Lead Opinion
Opinion
The People, through the Attorney General (real party in interest), filed suit against various insurers (petitioners) under the Unfair Practices Act (Bus. & Prof. Code, § 17000 et seq.). We granted review to decide whether this judicial action should be stayed under the doctrine of “primary jurisdiction” pending administrative action by the Commissioner of the Department of Insurance (hereafter sometimes the Commissioner). (See Ins. Code, § 1858 et seq.; all further statutory references are to this code unless otherwise indicated.)
We conclude that in the absence of legislation clearly addressing whether a court may exercise discretion under the primary jurisdiction doctrine, a court may exercise such discretion and may decline to hear a suit until the administrative process has been invoked and completed. We hold that prior resort to the administrative process is required in the circumstances of this case and that the trial court abused its discretion in concluding otherwise.
I. Facts and Procedure
The People filed a two-count complaint alleging petitioners violated sections 1861.02 and 1861.05, enacted by the voters in November 1988 as part of Proposition 103, by refusing to offer a “Good Driver Discount policy” to all eligible applicants.
In their first cause of action, the People claim that since November 1989, petitioners have violated the above provisions by: (i) refusing to offer and
Under the first cause of action the People seek an order pursuant to Code of Civil Procedure section 526, enjoining petitioners from violating section 1861.02, subdivisions (b)(1), (b)(2), and (c), and section 1861.05, subdivision (a).
The second cause of action—which is the subject of this proceeding— incorporates the allegations of the first count, and asserts: “The violations of sections 1861.02 and 1861.05 as set forth above constitute unlawful and unfair business practices, in violation of Business and Professions Code section 17200.”
Under the second cause of action the complaint seeks the injunctive relief described above pursuant to Business and Professions Code section 17204, a $2,500 civil penalty against each petitioner for each violation of law pursuant to Business and Professions Code section 17206, and “such other relief as this Court deems just and proper.”
Petitioners demurred to both causes of action on the ground, inter alia, that the People’s suit was precluded by their failure to pursue and exhaust administrative remedies. The trial court sustained the demurrer as to the first cause of action (the Insurance Code claim), concluding that under County of Los Angeles v. Farmers Ins. Exchange (1982)
As to the second cause of action (the Business and Professions Code claim), however, the court overruled the demurrer, concluding that under
Petitioners sought a writ of mandate in the Court of Appeal challenging the propriety of this latter ruling. In an unpublished opinion, the Court of Appeal agreed with the trial court. It reasoned that “exhaustion of administrative remedies” is not required before an action under section 17200 of the Business and Professions Code may be prosecuted because (i) the People’s second cause of action seeks a remedy that is “merely cumulative” to administrative remedies sought in the first count, and (ii) the courts can more promptly resolve the issues in this case than can the Insurance Commissioner.
As noted, we conclude prior resort to the administrative process is appropriate in these circumstances, and we therefore reverse the decision of the Court of Appeal.
II. The Statutory Schemes
A. The Unfair Practices Act
The Unfair Practices Act is found in Business and Professions Code, section 17000 et seq. Section 17200 of the Business and Professions Code broadly defines “unfair competition” as, inter alia, any “unlawful, unfair or fraudulent business practice . . . .” “Unlawful business activity” proscribed under section 17200 includes “ ‘anything that can properly be called a business practice and that at the same time is forbidden by law.’ ” (Barquis v. Merchants Collection Assn. (1972)
Section 17205 of the Business and Professions Code states: “Unless otherwise expressly provided, the remedies or penalties provided by this chapter are cumulative to each other and to the remedies or penalties available under all other laws of this state." (Italics added.) Section 17204 of the Business and Professions Code authorizes the Attorney General to prosecute an action to enjoin violations of section 17200 of the Business and Professions Code. Finally, Business and Professions Code section 17206 provides for a $2,500 civil penalty for each violation of section 17200.
