CASSAUNDRA ELLENA, Plaintiff and Appellant, v. DEPARTMENT OF INSURANCE et al., Defendants and Respondents.
No. A137268
First Dist., Div. Two.
Oct. 1, 2014.
230 Cal. App. 4th 198
Law Office of Bennett M. Cohen and Bennett M. Cohen for Plaintiff and Appellant.
Kamala D. Harris, Attorney General, Paul D. Gifford, Assistant Attorney General, Joyce E. Hee and Anne Michelle Burr, Deputy Attorneys General, for Defendants and Respondents.
KLINE, P. J.—Cassaundra Ellena appeals from a judgment of dismissal of her mandamus claim against the Department of Insurance and the Commissioner of the Department of Insurance (the commissioner; collectively, the DOI). Ellena contends, among other things, that the trial court erred when it found that she did not sufficiently allege in her pleading that the DOI violated a specific mandatory duty. We conclude that Ellena stated a viable mandamus claim because, as alleged, the commissioner violated the mandatory duty under
BACKGROUND
On November 18, 2011, Ellena filed a complaint against Standard Insurance Company (Standard), Stancorp Financial Group (Stancorp), and the DOI. She alleged that Standard is a wholly owned subsidiary of Stancorp, and that Standard failed to provide disability benefits to her under a group disability policy issued to her employer, the County of Sonoma (the policy), after she stopped working because of her lupus disease in April 2010.
Standard, according to Ellena‘s pleading, denied her claim for disability on August 27, 2010, based on the language of a policy form entitled “Definition of Disability.” Her pleading stated that this policy form was deceptive and violated settled law in California. In her sixth cause of action, she asserted that the DOI approved the policy without complying with its mandatory duty to review the policy form in accordance with established criteria. She sought a writ of mandamus against the DOI under
The DOI demurred, and Ellena filed a first amended complaint, alleging the same mandamus cause of action against the DOI. The DOI demurred, and the trial court sustained the demurrer with leave to amend.
On June 6, 2012, Ellena filed a second amended complaint with six causes of action. The second amended complaint set forth five causes of action against Standard and Stancorp, and included a sixth cause of action for mandamus against the DOI.
Ellena asserted that the DOI had a mandatory duty under
Two years after approving the policy for distribution in California, the DOI, according to Ellena‘s pleading, defined “‘total disability‘” in an agreement negotiated with another insurance company, known as the “California Settlement Agreement,” as “a disability that renders one unable to perform with reasonable continuity the substantial and material acts necessary to pursue his or her usual occupation in the usual and customary way . . . .” Ellena asserted that this definition in the California Settlement Agreement reflected settled California law and this settled law was known to the DOI when it approved the policy. The second amended complaint stated that the “‘Definition of Disability’ form [in the policy] that was ‘approved’ by the DOI Defendants ha[d] the effect of making it substantially easier than is permissible under settled California law for the insurer to deny benefits.” The DOI‘s approval of
Ellena alleged that the DOI “never actually exercised” its “discretion or performed” its “mandatory duties under” the Insurance Code to determine whether the policy complied with California law or qualified for approval under the Insurance Code. Additionally, she asserted, “Assuming that the DOI Defendants actually reviewed the ‘Definition of Disability’ form under the California Insurance Code . . . , the DOI Defendants abused their discretion in approving the [p]olicy . . . ; the DOI Defendants’ aforesaid abuses of discretion were palpably unreasonable, arbitrary and capricious.”
Ellena sought a writ of mandate to force the DOI to revoke and/or withdraw approval of the Definition of Disability form in the policy or to compel the DOI to exercise its discretion to approve or revoke the Definition of Disability form in the policy.
On June 28, 2012, the DOI again demurred to the second amended complaint. The trial court sustained the DOI‘s demurrer without leave to amend. The court ruled that Ellena had not sufficiently alleged a violation of a specific mandatory duty and that a writ of mandate could not be based on general enforcement provisions or statutes involving the DOI‘s exercise of discretion. On October 11, 2012, the court dismissed with prejudice the DOI from the lawsuit.
