Farmers Insurance Exchange v. Superior Court

826 P.2d 730, 2 Cal. 4th 377, 6 Cal. Rptr. 2d 487, 92 Daily Journal DAR 4719, 92 Cal. Daily Op. Serv. 2946, 1992 Cal. LEXIS 1364
CourtCalifornia Supreme Court
DecidedApril 6, 1992
DocketS016912
StatusPublished
Cited by270 cases

This text of 826 P.2d 730 (Farmers Insurance Exchange v. Superior Court) is published on Counsel Stack Legal Research, covering California Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Farmers Insurance Exchange v. Superior Court, 826 P.2d 730, 2 Cal. 4th 377, 6 Cal. Rptr. 2d 487, 92 Daily Journal DAR 4719, 92 Cal. Daily Op. Serv. 2946, 1992 Cal. LEXIS 1364 (Cal. 1992).

Opinions

Opinion

LUCAS, C. J.

The People, through the Attorney General (real party in interest), filed suit against various insurers (petitioners) under the Unfair Practices Act (Bus. & Prof. Code, § 17000 et seq.). We granted review to decide whether this judicial action should be stayed under the doctrine of “primary jurisdiction” pending administrative action by the Commissioner of the Department of Insurance (hereafter sometimes the Commissioner). (See Ins. Code, § 1858 et seq.; all further statutory references are to this code unless otherwise indicated.)

We conclude that in the absence of legislation clearly addressing whether a court may exercise discretion under the primary jurisdiction doctrine, a court may exercise such discretion and may decline to hear a suit until the administrative process has been invoked and completed. We hold that prior resort to the administrative process is required in the circumstances of this case and that the trial court abused its discretion in concluding otherwise.

I. Facts and Procedure

The People filed a two-count complaint alleging petitioners violated sections 1861.02 and 1861.05, enacted by the voters in November 1988 as part of Proposition 103, by refusing to offer a “Good Driver Discount policy” to all eligible applicants.

In their first cause of action, the People claim that since November 1989, petitioners have violated the above provisions by: (i) refusing to offer and [382]*382sell a Good Driver Discount policy to any person who meets the standards of section 1861.025 (see § 1861.02, subd. (b)(1); (ii) refusing to charge persons who qualify for the Good Driver Discount policy a rate “at least 20% below the rate the insured would otherwise have been charged for the same coverage” (see § 1861.02, subd. (b)(2)); (iii) unlawfully using the absence of insurance as a criterion for determining eligibility for a Good Driver Discount policy, and generally, for the setting of automobile insurance rates and premiums (see § 1861.02, subd. (c)); and (iv) “unfairly discriminating in eligibility and rates for insurance for persons who qualify under the statutory criteria for a Good Driver Discount policy” (see § 1861.05, subd. (a)).

Under the first cause of action the People seek an order pursuant to Code of Civil Procedure section 526, enjoining petitioners from violating section 1861.02, subdivisions (b)(1), (b)(2), and (c), and section 1861.05, subdivision (a).

The second cause of action—which is the subject of this proceeding— incorporates the allegations of the first count, and asserts: “The violations of sections 1861.02 and 1861.05 as set forth above constitute unlawful and unfair business practices, in violation of Business and Professions Code section 17200.”

Under the second cause of action the complaint seeks the injunctive relief described above pursuant to Business and Professions Code section 17204, a $2,500 civil penalty against each petitioner for each violation of law pursuant to Business and Professions Code section 17206, and “such other relief as this Court deems just and proper.”

Petitioners demurred to both causes of action on the ground, inter alia, that the People’s suit was precluded by their failure to pursue and exhaust administrative remedies. The trial court sustained the demurrer as to the first cause of action (the Insurance Code claim), concluding that under County of Los Angeles v. Farmers Ins. Exchange (1982) 132 Cal.App.3d 77, 85-87 [182 Cal.Rptr. 879], the People were barred from proceeding because they failed to exhaust administrative remedies available under the Insurance Code. The People do not contest this ruling.1

As to the second cause of action (the Business and Professions Code claim), however, the court overruled the demurrer, concluding that under [383]*383People v. McKale (1979) 25 Cal.3d 626 [159 Cal.Rptr. 811, 602 P.2d 731], the People may proceed under the Business and Professions Code “even though there is a separate statutory scheme for enforcement of [Insurance Code] section 1861.02.”

Petitioners sought a writ of mandate in the Court of Appeal challenging the propriety of this latter ruling. In an unpublished opinion, the Court of Appeal agreed with the trial court. It reasoned that “exhaustion of administrative remedies” is not required before an action under section 17200 of the Business and Professions Code may be prosecuted because (i) the People’s second cause of action seeks a remedy that is “merely cumulative” to administrative remedies sought in the first count, and (ii) the courts can more promptly resolve the issues in this case than can the Insurance Commissioner.

As noted, we conclude prior resort to the administrative process is appropriate in these circumstances, and we therefore reverse the decision of the Court of Appeal.

II. The Statutory Schemes

A. The Unfair Practices Act

The Unfair Practices Act is found in Business and Professions Code, section 17000 et seq. Section 17200 of the Business and Professions Code broadly defines “unfair competition” as, inter alia, any “unlawful, unfair or fraudulent business practice . . . .” “Unlawful business activity” proscribed under section 17200 includes “ ‘anything that can properly be called a business practice and that at the same time is forbidden by law.’ ” (Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 113 [101 Cal.Rptr. 745, 496 P.2d 817] [hereafter Barquis].) As the People observe in their brief on the merits, “[i]n essence, an action based on Business and Professions Code section 17200 to redress an unlawful business practice ‘borrows’ violations of other laws and treats these violations, when committed pursuant to business activity, as unlawful practices independently actionable under section 17200 et seq. and subject to the distinct remedies provided thereunder.”

Section 17205 of the Business and Professions Code states: “Unless otherwise expressly provided, the remedies or penalties provided by this chapter are cumulative to each other and to the remedies or penalties available under all other laws of this state." (Italics added.) Section 17204 of the Business and Professions Code authorizes the Attorney General to prosecute an action to enjoin violations of section 17200 of the Business and Professions Code. Finally, Business and Professions Code section 17206 provides for a $2,500 civil penalty for each violation of section 17200.

[384]*384The People’s complaint under section 17200 of the Business and Professions Code is grounded on asserted violations of four provisions of the McBride-Grunsky Insurance Regulatory Act of 1947 (McBride Act) (Stats. 1947, ch. 805, §§ 1-7, pp. 1896-1908), which is set out in the Insurance Code, division 1, part 2, chapter 9. We will briefly outline the relevant provisions of the McBride Act before analyzing the People’s action under the Business and Professions Code.

B. The McBride Act

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826 P.2d 730, 2 Cal. 4th 377, 6 Cal. Rptr. 2d 487, 92 Daily Journal DAR 4719, 92 Cal. Daily Op. Serv. 2946, 1992 Cal. LEXIS 1364, Counsel Stack Legal Research, https://law.counselstack.com/opinion/farmers-insurance-exchange-v-superior-court-cal-1992.