B. The McBride Act
As modified by the voters through the initiative process, and by the Legislature through various amendments, the McBride Act presently is found in sections 1851 through 1861.16 of the Insurance Code.
1. Provisions for Administrative Hearings and Judicial Review
Section 1858 establishes an administrative scheme under which “[a]ny person aggrieved by any rate charged, rating plan, rating system, or underwriting rule . . . may” file a complaint with the Insurance Commissioner. (Id., subd. (a).)
Section 1858.1 sets out procedures for the Commissioner’s investigation and resolution of the complaint. If the Commissioner determines there is “good cause” to believe an insurer’s rating scheme fails to comply with the requirements of the chapter, he or she “shall give notice in writing to that insurer, . . . stating therein in what manner and to what extent that noncompliance is alleged to exist and specifying therein a reasonable time ... in which that noncompliance may be corrected, and specifying therein the amount of any penalty that may be due . . . .” (Id., 1st par.) The section also sets out procedures to be followed by an insurer to contest the allegation of noncompliance, or, inter alia, to enter into a consent order. (Id., 2d par.)
Section 1858.2 sets out procedures for public hearings on disputed issues and requires the Commissioner to issue a decision within 60 days after
Finally, section 1858.6 provides for judicial review following “[a]ny finding, . . . ruling or order made by the commissioner under this chapter ... in accordance with the provisions of the Code of Civil Procedure.”
2. Relevant Substantive Provisions
Various substantive sections of the McBride Act were significantly augmented and altered by the voters in November 1988. (See CalFarm Ins. Co. v. Deukmejian (1989)
Section 1861.02, subdivision (b)(1) (hereafter section 1861.02(b)(1)), provides, inter alia, that all persons who meet specified criteria set out in section 1861.025 “shall be qualified to purchase a Good Driver Discount policy from the insurer of his or her choice.” Section 1861.02, subdivision (b)(2) (hereafter section 1861.02(b)(2)), requires that the “rate charged for a Good Driver Discount policy shall. . . be at least 20% below the rate the insured would otherwise have been charged for the same coverage.” Under subdivision (c) of section 1861.02 (hereafter section 1861.02(c)), “[t]he absence of prior automobile insurance coverage, in and of itself, shall not be a criterion for determining eligibility for a Good Driver Discount policy, or generally for automobile rates, premiums, or insurability.” Finally, section 1861.05, subdivision (a) (hereafter section 1861.05(a)) states, “[n]o rate shall be approved or remain in effect which is . . . unfairly discriminatory or otherwise in violation of this chapter.” (As noted above, the People claim petitioners have violated all four provisions since November 1989.)
The voters in 1988 also repealed various sections that had previously exempted the business of insurance from this state’s antitrust laws (see
III. The Primary Jurisdiction Doctrine
A. Development of the Doctrine
The judicially created doctrine of “primary jurisdiction” (also referred to as the doctrine of “prior resort”
1. Abilene
In Abilene, supra,
The court concluded that the act should be construed to allow only those judicial actions that seek “redress of such wrongs as can, consistently with the context of the act, be redressed by courts without previous action by the Commission, and, therefore, does not imply the power in a court to primarily hear complaints concerning wrongs of the character of the one here complained of.” (Abilene, supra,
2. Merchants
The doctrine of Abilene, supra,
3. Western Pacific
In a third railroad shipping case, United States v. Western Pac. R. Co. (1956)
The high court considered the factors articulated in Abilene, supra,
4. Nader
A more recent high court case illustrates both procedural and substantive aspects of the primary jurisdiction doctrine. In Nader v. Allegheny Airlines (1976)
The United States District Court entertained the suit and entered judgment for the plaintiff, but the United States Court of Appeals for the District of Columbia, applying the primary jurisdiction doctrine, reversed and remanded for administrative findings on, inter alia, the common law claim. It took judicial notice that the Civil Aeronautics Board (Board) was then considering the same challenges to carriers’ overbooking practices in an ongoing rule-making proceeding, and held that before the plaintiff would be allowed to proceed with his misrepresentation action, the Board should be allowed to consider whether the challenged practices fell within its power to investigate complaints and issue cease-and-desist orders. (Nader v. Allegheny Airlines, Inc. (D.C.Cir. 1975)
The high court reversed. Initially, it observed that there was no “irreconcilable conflict between the statutory scheme and the persistence of common-law remedies. . . ,’’ (Nader, supra,
The court then proceeded to apply the primary jurisdiction doctrine. It noted that under the administrative scheme at issue, individual consumers were “not even entitled” to initiate proceedings before the Board. (Nader, supra,
B. The Primary Jurisdiction and Exhaustion Doctrines Compared
Petitioners assert throughout their briefs that the People should be required to “exhaust” their administrative remedies before pursuing their civil action in this case. As suggested above and explained below, the applicable principle in this case is the primary jurisdiction doctrine, not the exhaustion doctrine.
