj. opn., ante, at p. 92.) The majority opinion never even considers the possibility that the commissioner may have the authority, even the duty, to say “no.”
But the case in which the commissioner says “no” is the one which demonstrates the mischief in the majority’s holding. Since under the majority opinion a company which applies to withdraw need not, and indeed must not, renew policies,8 by the date of the commissioner’s ruling the insurer will have refused to renew some of its expiring policies. When the commissioner rejects the application, must the company renew those expired policies? If not, insurers have discovered an easy way to evade Proposition 103’s restriction on nonrenewal while remaining in business in California—the company simply submits an inadequate application to withdraw, and starts sending out nonrenewal notices.9 But if the insurer must renew its expired *112policies, complications abound. Would the insurer be required to provide coverage nunc pro tunc? Would it then be entitled to collect back premiums? Would it reimburse insureds who have lost the use of their car because, lacking insurance, they could not legally drive? Would it reimburse insureds who have been fined for driving without coverage? If the insured has bought a new policy, which policy provides primary coverage for an accident during the interim period? The problems of trying to correct a large-scale refusal to renew by a remedial order issued months later are manifold. This whole can of worms10 can be avoided by upholding the commissioner’s ruling that an insurer must renew until the commissioner has approved its application and cancelled its certificate.
That ruling rests on the undisputed proposition that an insurer remains an admitted insurer until the commissioner has approved the application for withdrawal. It follows from that conclusion that the insurer remains subject to all laws governing the practices of admitted insurers. As the commissioner said in her decision below, “[djuring the pendency of these lengthy and detailed [withdrawal] proceedings, insurers necessarily must continue to comply with all California statutes. No insurer can place itself above the law by the mere act of filing papers to withdraw.”* 11
No one would question this conclusion as applied to statutes other than section 1861.03, subdivision (c). Section 661, for example, limits the authority of insurers to cancel policies; the parties assume that this limitation applies to a company that has applied for permission to withdraw. Section 790.03, subdivision (h)(15), makes it illegal for an insurer to mislead a claimant as to the applicable statute of limitations; certainly this governs a company which has applied to withdraw. Section 791 et seq. limits an *113insurer’s right to disclose confidential information; surely this applies to an insurer which has applied for withdrawal. One can peruse the hundreds of statutes governing the conduct of insurers without finding any which would cease to apply to a company upon its mere application to withdraw.
The majority respond that “an insurer’s status as admitted or nonadmitted is not [a] universal litmus test” (maj. opn., ante, at p. 99); there are some provisions which apply to some admitted insurers and not others. Section 1861.03, subdivision (c), the nonrenewal provision at issue here, is an example: it applies only to admitted automobile insurers. But while some statutes distinguish between types of insurance (e.g., fire insurance versus life insurance), or types of insurers (e.g., corporate insurers versus mutual insurers), none relieve an admitted insurer which has applied to withdraw from obligations imposed on one which has not.
The majority in effect create by judicial decision a new category of insurance company—one which is admitted, and bound by all laws governing admitted insurance companies of that type, except that it cannot issue new policies and has no right or statutory duty to renew policies.12 No statute and no prior decision recognize the existence of such a category. The statutes governing the rights and duties of insurers admitted to California are detailed and comprehensive, and not in need of judicial amendment.
Indeed the only statutory support the majority offer for their innovation is a false analogy to the winding up of a corporation. When a corporation adopts a resolution to dissolve, they point out, it “shall cease to carry on business except to the extent necessary for the beneficial winding up thereof . . . .” (Corp. Code, § 1903.) Presumably the majority intend an analogy between a corporate resolution to dissolve, and an insurer’s act of surrendering its certificate and applying to withdraw.13 A corporate dissolution, *114however, is a one-step proceeding. Once it has resolved to dissolve, the decision is made, and everything thereafter is part of the process of dissolution. The corporation needs no permission from any state official, and there is no danger that a subsequent state ruling will force the corporation to. undo actions taken pursuant to the resolution. An insurer’s withdrawal, on the other hand, is a multi-step process. First the insurer decides it wants to withdraw, then it applies for permission to do so, then the commissioner grants that permission, and finally the company withdraws. The last point of decision, when the process can be halted and reversed, is not the corporate resolution but the ruling of the commissioner. In the insurance context, consequently, the commissioner has the last word, and the date when she decides to approve or disapprove the withdrawal application is the critical date which should define the duties of the insurer.
The only decisional authority the majority cite is a New York trial court decision, People ex rel. Lewis v. Safeco (1978) 98 Misc.2d 856 [414 N.Y.S.2d 823], but that decision in fact supports this dissent. In the New York case, the Superintendent of Insurance had prohibited two insurers from surrendering their licenses because they were obliged by statute to renew no-fault insurance policies. The court held that the superintendent could not require the insurer to renew policies and remain in business indefinitely. Since New York had no statute governing when and how companies could withdraw, the court sought to fashion a remedy itself. It concluded that the superintendent could require the insurers to service existing policies and “to renew certain other policies for a short period so that during such periods, those presently insured may be able to obtain follow-up coveragef.]” (414 N.Y.S.2d at p. 830.) At the expiration of that period the insurers would be permitted to surrender their licenses. The decision thus supports the majority opinion’s position on the broader issue which we need not decide—that once an insurer has withdrawn it is not statutorily required to renew policies. On the issue before us, however, its holding that an insurer may be required to renew policies after it has applied to withdraw is inconsistent with the position of the majority opinion, and consistent with the views of the Insurance Commissioner and this dissent.
My conclusion is simple: Travelers remains an admitted insurer until the commissioner permits it to withdraw and cancels its certificate. As an admitted insurer, it must obey all laws regulating such insurers. Nothing in section 1861.03, subdivision (c), makes that provision an exception to this rule. Thus, whether or not Travelers could refuse to renew once it has *115actually withdrawn from California, it had no right to do so upon the filing of an application to withdraw. The commissioner properly found that Travelers’ nonrenewal notices did not comply with California law.
This conclusion is the only one consistent with the spirit, as well as the letter, of Proposition 103. That initiative was not enacted to make it easy for insurers to terminate coverage, but to make insurance more available to Californians and to protect them against loss of coverage. I would deny the petition for a peremptory writ of mandate.
Mosk, J., concurred.