Ellena filed a timely notice of appeal. On September 16, 2013, the DOI filed in this court a motion to augment the record to include exhibits attached to the second amended complaint and a request for judicial notice of, among other things, two superior court orders in other cases. We granted the unopposed motion to augment and we took the request for judicial notice under submission, stating that we would rule on this request when deciding the merits of the appeal. We hereby grant the DOI‘s request for judicial notice. On October 16, 2013, Ellena filed an unopposed request for judicial notice of superior court orders in other cases. We granted this unopposed request on November 6, 2013.
DISCUSSION
I. Standard of Review
“A demurrer tests the legal sufficiency of the complaint, and the granting of leave to amend involves the trial court‘s discretion. Therefore, an appellate court employs two separate standards of review on appeal. [Citations.] First,
II. Requirements for Writ of Mandate
A court may issue a writ of mandate to compel a public agency or officer to perform a mandatory duty. (
A ministerial act is one that a public functionary “‘is required to perform in a prescribed manner in obedience to the mandate of legal authority,‘” without regard to his or her own judgment or opinion concerning the propriety of such act. (Ridgecrest Charter School v. Sierra Sands Unified School Dist. (2005) 130 Cal.App.4th 986, 1002.) “Thus, ‘[w]here a statute or ordinance clearly defines the specific duties or course of conduct that a governing body must take, that course of conduct becomes mandatory and eliminates any element of discretion.‘” (Carrancho v. California Air Resources Board (2003) 111 Cal.App.4th 1255, 1267.)
While a party may not invoke mandamus to force a public entity to exercise discretionary powers in any particular manner, if the entity refuses to act, mandate is available to compel the exercise of those discretionary powers in some way. (Ballard v. Anderson (1971) 4 Cal.3d 873, 884 [mandamus proper to compel the committee to consider the application for a therapeutic abortion without requiring parental consent as
Ellena contends that the Insurance Code imposes a mandatory duty on the DOI to review group disability policy forms prior to approving the policy. Ellena acknowledges that the DOI has the discretion to decide whether to approve a policy, but maintains that the DOI must exercise that discretion by reviewing the policy to determine whether it does or does not comply with California law. Alternatively, Ellena asserts that if the DOI did review the policy and exercised its discretion, the approval of the disability policy in the present case constituted an abuse of discretion as a matter of law because the decision was unreasonable and arbitrary.
The question before us is whether Ellena has stated a viable claim for mandamus under either of her two theories. A demurrer must be overruled if the complaint states a claim on any theory. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38–39.)
III. Mootness
The DOI maintains that a mandamus action based on Ellena‘s theory and allegations that the DOI never reviewed the policy prior to approving it will have no effect on her. The DOI points out that the commissioner has the authority under
Furthermore, even if Ellena cannot personally benefit from a mandamus proceeding, this does not necessarily bar her claim. “‘[I]f a pending case poses an issue of broad public interest that is likely to recur, the court may exercise an inherent discretion to resolve that issue even though an event occurring during its pendency would normally render the matter moot. “Such questions [of general public concern] do not become moot by reason of the fact that the ensuing judgment may no longer be binding upon a party to the action.” [Citation.]’ . . . And, in an earlier case, a Court of Appeal applied identical principles with specific reference to a writ of mandate: ‘As a general proposition courts will not issue a writ of mandate to enforce an abstract right of no practical benefit to petitioner, or where to issue the writ would be useless, unenforceable or unavailing. [Citation.] However, where the problem presented and the principle involved are of great public interest, the courts have deemed it appropriate to entertain the proceedings rather than to dismiss the same as being moot.’ [Citations.]” (Ballard v. Anderson, supra, 4 Cal.3d at pp. 876–877.)