Petitioners’ mischaracterization is understandable because courts have often confused the two closely related concepts (see, e.g., 2 Cooper, supra, at pp. 572-573). “Both are essentially doctrines of comity between courts and agencies. They are two sides of the timing coin: Each determines whether an action may be brought in a court or whether an agency proceeding, or further agency proceeding, is necessary.” (Schwartz, Administrative Law (1984) § 8.23, p. 485.)
In Western Pacific, supra,
As noted above, count 1 of the People’s complaint presented a question of exhaustion of administrative remedies; the People attempted to litigate Insurance Code claims over which the Insurance Commissioner has been given exclusive jurisdiction without first invoking and completing the available administrative process set out in the Insurance Code. (See ante, p. 382, fn. 1.) By contrast, count 2 of the complaint—the only count before us now—presents a different issue. The Business and Professions Code claim in count 2 is “originally cognizable in the courts,” and thus it triggers application of the primary jurisdiction doctrine.
C. Policy Considerations Underlying the Primary Jurisdiction and Exhaustion Doctrines
The policy reasons behind the two doctrines are similar and overlapping. The exhaustion doctrine is principally grounded on concerns favoring administrative autonomy (i.e., courts should not interfere with an agency determination until the agency has reached a final decision) and judicial efficiency (i.e., overworked courts should decline to intervene in an administrative dispute unless absolutely necessary). (See 2 Cooper, supra, at p. 573; Schwartz, supra, § 8.30 at p. 503; Koch, Administrative Law and Practice (1985) § 10.22, p. 177.) As explained above, the primary jurisdiction doctrine advances two related policies: it enhances court decisionmaking and efficiency by allowing courts to take advantage of administrative expertise, and it helps assure uniform application of regulatory laws. (See Western Pacific, supra, 352 U.S. at pp. 64-65 [
No rigid formula exists for applying the primary jurisdiction doctrine (Western Pacific, supra,
IV. Whether the Legislature has Precluded Application of the Primary Jurisdiction Doctrine in Actions Filed Under Section 17200 of the Business and Professions Code
The People suggest that the Legislature, by establishing “cumulative” administrative (§ 1858 et seq.) and civil (Bus. & Prof. Code, § 17200) “remedies” for the alleged violation of sections 1861.02 and 1861.05, has precluded courts from applying the primary jurisdiction doctrine in a case filed under the Business and Professions Code. In support, they cite City of Susanville v. Lee C. Hess Co. (1955)
Contrary to the People’s suggestions, we do not view the cited cases as addressing the primary jurisdiction doctrine. All three cases applied the exhaustion of remedies doctrine, and not the primary jurisdiction doctrine.
If the Legislature establishes a scheme under which a court is prohibited from exercising discretion under the doctrine of primary jurisdiction, a court must honor the legislative scheme, and may not decline to adjudicate a suit on the basis that available administrative processes should first be invoked and completed. If, however, the Legislature does not preclude a court from exercising its discretion under the primary jurisdiction doctrine, a court may do so and, in appropriate cases, may decline to adjudicate a suit until the administrative process has been invoked and completed.