 Unless otherwise noted, statutory citations are to the Insurance Code.

The commissioner also decided that section 1861.03, subdivision (c), applied to policies in effect when Proposition 103 was enacted. We later reached the same conclusion in Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d 805 [258 Cal.Rptr. 161, 771 P.2d 1247] (hereafter Calfarm).

Section 1861.11 states that “[i]n the event that the commissioner finds that (a) insurers have substantially withdrawn from any insurance market covered by this article, including insurance described by Section 660 [automobile insurance], and (b) a market assistance plan would not be sufficient to make insurance available, the commissioner shall establish a joint underwriting authority . . . .”

 1 question whether a conditional application complies with section 1070. That question can be determined when the commissioner decides whether to approve Travelers’ application.

 In context, all the quoted statement meant was that Proposition 103 does not prevent an insurer from discontinuing its California business, i.e., withdrawing from the California market, by following the procedures set out in sections 1070 through 1076.

.The majority opinion from time to time refers to an insurer who has applied to withdraw, but not yet received permission to do so, as a “withdrawing insurer.” (See, e.g., maj. opn., ante, at p. 101.) As explained in text, this usage is inconsistent with the statutory language, under which an insurer may not begin to withdraw from the state until its application to do so has been approved by the commissioner.

 In the context of automobile insurance, we have to be concerned with two kinds of obligations: those owed the insureds, and those owed persons injured by the insureds.

 According to the majority, an insurer which has applied for permission to withdraw may renew policies when it is contractually obligated to do so, but not otherwise. (See maj. opn., ante, at p. 101, fn. 18.)
Virtually all life insurance policies, and a minority of automobile policies, give the insured a right to renew. Perhaps because Travelers’ policies presumably do not, the majority opinion does not consider how the withdrawal statutes would operate in the presence of such a right. Yet the legislative history of those statutes, particularly the 1945 amendment (see maj. opn., ante, at p. 96), shows that the Legislature was particularly concerned with how life insurance companies could withdraw from California. It seems apparent that the Legislature, unlike the majority, sees no inconsistency in permitting an insurer to withdraw from California and yet insisting that the insurer renew its existing policies.

 The majority suggest that under some circumstances the commissioner could refuse to permit an insurer to abandon its withdrawal application. (See maj. opn., ante, at pp. 101-102.) (They do not discuss whether the commissioner could do so if the company reserved the right to abandon in the application itself.) But the problem with this remedy is that by forcing the insurer to go through with its plan to leave the California market, it would reduce the number of insurers and the availability of insurance, contrary to the purpose of Proposi*112tion 103. The only remedy consistent with Proposition 103 would be to permit the insurer to abandon its application but require it to renew all expired policies. But as explained in text, this remedy presents many legal and practical problems if the insurer has failed to renew a substantial number of policies.

 “Basket of snakes” might be a better metaphor. The process of undoing a large-scale refusal to renew will not only be messy, but some people are likely to be hurt.

 The commissioner argued in her brief that once an insurer’s certificate has been cancelled and it is no longer an admitted insurer, the insurer cannot service its outstanding policies. The majority point out that if this view were true, it would be difficult for an automobile insurer to leave this state, at least in an orderly and efficient fashion. (See maj. opn., ante, at pp. 98-99.) But as the majority convincingly demonstrate, the commissioner’s claim that a withdrawn insurer cannot service policies is in error; a company that has received permission to withdraw may still fulfill its contractual obligations to process claims, provide defenses, pay judgments, and renew policies.
The commissioner’s mistaken argument on this point does not undermine her conclusion that a company must renew up to the date when its application to withdraw is approved. To the contrary, the ability of a withdrawing company to service policies is what makes it possible for a company which has renewed up to the date of approval thereafter to conduct an orderly and efficient withdrawal.

 If I read the majority opinion correctly, it is not limited to renewals by automobile insurers under section 1861.03, subdivision (c), but applies to all insurers seeking to withdraw from the California market. If, for example, a fire insurance company (which is not regulated by Proposition 103) applies to withdraw from California, under the majority view that company could not renew policies or write new policies while its application was pending—a limitation on its authority which does not appear in any statute, and was not previously declared by judicial decision. This may make it more difficult for a withdrawing insurer to find an admitted company willing to assume the liabilities under unexpired policies. If the insurer planning to withdraw could renew up to the time when its application is approved, it could offer the reinsurer a portfolio of annual policies which expire and come up for renewal at regular intervals throughout the year. But if it cannot renew policies during the period between application and approval, its portfolio is skewed by the absence of any policies expiring during those months in the following year.

.Under Corporations Code sections 1900-1903, a company begins to wind up its business immediately after the stockholders or directors vote to dissolve, not from the subsequent date when it notifies the Corporations Commissioner of its election to dissolve. If the majority be*114lieved their analogy was on point, they would argue that an insurer could refuse to renew policies from the date when its board of directors had resolved to withdraw from the California market, not from the date when it applied to the Insurance Commissioner for permission to withdraw.