The Insurance Code does not provide for an administrative avenue to contest the commissioner‘s approval of a policy form (
Accordingly, we exercise our discretion to consider Ellena‘s mandamus claim that the commissioner should be compelled to review the policy to determine whether it complies with California law.
IV. Ellena Has a Viable Claim for Mandamus
A. Compelling the Exercise of Discretion
Ellena maintains that the trial court erred in sustaining DOI‘s demurrer without leave to amend against her mandamus claim because the Insurance Code requires the DOI to review any new group disability policy form under established criteria prior to approving or disapproving it for use in California and she alleged in her second amended complaint that the DOI did not review the policy.5 She contends that she is not asking the court to force the DOI to implement a particular remedy but is seeking an order compelling the DOI to exercise its discretion to review the policy and decide whether to approve or revoke it. (See Ballard v. Anderson, supra, 4 Cal.3d at p. 884; Common Cause v. Board of Supervisors (1989) 49 Cal.3d 432, 442.) The DOI responds that the Insurance Code does not mandate any duty to review a new group disability insurance policy form and Ellena is improperly requesting the court to order the DOI to exercise its discretionary power.
Discerning the nature of the DOI‘s duties under the Insurance Code is a matter of statutory construction. It is well settled that when interpreting a statute we “determine and give effect to the intent of the enacting legislative body.” (People v. Braxton (2004) 34 Cal.4th 798, 810.) To do this, “‘[w]e first examine the words themselves because the statutory language is generally the most reliable indicator of legislative intent. [Citation.] The words of the statute should be given their ordinary and usual meaning and should be construed in their statutory context.’ [Citation.] If the plain, commonsense meaning of a statute‘s words
We are not aware of any state court that has directly considered the issue before us. However, Division Four of this court in dicta (Van Ness v. Blue Cross of California (2001) 87 Cal.App.4th 364, 371–372) and numerous federal courts (see, e.g., Peterson v. American Life & Health Ins. Co. (9th Cir. 1995) 48 F.3d 404, 410 (Peterson); Rader v. Sun Life Assurance Co. of Canada (N.D.Cal. 2013) 941 F.Supp.2d 1191, 1195; Palma v. Prudential Ins. Co. (N.D.Cal. 2011) 791 F.Supp.2d 790, 795–797 (Palma); Graybill-Bundgard v. Standard Ins. Co. (N.D.Cal. 2011) 793 F.Supp.2d 1117, 1120 (Graybill-Bundgard); Firestone v. Acuson Corp. Long Term Disability Plan (N.D.Cal. 2004) 326 F.Supp.2d 1040, 1050; Brazina, supra, 271 F.Supp.2d at p. 1167; Hansen v. Ohio National Life Assurance (N.D.Cal., Aug. 1, 2011, No. C 11-01382 MEJ) 2011 WL 3294289; Blake v. Unumprovident Corp. (N.D.Cal., Nov. 20, 2007, No. C 07-04366 MHP) 2007 WL 4168235; Sullivan v. Unum Life Ins. Co. of America (N.D.Cal., Apr. 15, 2004, No. C 04-00326 MJJ) 2004 WL 828561) have stated that
The DOI emphasizes that the federal court decisions, which are not binding on this court, were wrongly decided. The DOI discusses Peterson, Brazina, Palma, and Graybill-Bundgard and asserts that these courts relied on inaccurate dicta in state court decisions and/or inapplicable statutes or regulations. The DOI points out that the commissioner was not a party to these federal actions and after the federal courts remanded these cases to the state court,
We need not address the DOI‘s extensive criticisms of the federal court decisions because, as we explain below, we independently interpret the relevant statutes in the Insurance Code. In particular, we examine the plain language of
In the present case, however, unlike the situation in Schwartz, Ellena is not seeking to require the commissioner to exercise his or her discretion in a particular manner, but is seeking to compel the commissioner to review the policy to determine whether it complies with the requirements of the Insurance Code. As already discussed, “[m]andamus will not lie to control an exercise of discretion, i.e., to compel an official to exercise discretion in a particular manner. Mandamus may issue, however, to compel an official both to exercise his discretion (if he is required by law to do so) and to exercise it under a proper interpretation of the applicable law.” (Common Cause v. Board of Supervisors, supra, 49 Cal.3d at p. 442.) As federal courts have pointed out, the court in Schwartz did not address this distinction. (See, e.g., Palma, supra, 791 F.Supp.2d at p. 796.)