Accordingly, the threshold question we must decide is whether the Legislature established a scheme that precludes a court from exercising discretion under the primary jurisdiction doctrine. For the reasons set out below, we conclude the legislative scheme at issue here does not address the primary jurisdiction issue, and a court thus is free to exercise its discretion to determine whether to stay proceedings in this suit pending action by the Insurance Commissioner.
The People assert that section 1861.03, subdivision (a) (which, as noted above,
We agree that section 1861.03 does not condition a suit under Business and Professions Code section 17200 on prior resort to the administrative process under the Insurance Code. Indeed, it does not speak to that issue at all. It merely modifies preexisting law, to provide, in essence, that insurers are subject to the unfair business practices laws in addition to preexisting regulations under the McBride Act, as amended. Section 1861.03 discloses no legislative preference for, or against, permitting a court to exercise its discretion under the primary jurisdiction doctrine to stay judicial proceedings pending action by the Insurance Commissioner.
The People advance a similar argument with respect to Business and Professions Code section 17205, which, as noted above, states: “Unless
We base our construction of section 17205 of the Business and Professions Code not merely on the language of that section viewed in isolation, but on the scheme of the Unfair Practices Act as a whole. As noted above, section 17200 of the Business and Professions Code defines “unfair competition” very broadly, to include “ ‘anything that can properly be called a business practice and that at the same time is forbidden by law.’ ” (Barquis, supra,
V. Recent Application of the Primary Jurisdiction Doctrine
Recently we applied primary jurisdiction principles in Rojo v. Kliger (1990)
We held prior resort to the administrative process unnecessary for two reasons. First, we explained, “the FEHA does not have a ‘pervasive and self-contained system of administrative procedure’ [citation] for general regulation or monitoring of employer-employee relations so as to assess or prevent discrimination or related wrongs in the employment context. . . .” (Rojo, supra, 52 Cal.3d at pp. 87-88.) Second, “the factual issues in an employment discrimination case [are not] of a complex or technical nature beyond the usual competence of the judicial system.” (Id., at p. 88.) We concluded, “[w]ith all due respect to the efficiency and expertise the [administrative agency] bring[s] to bear in investigating and determining statutory discrimination cases, and the salutary effect [it has] on the settlement and disposition of such cases, these are not cases having such a paramount need for specialized agency fact-finding expertise as to require [prior resort to and] exhaustion of administrative remedies before permitting an aggrieved person to pursue his or her related nonstatutory claims and remedies in court.” (Ibid.)
VI. Application of the Primary Jurisdiction Doctrine in This Case
Our analysis in Rojo, supra, 52 Cal.3d 65, informs the result in this case. First, as explained above (ante, pp. 384-385), the Insurance Commissioner has at his disposal a “pervasive and self-contained system of administrative procedure” (Rojo, supra, at p. 87) to deal with the precise questions involved herein.
Second, and more important, based on the allegations in the People’s complaint, there is good reason to require that these administrative procedures be invoked here. As we explain below, we conclude that considerations of judicial economy, and concerns for uniformity in application of the complex insurance regulations here involved, strongly militate in favor of a stay to await action by the Insurance Commissioner in the present case.
In Rojo, supra, 52 Cal.3d 65, we reasoned that in light of the nature of the common law action involved in that case, the agency had no special expertise that would warrant prior resort to its procedures. By contrast, other
The People assert the claims at issue here “involve relatively simple factual determinations which do not require the detailed examination of experts within the Department of Insurance.” To support this view of their complaint, they assert, for the first time in briefs filed in this court, that their action is in reality one to preclude Farmers Insurance Exchange from referring persons who meet the criteria for a Good Driver Discount policy to Mid-Century Insurance Company, a “substandard” insurer that is part of the Farmers Group, but which charges rates “substantially higher” than Farmers for the same coverage.
