Association of California Insurance Companies v. Jones
212 Cal. Rptr. 3d 395
| Cal. | 2017Background
- Wildfires in California revealed widespread homeowner underinsurance; insurer replacement-cost tools often understated rebuild costs.
- The Insurance Commissioner promulgated Cal. Code Regs., tit. 10, § 2695.183 (2011) to standardize content, methodology, and disclosure for insurer replacement-cost estimates given at application or renewal.
- The Regulation requires estimates to include labor, materials, overhead/profit, demolition/debris removal, permits/architect plans, and specific dwelling features; it bars depreciation and requires annual method updates and recordkeeping.
- Association of California Insurance Companies sued for declaratory relief arguing the Commissioner exceeded authority, improperly regulated underwriting, and violated free speech; trial court and Court of Appeal invalidated the Regulation as beyond authority under Ins. Code § 790.10 and the UIPA.
- The Supreme Court granted review to decide whether § 790.10 authorized the Commissioner to promulgate a regulation defining misleading replacement-cost estimates under Ins. Code § 790.03(b).
- The Supreme Court reversed the Court of Appeal, holding the Regulation validly implements the UIPA and is within the Commissioner’s rulemaking authority; the case was remanded for further proceedings on other challenges.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 790.10 authorizes the Commissioner to promulgate the Regulation defining misleading replacement-cost estimates | § 790.10 does not permit the Commissioner to add new substantive unfair practices; such expansions must proceed under § 790.06 order-to-show-cause process | § 790.10 authorizes promulgation of reasonable rules "as are necessary to administer" the UIPA, including making specific what constitutes misleading statements under § 790.03(b) | Held: § 790.10 grants sufficient authority to promulgate the Regulation as an exercise of administrative rulemaking power |
| Whether the Regulation conflicts with the UIPA or exceeds delegated authority by specifying new unfair practices | The Regulation improperly expands the statutory list and circumvents legislatively prescribed procedures; expressio unius indicates exclusion | The Regulation implements and interprets the broad statutory prohibition on untrue, deceptive, or misleading statements and fills in details the Legislature left to the Commissioner | Held: Regulation is consistent with UIPA and reasonably necessary to effectuate its purpose; expressio unius does not preclude agency elaboration |
| Whether an estimate — inherently uncertain — can be deemed "misleading" under § 790.03(b) | Estimates are inherently inexact; labeling an estimate misleading solely because it omits some components is unreasonable | An estimate that omits essential, reasonably knowable rebuild costs is likely to mislead consumers; regulation reduces that risk | Held: The Regulation reasonably targets estimates likely to mislead by omitting essential cost components; facial challenge fails |
| Whether format, disclosure, update, and recordkeeping requirements are arbitrary or unnecessary | Some required elements (e.g., age, annual updates) may be irrelevant or burdensome and could lead to overestimates | Those elements are relevant to rebuild cost accuracy and facilitate enforcement and consumer comparison; annual ‘‘reasonable steps’’ is sensible | Held: Format, update, and recordkeeping provisions are reasonably related to regulatory purpose and survive facial challenge |
Key Cases Cited
- Ford Dealers Assn. v. Dep’t of Motor Vehicles, 32 Cal.3d 347 (Cal. 1982) (agency may promulgate regulations barring specific classes of misleading statements within statute)
- Moore v. Cal. State Bd. of Accountancy, 2 Cal.4th 999 (Cal. 1992) (board authorized to define misleading titles under broad grant to administer statute)
- Yamaha Corp. of Am. v. State Bd. of Equalization, 19 Cal.4th 1 (Cal. 1998) (framework for judicial deference to administrative statutory interpretations)
- Agricultural Labor Relations Bd. v. Superior Court, 16 Cal.3d 392 (Cal. 1976) (agency discretion to choose rulemaking versus adjudication)
- Ralphs Grocery Co. v. Reimel, 69 Cal.2d 172 (Cal. 1968) (rejecting argument that specific statutory silence limits broad agency authority)
- Credit Ins. Gen. Agents Assn. v. Payne, 16 Cal.3d 651 (Cal. 1976) (presumption of validity for agency regulations)