In re Insurance Installment Fee Cases
150 Cal. Rptr. 3d 618
Cal. Ct. App.2012Background
- Plaintiffs, a tentatively certified class of State Farm insureds paying monthly installments, challenge an installment fee charged to cover billing/collection costs.
- They allege the SFPP installment fee is an unlawful extra premium not disclosed on declarations pages and not approved as required by statute.
- Plaintiffs contend the SFPP is a separate agreement from the insurance contract and that the fee results in double-charging for billing costs.
- State Farm demurred, and the trial court sustained the demurrer without leave to amend, ruling the fee is not premium, the policy does not authorize installments, and no misrepresentation was pled.
- Plaintiffs also pursued UCL claims and asserted related misrepresentation theories; the court addressed integration and amendment issues regarding the policy.
- State Farm cross-appealed on costs related to notice provisions for discovery of policyholders’ information.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the SFPP installment fee premium under §381/§383.5? | Nakashima/Nakashima-like view: fee is premium as part of the policy cost. | Auto Club/Troyk view: fee is separate consideration, not premium. | Installment fee is not premium; SFPP is a separate agreement. |
| Does the policy permit installments or require amendment to impose installments? | Policy language allows six-month renewals and installments without an endorsement. | Policy requires upfront full premium; SFPP cannot modify contract without endorsement. | Policy does not allow installment payments within the policy and endorsement is not required for SFPP as it is a separate agreement. |
| Does charging the installment fee breach the contract or violate UCL? | Fee is unlawful premium; misrepresentation and deception under UCL. | Fee is lawful, not premium, and not deceptive; no breach. | No breach of contract or UCL based on premium theory; UCL claim rejected. |
| Are plaintiffs entitled to costs for policyholder notice and disclosure during discovery? | State Farm should bear the discovery notice costs. | Costs should be awarded to prevailing party; notice costs may be discretionary. | Notice costs were required by law/order; remand on reasonableness of amount; prevailing party cost shift affirmed. |
Key Cases Cited
- Auto Club Ins. Exch. v. Superior Court, 148 Cal.App.4th 1218 (Cal. Ct. App. 2007) (installment charges treated as interest, not premium under §381(f))
- Troyk v. Farmers Grp., Inc., 171 Cal.App.4th 1305 (Cal. Ct. App. 2009) (service charges for one-month term deemed premium; consumer perspective)
- Nakashima v. State Farm Mut. Auto. Ins. Co., 153 P.3d 667 (N.M. 2007) (installation fee as separate consideration, not premium; supported by contract interpretation)
- Stringer v. State Farm Mut. Auto. Ins. Co., 387 S.C. 188, 687 S.E.2d 58 (S.C. 2009) (contextual interpretation of payments clause in policy terms)