We cannot accept the People’s recharacterization of their complaint. The complaint filed in superior court makes no mention of any alleged improper referral plan between Farmers and Mid-Century, and, although it was clearly possible for the People to do so,
We conclude that in determining whether it is appropriate to issue a stay of judicial proceedings in order to permit administrative action under the primary jurisdiction doctrine, we must confine our analysis to the complaint as written. A review of the allegations in the People’s complaint demonstrates the “paramount need for specialized agency fact-finding expertise” in this case. (Rojo, supra,
The gravamen of the People’s action under section 17200 of the Business and Professions Code is alleged violation of three specific “Good Driver Discount policy” provisions of section 1861.02(b) and 1861.02(c), and the “unfairly discriminatory rates” provision of section 1861.05(a). In order to decide whether petitioners have violated the cited subdivisions of section 1861.02, it must be determined whether petitioners refused to offer discount policies to those who qualified for such a policy; refused to charge rates at least 20 percent below the rate that would otherwise have been charged; and used the absence of prior automobile insurance coverage, “in and of itself,” to determine eligibility for a Good Driver Discount policy, or to establish rates and premiums. In order to decide whether petitioners have violated section 1861.05, it must be determined whether they employed an “unfairly discriminatory” rate. The resolution of these questions mandates exercise of expertise presumably possessed by the Insurance Commissioner, and poses a risk of inconsistent application of the regulatory statutes if courts are forced to rale on süch matters without benefit of the views of the agency charged with regulating the insurance industry.
First, in determining eligibility for Good Driver Discount policies, section 1861.02(b)(1) specifies that the criteria set out in section 1861.025 are to be used. That section in turn addresses the eligibility of persons who have been involved in accidents during the prior three years, and who were “principally at fault.” (§ 1861.025, subd. (b)(1), (b)(4).) The statute further provides, as to both criteria, “[t]he commissioner shall adopt regulations setting guidelines to be used by insurers for their determination of fault for the purposes
Similarly, the determination of whether a given Good Driver Discount policy comports with the “20 percent discount” provision of the statute also calls for exercise of administrative expertise preliminary to judicial review. Inevitably, analysis of the People’s claim will require “a searching inquiry into the factual complexities of [automobile] insurance ratemaking and the conditions of that market during the turbulent time here involved.” (Karlin v. Zalta, supra,
There is no reason to conclude otherwise in the present case; we think it is plain that a court attempting to determine whether a given Good Driver Discount policy meets the statutory 20 percent discount requirements should have the benefit of the Insurance Commissioner’s expert assessment of that issue. In addition, we note that section 1861.02, subdivision (e), provides, “The commissioner shall adopt regulations implementing this section and insurers may submit applications pursuant to this article which comply with those regulations . . . .” (Italics added; see Cal. Code Regs., tit. 10, ch. 5, subch. 4.7, § 2632.1 et seq.) As above, it seems clear that the Insurance Commissioner, rather than a court, is best suited initially to determine whether his or her own regulations pertaining to compliance have been faithfully adhered to by an insurer.
Finally, and for the same reasons, the determination whether petitioners employed rates that are “unfairly discriminatory” also calls for exercise of administrative expertise preliminary to judicial review. In practice, resolution of the “unfairly discriminatory rate” question will turn in many instances on determination of the above discussed rate-setting provisions of
Accordingly, we reject the People’s assertion that because eventual recourse to the courts is likely in this case, nothing is to be gained by requiring prior resort to the administrative process involved here. As we said in Westlake Community Hosp. v. Superior Court (1976)
The cases cited by the People (People v. McKale, supra,
Finally, we reject the People’s unsupported and novel claim that because the Attorney General is the chief law enforcement officer of the state, actions filed by him should not be subject to the primary jurisdiction doctrine. The reasons supporting the doctrine apply to private citizens and the Attorney General alike, and the two classes of plaintiffs should be treated equally. The primary jurisdiction doctrine evolved for the benefit of courts and administrative agencies, and unless precluded by the Legislature, it may be invoked whenever a court concludes there is a “paramount need for specialized agency fact-finding expertise.” (Rojo, supra, 52 Cal.3d at p. 88.)