The Schwartz court did not analyze the language of
The clear language of this statute is that “[t]he commissioner shall not approve any disability policy for insurance or delivery . . .” unless it meets a number of requirements. (
We recognize that the use of the word “shall” in a statute does not necessarily create a mandatory duty. (See County of Los Angeles v. Superior Court (2002) 102 Cal.App.4th 627, 639.) However, in the present case, the statute requires the commissioner to reject certain policies and thus compliance with this mandate demands that the commissioner review the policy. The plain meaning of these provisions is
The above interpretation of the Insurance Code advances the expressed objective of
The need for the commissioner to review disability policies prior to approving them was apparently appreciated by the Legislature as many if not most consumers do not read or understand the meaning of disability insurance policies. As Williston observes, and is commonly known, it is a “reality of the insurance business . . . that few people take time to read their policies.” (28 Williston on Contracts (4th ed.) § 70:246; accord, Boardman, Insuring Understanding (2010) 95 Iowa L.Rev. 1075, 1077 [“Consumers do not read their insurance policies.“]; Loewenstein et al., Consumers’ Misunderstanding of Health Insurance (2013) 32 Journal of Health Econ. 850, 852 [“consumers limited understanding of health insurance . . . is likely to lead to suboptimal decisions“]; Cude, Insurance Disclosures: An Effective Mechanism to Increase Consumers’ Insurance Market Power? (2006) 24 J. Ins. Reg. 57 [“many consumers do not read and understand insurance disclosures and misinterpretations are likely among at least some consumers who do read disclosures].“)7 Because “the policy is seldom read [and] almost never
Unless the commissioner reviews the policy, how can he or she “prevent, in respect to disability insurance, fraud, unfair trade practices, and insurance economically unsound to the insured,” or adequately “[a]ssure that the language of all insurance policies can be readily understood and interpreted” by those who take the trouble to read them, as required by subdivision (a) of
The DOI claims that
Ellena‘s mandamus action is not directed towards forcing the commissioner to comply with
meaning, path dependence can preclude otherwise desirable improvements in the language.” (Boardman, Contra Proferentem (2006) 104 Mich. L.Rev. 1105, 1107, italics omitted.)
The 1949 amendment to
The Legislature‘s review of
The DOI asserts that
The DOI also relies on
The DOI contends that
Furthermore,
We conclude that the Insurance Code requires that the commissioner review a disability policy form prior to approving the policy.8 The trial court therefore erred in finding that Ellena failed to state a claim for mandamus
B. Abuse of Discretion
Ellena also claims that she pled in her sixth cause of action the essential elements of an alternative cause of action for a writ of mandate based on the allegation that, if the commissioner did review the policy and approve it, such an approval was an abuse of discretion.
We have concluded that Ellena‘s sixth cause of action states a viable claim for writ of mandate based on her allegation that the commissioner failed to review the group disability policy prior to approving it as required by the Insurance Code. Since the trial court‘s order sustaining the demurrer as to the sixth cause of action against the DOI must be reversed, we need not determine whether that cause of action is also viable on Ellena‘s alternative theory that approval of the policy was an abuse of discretion.9 “A demurrer does not lie to a portion of a cause of action.” (PH II, Inc. v. Superior Court
DISPOSITION
The order entering a judgment of dismissal in favor of the DOI is reversed and the matter is remanded to the superior court. The superior court is directed to vacate its order sustaining the DOI‘s demurrer without leave to amend and to enter a new and different order overruling the demurrer. Ellena is awarded the costs of appeal.
