A California appellate court recently heard a consolidated appeal of two class action lawsuits against a title insurer. The plaintiffs in each case obtained owner’s and lender’s title insurance policies and allege they were overcharged for their title insurance policies.
The case is Jeffrey Albert Sjobring et al. v. First American Title Insurance Co., et al. (Court of Appeal, Second District, California, No. B293732).
The case is a consolidated appeal of two class action lawsuits against First American Title insurance Co. In each case, the plaintiffs obtained owner’s and lender’s title insurance policies and allege they were overcharged for their title insurance policies.
In the first case, Jeffrey Albert Sjobring alleged that First American’s filed rate for an extended coverage loan policy when sold together with an extended coverage owner’s policy was $125, not the $563 he was charged. Alternatively, Sjobring argued that even if his policy is considered a standard coverage policy, he should have been charged First American’s filed rate of $290.
The trial court certified two classes in this case. The first was “All persons who paid all or part of the premium in a transaction occurring from Jan. 1, 2003, through Oct. 8, 2006, in which the premium paid was more than $125 for any First American concurrent loan policy issued with an Eagle Owner’s Policy issued without regional exceptions insuring property in California, where the aggregate liability of the loan policies issued did not exceed the aggregate liability of the owner’s policy.” The second was “All persons who paid all or part of the premium in a transaction occurring from Jan. 1, 2003, through Oct. 8, 2007, in which the premium paid was more than 20 percent of ‘Base Rate A’ for a First American first concurrent loan policy insuring property in California, where the aggregate liability under the loan policies did not exceed the liability under the owner’s policy, excepting those persons who are members of any class that may be certified in Kaufman ... . Class Two may only seek to claim that the rate applied to the lender’s policy, as issued, was improper and should have been charged at the lower C-5 rate.”
In the second case, Wendy Kaufman argues that under First American’s filed rates, there was no charge for a loan policy purchased concurrently with a standard coverage owner’s policy. She argues she should have paid $125, not the $710 she was charged. The trial court certified a class consisting of “All persons who paid for a first Eagle loan title policy in a residential real estate sales transaction in California that was issued concurrently with an owner’s policy during the period Oct. 2, 2006, to Oct. 2, 2007, where the aggregate liability of the loan policies did not exceed the liability of the owner’s policy.”
The trial court granted First American’s motions for judgment on the pleadings and dismissed both cases. It held that the plaintiffs’ allegations amounted to an improper challenge to the use of a rate and implicates ratemaking. It found First American was shielded from liability under Section 12414.26, which bars suits under noninsurance laws for an act done, action taken or agreement made pursuant to the authority conferred by the rate-filing statutes.
The plaintiffs appealed, arguing that “immunity under Section 12414.26 is limited to conduct authorized by Articles 5.5 and 5.7 of the Insurance Code. Those articles do not authorize title insurers to charge more than their filed rates. To the contrary, such conduct is expressly prohibited by Section 12414.27. Whether defendants charged more than the filed rates depends, in turn, on whether plaintiffs’ policies provided standard or extended coverage and courts routinely interpret insurance policies. Because those classifications are not clear from the face of the pleadings and judicially noticed documents, it is a question of fact that cannot be resolved by motions for judgment on the pleadings. Plaintiffs also contend that administrative proceedings before the Insurance Commissioner are not a consumer’s exclusive remedy for the charging of an unauthorized rate.”
First American countered that it is immune from suit under Section 12414.26 “because the lawsuits challenge acts done pursuant to authority conferred by Article 5.5—namely, rate setting and the classification of title insurance policies. And Villanueva doesn’t assist plaintiffs because that case dealt with a title insurer that charged rates without filing them with the insurance commissioner. Defendants also argue that Article 6.7’s administrative process is the sole remedy for claims that fall within Section 12414.26’s immunity provision.”
The appellate court reversed the judgments and remanded for further proceedings, finding that the plaintiffs do not challenge First American’s filed rates or coverage classification and, therefore, Section 12414.26 does not shield them from suit for charging unauthorized rates for their title policies.
The court noted that the California Supreme Court in Villanueva recently rejected a title company’s expansive view of its immunity from suit under Section 12414.26. In that case, the plaintiff and his wife had refinanced the mortgage on their home. The title company that provided escrow services charged an escrow fee, overnight delivery fee, courier fee and a fee for preparing a new deed. The couple sued the company, arguing that the delivery, courier and draw deed fees were illegal because they had never been filed with the insurance commissioner. The California Supreme Court held that the immunity provided for in Section 12414.26 does not extend beyond activity authorized by Articles 5.5 and 5.7.
First American argued that Villanueva is inapplicable to this case because it addressed a situation in which rates for the charged fees had not been filed at all. The court disagreed.
