CALIFORNIA SUPREME COURT AGREES TO DECIDE WHETHER CONSUMER LEGAL REMEDIES ACT APPLIES TO INSURERS

The California Supreme Court has granted review in Fairbanks v. Superior Court (New World Life Ins. Co.), Case No. S157001 to decide whether insurance is a "good" or "service" within the meaning of the California Consumer Legal Remedies Act (CLRA).

The CLRA is a consumer protection statute that regulates any "transaction intended to result or which results in the sale or lease of goods or services to any consumer." It prohibits 23 "proscribed practices," a few of which could, in the words of the court, "conceivably apply to insurance," such as "[r]epresenting that goods or services have . . . benefits, or quantities which they do not have" or "[r]epresenting that goods or services are of a particular standard, quality,or grade." The CLRA offers a broad range of remedies, including restitution, injunctive relief, compensatory and punitive damages, and attorney fees. In contrast, the Unfair Insurance Practices Act (UIPA) more narrowly defines the scope of actionable insurance sales practices, and offers only administrative remedies imposed by the Insurance Commissioner.

The plaintiff in Fairbanks charged that the defendant's practices in selling life insurance policies were deceptive, and that they fell within the proscriptions of the CLRA. The intermediate Court of Appeal concluded that the plain language of the statute, legislative history, and public policy all dictate that a CLRA action cannot be brought based on allegedly deceptive insurance sales practices because the financial transaction resulting in an insurance contract is neither a "good" (i.e., a "tangible item") nor a "service" (i.e., a "work, labor, and services for other than a commercial or business use, including services furnished in connection with the sale or repair of goods").

If you have any questions about this case, please contact Lisa Perrochet or Mitch Tilner at (818) 995-0800 or lperrochet@horvitzlevy.com or mtilner@horvitzlevy.com.

www.horvitzlevy.com

If you do not wish to continue to receive these informational bulletins, please e-mail
jpaul@horvitzlevy.com with a subject line "UNSUBSCRIBE."