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Court of Appeal Holds Violation of Insurance Unfair Practices Regulations Can be Based On A Single Knowing Act

October 1, 2018

PacifiCare Life & Health Ins. Co. v. Jones
(September 20, 2018, G053914) __ Cal.App.5th __ [2018 WL 4501610]

The California Department of Insurance imposed penalties on PacifiCare for “over 900,000 acts and practices in violation of the Insurance Code.” PacifiCare argued that the Department’s definition of a “violation” of the unfair claims settlement practices regulations as either a “single occasion” of an unfair practice or a “general business practice” was inconsistent with the definition of an “unfair claims settlement practice” under Insurance Code section 790.03(h). Pacificare sought an injunction to prevent the Insurance Commissioner from enforcing the regulations. The trial court granted the injunction, agreeing with PacifiCare that an insurer can violate the unfair claims settlement practice regulations only by engaging in a “pattern of misconduct.” The Insurance Commissioner appealed.

The Court of Appeal reversed the injunction, holding that a “violation” of the unfair claims settlement practice regulations can occur either as the result of a single occurrence or a pattern of misconduct. The court based its definition on Royal Globe Ins. Co. v. Superior Court (1979) 23 Cal.3d. 880, 891, where the California Supreme Court held that section 790.03(h), which lists sixteen prohibited settlement practices, applies to an insurer’s “single knowing act.”

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