“Villanueva’s holding, however, was not limited to the situation involving unfiled rates for certain fees—it broadly and expressly held that 12414.26’s immunity ‘does not shield title insurers from suit for charging unauthorized rates,’” the court stated. “Indeed, the court emphasized that the legislative history ‘offers no hint that either Section 12414.26 or its predecessor immunity provisions were ever thought to categorically immunize all ratemaking activity—even unauthorized activity—from suit.”
First American also argued that Article 5.5 allows it to set and file rates, then charge those rates after 30 days. It argues it is immune from the plaintiffs’ challenge to its making and use of its filed rates and asking the court to remake its coverage classifications and filed rates by reinterpreting them.
“Defendants’ argument rests on the premise that they, in fact, classified plaintiffs’ policies the way defendants claim,” the court stated. “First, as to Sjobring, they contend they classified his owner’s policy as standard coverage, and he is seeking to reclassify it as extended coverage. But that is not Sjobring’s argument. He does not assert that defendants misclassified the policy; he contends that the policy was always classified as extended coverage, and they charged him for the wrong thing.
“Second, as to Kaufman, and discussed in more detail below, defendants assume that her owner’s policy was classified as extended coverage in the filed rate schedule and contend that Kaufman wants to reclassify it as a standard policy,” the court continued. “But that is not Kaufman’s argument. Her argument is that the fee schedule itself—the schedule defendants prepared and filed—classifies the policy as a standard policy. She seeks only to hold defendants to their filing.
“Defendants also suggest that it is irrelevant whether the amounts they ultimately charged for various policies were for the amounts listed for those policies in the schedule of fees because only they get to decide whether a policy is a standard or extended coverage policy. We disagree. Villanueva provided the following example, which is illustrative here: “Consider, for example, the case of an insurer that deviates from its filed rates to impose higher rates for African–Americans seeking title insurance for home purchases in particular neighborhoods. Such a policy would surely relate to ratemaking: The insurer effectively has two rate schedules, one for African–Americans and another for those of other races. Such a policy would also be clearly illegal—not only under general antidiscrimination laws like the Unruh Civil Rights Act and the California Fair Employment and Housing Act, but also under Article 5.5 itself. In this example, the insurer has rates on file but is not actually charging the filed rates. That conduct is not authorized by the statute. Thus, the insurer is not immune from suit. Under the defendant’s argument, however, the fact that the insurer is not charging the filed rates would be irrelevant because courts could not even consider the question.”
The court also disagreed with Fidelity’s argument that the administrative process in Article 6.7 is the sole remedy for claims that fall within Section 12414.26’s immunity provision. It found the claims in this case do not fall within section 12414.26’s immunity provision and that Villanueva squarely rejected this argument.
“As Villanueva explains: ‘Article 6.7 of the chapter covering title insurance provides for administrative proceedings before the commissioner in the event of dispute over charged rates or rating plans or systems. First, a ‘person aggrieved by any rate charged by a title insurer may request such person or entity to review the manner in which the rate, plan, system or rule has been applied with respect to insurance or services afforded him,” the court stated. “Such request shall be written. If unable to obtain satisfaction from the insurer, the aggrieved consumer may then turn to the commissioner. ‘Any person aggrieved by the action of any such person or entity in refusing the review requested, or in failing or refusing to grant all or part of the relief requested, may file a written complaint and request for hearing wit the commissioner, specifying the grounds relied upon.’ Under this provision, a written complaint to the regulated entity is a necessary prerequisite to a written complaint to the commissioner; it is only if the written complaint fails that a person is ‘aggrieved’ and entitled to seek a hearing with the commissioner. But nothing in either Insurance Code Section 12414.13 or the remainder of Article 6.7 suggests that a complaint to the commissioner is exclusive of any other remedy that might be available to the consumer, including remedies otherwise available in judicial proceedings.
“Furthermore, as in Villanueva, the parties here seek ‘restitution on a classwide basis, but ... the statutory scheme grants the commissioner no power to issue restitution to aggrieved individual consumers, never mind a class of them. The only relief the commissioner can provide is an order prohibiting the unlawful rate or suspending or revoking the insurer’s license. To interpret Article 6.7 as supplying consumers’ sole avenue of recourse would leave them unable to obtain restitution of, or have the insurer disgorge, illegal overcharges. It would, as the commissioner argues, undermine the stated overarching goal of ensuring that insurers do not impose excessive or unfairly discriminatory rates. In some cases where a violation is too minor to warrant a license suspension, exclusivity would eliminate any effective deterrent, and in other cases where a suspension is imposed, the absence of restitution would render any remedy incomplete. For this reason, the commissioner in his briefing urges that ‘private enforcement is an important complement to the Department[ of Insurance]’s jurisdiction and consumer protection mission,’” the court stated. “In sum, Villanueva is clear on this point, and we are bound by its holding.”