VII. Conclusion
We conclude, based on the complaint as it stands, that a paramount need for specialized agency review militates in favor of imposing a requirement of prior resort to the administrative process, and as noted above we reject any suggestion that the interests of justice militate against application of a prior resort requirement in this case.
Accordingly, the judgment of the Court of Appeal is reversed with directions to issue a writ of mandate directing the superior court to stay judicial proceedings in this case and retain the matter on the court’s docket pending proceedings before the Insurance Commissioner (see, e.g., Tank Car Corp. v. Terminal Co., supra,
Panelli, J., Kennard, J., Arabian, J., Baxter, J., and George, J., concurred.
Notes
This conclusion appears correct. Pursuant to the Insurance Code, the People’s claims under that code are exclusively the province of the Insurance Commissioner. (§ 1860.2 [“The . . . enforcement of this chapter shall be governed solely by the provisions of this chapter.”]; § 1858 et seq. [setting out procedures for administrative determination of rate and rate-making issues].) Judicial review is of course available to challenge those administrative determinations (see §§ 1858.6, 1861.09), but such review may be obtained only after the available administrative procedures have been invoked and exhausted. (See post, pp. 392, 393, fn. 11.)
It is clear that the Attorney General, on behalf of the People, may initiate or intervene in such a complaint. (§ 1861.10, subd. (a) [“Any person may initiate or intervene in any proceeding permitted or established pursuant to this chapter, challenge any action of the commissioner under this article, and enforce any provision of this article”].)
As an alternative to the complaint procedure, section 1858.1, paragraph one, allows the Commissioner to initiate proceedings by providing the insurer with written notice of noncompliance.
Effective September 1990, and operative January 1, 1991, the Legislature added section 1861.16, subdivision (b), which states: “An agent or representative representing one or more insurers having common ownership or operating in California under common management or control shall offer, and the insurer shall sell, a good driver discount policy to a good driver from an insurer within that common ownership, management, or control group, which offers the lowest rates for that coverage. This requirement applies notwithstanding the underwriting guidelines of any of those insurers or the underwriting guidelines of the common ownership, management, or control group. . . .” (Stats. 1990, ch. 1185, § 2, subd. (b) [No. 6 Deering’s Adv. Legis. Service, p. 4450].)
See 2 Cooper, State Administrative Law (1965) pages 561-562 (hereafter Cooper).
See, e.g., Gt. No. Ry. v. Merchants Elev. Co. (1922)
Section 9 of the Commerce Act stated: “ ‘[A]ny person or persons claiming to be damaged by any common carrier subject to the provisions of this act may either make a complaint to the Commission ... or may bring suit in his or their own behalf for the recovery of the damages for which such common carrier may be liable under the provisions of this act... ; but such person shall not have the right to pursue both of said remedies, and must in each case elect which one of the two methods of procedure herein provided for he or they will adopt. . . .’ ” (204 U.S. at pp. 438-439 [
Subsequent cases applying the primary jurisdiction doctrine have refrained from holding that courts have no power to entertain a civil suit, and have instead viewed the question as one of timing. Thus, as Professor Davis observed, “the law of primary jurisdiction almost always answers the question when a court may act, not the question whether it may act . . . .” (4 Davis, Administrative Law (2d ed. 1983) § 22:1, p. 82, italics in original; accord, 2 Cooper, supra, at p. 562 [“The doctrine does not operate to remove these issues completely from the sphere of judicial action; its operation is, rather, to determine whether the initial consideration of the matter should be by a court or by an agency. If it is held that the doctrine is applicable, and prior resort to the agency is required, the case may still (in appropriate instances) be considered by the courts subsequent to the administrative determination.”]; accord, Shernoff v. Superior Court (1975)
The stay procedure employed by the court of appeal in Nader was consistent with prior high court cases involving the primary jurisdiction doctrine. In Tank Car Corp. v. Terminal Co. (1940)
Although this approach focuses on the benefits to be gained by courts (e.g., efficiency and uniform application of regulatory laws) and agencies (e.g., autonomy) under the primary jurisdiction doctrine, courts have also appropriately considered the alleged “inadequacy” of administrative remedies, and other factors affecting litigants, in determining whether the interests of justice militate against application of the doctrine in a particular case. (See, e.g., 2 Cooper, supra, at p. 570 [“[occasionally, prior resort is excused on the grounds that the
“Other state courts have declined to treat the doctrine of primary jurisdiction as an “inflexible mandate.” Instead, the doctrine “is predicated on an attitude of judicial self-restraint, and is applied when the court believes that considerations of policy recommend that the issue be left to the administrative agency for initial determination. . . . The state courts have made it plain . . . that the application of the requirement involves the exercise of judicial discretion.” (2 Cooper, supra, at pp. 564-565.)
