A California district court has denied class certification in a lawsuit filed by auto insurance policyholders who say National General Insurance Co. and several other companies erroneously charged them higher premiums.

The plaintiffs sought class certification on claims that the insurers violated the California Unfair Competition Law (UCL) and breached the implied covenant of good faith and fair dealing. The defendant insurers are National General, Integon National Insurance Co., Integon Preferred Insurance Co. MIC General Insurance Corp., and Personal Express Insurance Co.

“All plaintiffs qualified as good drivers and were therefore entitled to a GDD [good driver discount] policy from an insurer within defendants’ control group that offered the lowest rates for that coverage,” an Oct. 8 court order states. “In violation of the Lowest Rates Rule, defendants’ agents and representatives failed to offer plaintiffs and class members the lowest available GDD policy rates within their control group.

“Plaintiffs assert that at the time they purchased their policies, certain defendants [other insurance companies] within the same control group had GDD policies with lower rates than what plaintiffs paid for substantially similar coverage but plaintiffs were never offered those lower rate policies.”

The same was true at policy renewal, according to the suit. “They would have purchased the lower premium policies if offered,” it states.

The court instructed the parties to address the meaning of “control group” under the applicable statute as the definition would inform standing.

“Section 1861.16(b) states that ‘[a]n agent or representative representing one or more insurers having common ownership or operating in California under common management or control shall offer, and the insurer shall sell, a good driver discount policy to a good driver from an insurer within that common ownership, management or control group,'” the order states. “Plaintiffs assert that this language is unambiguous; they argue that the court need only look to the plain meaning of ‘common ownership,’ ‘operated under common management,’ and ‘operated under common control’ to apply the statute.”

The insurance companies disagree, stating that “insurers are only part of a control group if they are ‘acting in concert together with respect to ratemaking, underwriting, etc.,'” according to the order.

“Defendants further argue that the legislative history of AB 2737 supports their interpretation because section 1861.16(b) was written to target corporate groups that were working together to manipulate the GDD insurance market and was not aimed at groups of insurers in general.”

The defendants argue that Personal Express Insurance Company (PEIC) wasn’t responsible for offering policies to the plaintiffs because it wasn’t in the same control group as National General and Integon Preferred at the time of their policy purchases. They contend that MIC also had no duty to offer a policy to the plaintiffs Edd and Dierdre King because they didn’t qualify for the lower-premium MIC “affinity group” policy.

In addition, plaintiff Sheila Lee cannot establish liability because she purchased her policy from a broker and not an agent, according to the defendants.

“Plaintiffs lack standing for injunctive relief because they are not now insureds,” the order states. “Defendants also argue that plaintiffs lack standing because ‘the lower rate policies they contend they should have been offered had different coverages than they actually purchased,’ in contravention of section 1861.16(b), which requires a cross-offer ‘from an insurer within [the control group] which offers the lowest rates for that coverage.'”

The court agreed with the plaintiffs’ interpretation of the “control group” definition.

The court ruled that Section 1861.16(b) is ambiguous and that the authorization in a separate statute for insurers within a control group to “act in concert between or among themselves” is for ratemaking purposes and doesn’t define “control group.” It also ruled that Lee doesn’t have standing to sue because “plaintiffs fail to present sufficient evidence to reasonably support a conclusion that Omni Safe was acting as an agent rather than a broker when Lee purchased and considered renewing her policy from it.”

The Kings are the only remaining representative plaintiffs.

• • In summary, the court found that:
  • Plaintiffs have not established Article III standing for Lee. Article III requires a concrete and actual “injury in fact,” that the injury is fairly traceable to the challenged conduct, and that it is likely, rather than speculative, that a favorable decision will redress the injury.
  • Plaintiffs have shown sufficient evidence from which a reasonable juror could determine that PEIC was in the control group between April 19, 2013 and April 1, 2014;
  • Plaintiffs have failed to establish that the Kings were eligible for the MIC lower-rate policy;
  • Plaintiffs have shown sufficient evidence to support their argument that the lower-rate PEIC policy was comparable to the NGIC policy purchased by the Kings in June 2013; and
  • Plaintiffs have not established standing for injunctive relief.

The parties were ordered to confer on and submit a proposed Rule 23 class actions briefing schedule by Oct. 22.

Images

Featured image credit: nathaphat/iStock