Richman, J., and Brick, J.,* concurred.
Respondents’ petition for review by the Supreme Court was denied December 17, 2014, S222452.
*Judge of the Alameda Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
Notes
The DOI requested that we take judicial notice of orders in the San Francisco Superior Court sustaining without leave to amend the demurrers of the commissioner in Palma, No. CGC-10-503043, order filed on December 15, 2011, and Graybill-Bundgard, No. CGC-10-504747, order filed on February 10, 2011. The DOI also requested that we take judicial notice of the memoranda of points and authorities in support of these demurrers.
Although we hereby grant the DOI‘s request for judicial notice, we note that these orders are not binding on us; nor are they especially helpful. Although the DOI included the commissioner‘s memorandum of points and authorities in support of the demurrers, it did not include the pleadings or the memorandum of points and authorities in opposition to the demurrers. The order sustaining the demurrer without leave to amend in Palma, was issued by Judge Harold Kahn, the same judge sustaining the demurrer without leave to amend in the present case. Judge Peter J. Busch signed the order sustaining the demurrer without leave to amend in Graybill-Bundgard and this order provides no explanation or reasons for sustaining the demurrer.
On November 6, 2013, we granted Ellena‘s request for judicial notice of three orders from the San Francisco Superior Court that overruled the commissioner‘s demurrers to the plaintiffs’ cause of action for mandamus. (Guyton v. Unum Life Ins. Co., No. CGC-02-415586, order filed on July 17, 2003, and signed by Judge Ronald E. Quidachay; Glick v. Unumprovident Corp., No. CGC-03-422858, order filed on May 7, 2004, and signed by Judge Ronald E. Quidachay; and Contreras v. Metropolitan Life Ins. Co., No. CGC-07-462224, order filed on Feb. 22, 2008, and signed by Judge Patrick Mahoney.) The order in Contreras cites to section 10291.5, subdivision (b)(1) and states that nothing in this statute suggests that the commissioner may choose not to review a policy. Ellena also did not include the pleadings or any other documents related to these cases.
The orders submitted are not helpful to our construction of section 10291.5, subdivision (b), but they do underscore the importance of settling the question of the commissioner‘s duties under the Insurance Code.
Some authorities believe the audience of those who draft insurance policies is not present or potential customers, but courts. As has been noted, “the sheer act of having interpreted a clause in a way that allows for predictable application in the future adds value to that clause. With insurance, the value is great enough that this generally makes it more likely, not less, that drafters will retain poor language. With ordinary commercial contracts, the value of certainty will sometimes outweigh a less than ideal clause content, and sometimes not. But where drafters—such as insurers—care more that a clause have a fixed meaning than a particular
“[N]o group disability policy shall be issued or delivered to any person in this state nor shall any endorsement for any such policy be issued which contains any provision contradictory, in whole or in part, of any of the provisions promulgated by the commissioner as being required or optional or alternative provisions to be incorporated into such policy in accordance with the rules promulgated by him for their use.” (
Regulation 2218.10 states in relevant part: “(a) This regulation shall control the filing of all group and blanket life and group disability insurance documents required by law to be filed by the Sections cited in [Insurance Code section 10191] except the following which must [be] submitted for prior substantive review in accord with contemporary Department standards: [] (1) Document filings involving concepts of insurance or types of coverage which may be considered as uncommon or unusual and which are not encompassed in any form of the insurer authorized by this Department at the time of the said filing, nor in any form filed in this State from which the submitted form has been copied.” Ellena argues that this regulation required the DOI to conduct a “substantive review in accord with contemporary Department standards” prior to approving certain group disability policies because her policy contained a concept of insurance and recovery that might be considered as uncommon or unusual.
The DOI objects to Ellena‘s reliance on