In Abelleira, supra,
Susanville, supra,
A more recent case, McKee v. Bell-Carter Olive Co. (1986)
Contrary to assertions of amicus curiae for the People, this conclusion is not in conflict with, but is consistent with, the high court’s analysis in Nader, supra,
Section 1861.03, subdivision (a) is quoted, ante, at page 386.
As have other state and federal courts in other contexts, we referred to “exhaustion” of administrative remedies in this portion of Rojo although we were in fact considering a question of prior resort to administrative procedures under the primary jurisdiction doctrine.
The People’s brief reads as follows: “In the months following the November 8, 1989[,] operative date for section 1861.02, the Attorney General received reports regarding widespread violations of the good driver provisions of that section. Notably, defendant Farmers Insurance was refusing to sell good driver discount insurance policies to persons who meet the definition of a good driver. Instead, Farmers referred those persons to defendant Mid-Century Insurance Company, a substandard company that is part of the Farmers Group [and] which charged substantially higher rates than Farmers for the same coverage. In the belief that defendants were failing to comply with the statute’s requirements, the Attorney General, on March 2, 1990, filed the instant complaint pursuant to Business and Professions Code section 17200.”
Over four months before the People’s complaint was filed in this case, the Insurance Commissioner filed a “Notice of Noncompliance Pursuant to Insurance Code Section 1858.1” against Farmers Insurance Exchange and Mid-Century Insurance Company alleging, inter alia, that “Farmers and Mid-Century Insurance Company . . . agreed that [certain applicants] who apply for insurance from Farmers would be offered and issued a policy in Mid-Century only and would not be offered or issued a policy in Farmers.” The record also discloses that two days after the People’s complaint was filed in this matter, the Insurance Commissioner filed another “Notice of Noncompliance” against Farmers Insurance Exchange, alleging the
For similar reasons, the determination of whether petitioners have used the absence of prior insurance “in and of itself’ as “a criterion for determining eligibility for a Good Driver Discount policy, or generally for automobile rates, premiums, or insurability,” also calls for exercise of administrative expertise preliminary to judicial review.
Shortly before oral argument the Insurance Commissioner, in a letter to the court, expressed his views that (i) we should not require “exhaustion” of Insurance Code claims in “all” cases filed under the Business and Professions Code; and (ii) we should not require prior resort to the administrative process in the present case. As explained above, we agree that the “exhaustion” rule does not apply to the claims at issue here; but as also explained above, we conclude prior resort to the administrative process is required because the People’s complaint demonstrates the “paramount need for specialized agency fact-finding expertise” in this case. (Rojo, supra,
Similarly, we reject the assertion of amicus curiae, the District Attorney of Contra Costa County, that district attorneys lack standing to bring administrative actions before the Insurance Commissioner, and thus a district attorney who wishes to prosecute a Business and Professions Code action against an insurer should be allowed to do so without regard to the primary jurisdiction doctrine. Application of the doctrine does not depend on the civil litigant’s ability to bring an administrative action; instead, the doctrine may be applied so long as the administrative agency itself has the authority to initiate administrative action. (See Nader, supra, 426 U.S. at pp. 302-304 [
Dissenting Opinion
I dissent. California has never recognized the doctrine of primary jurisdiction, and prior authority in this state is in conflict with that concept. Even if this court should decide at some time to judicially legislate that theory, the facts involved in this case, and the dilatory result, do not justify its application. Finally, there are sound reasons of policy for holding that the question whether petitioners violated the Unfair Practices Act (Bus. & Prof. Code, § 17000 et seq.) should be decided by a court initially rather than by successive determinations by the Commissioner of the Department of Insurance (Insurance Commissioner) and a court.
I
No decision in this state has ever forthrightly applied the doctrine of primary jurisdiction, and the three California cases to which the majority refer and attempt to distinguish are in direct conflict with that doctrine. (City of Susanville v. Lee C. Hess Co. (1955)
The majority opinion declares that the three cases cited applied “the exhaustion of remedies doctrine, and not the primary jurisdiction doctrine.” I disagree with this characterization of the cases. In fact, all three cases refused to apply the exhaustion doctrine because the Legislature had given the aggrieved party a choice of remedies. As the majority opinion concedes, the exhaustion doctrine applies when the administrative agency alone has initial jurisdiction to hear the matter. In all three cases cited above—as well as in the present case—both the agency and a court had such power, and therefore the exhaustion doctrine did not apply. The majority simply refuse to adhere to the prevailing theory on which those cases were decided, i.e., that it is for the litigant to choose which forum to utilize in these circumstances.
The opinion attempts to distinguish Scripps on the ground that it did not “address the primary jurisdiction question” because it failed to decide whether a court has authority to exercise its discretion to stay judicial proceedings pending action by an administrative agency. In fact, the Scripps court’s holding can only be read as prohibiting the exercise of such discretion. After stating the rule that a litigant may choose the forum in which to bring the action if the Legislature has provided alternative remedies, Scripps declares that “it is not for the courts to add conditions to the exercise of [the right to bring an action in court] which are not imposed by the statute.” (
As for Susanville, which the majority attempt to distinguish on the same ground as Scripps, it holds that the rule requiring exhaustion of administrative remedies has “no application” if the aggrieved person is granted alternative remedies and elects to use judicial means. (
The majority state, regarding McKee, that they do not to read the opinion in that case as suggesting that the availability of cumulative remedies bars
The only case cited by the majority which they claim applied the doctrine of primary jurisdiction in California is Rojo v. Kliger (1990)
If it should be deemed advisable to adopt a judge-made doctrine of primary jurisdiction in this state, the majority should state forthrightly that they do so, instead of futilely attempting to distinguish cases which are incompatible with the existence of that doctrine.
II
Even if the primary jurisdiction principle should become applicable in California, it would not apply under the circumstances of this case.
The majority state several grounds for requiring the People to bring this proceeding before the Insurance Commissioner. First, relying on the reasons advanced in Rojo, they assert that here, unlike in that case, the administrative agency has “a ‘pervasive and self-contained system of administrative procedure’ to deal with the precise questions involved herein.” In support of this proposition, they cite sections of the Insurance Code that prescribe the procedure for the investigation and resolution of complaints regarding allegations of unfair rates. That is, notice and hearing, proceedings to contest the allegations made by the complainant, and provisions for appeal. But the Fair Employment and Housing Commission in Rojo had similar powers. (
Once the question of fault is decided, it is necessary to ascertain whether the required discount has been afforded. The majority assert that this determination calls for a “searching inquiry into the factual complexities of [automobile] insurance ratemaking.” I disagree. The issue here is not whether the insurer charged a reasonable rate or one which complies with statutory requirements for such a rate, but whether the rate charged is below what the insurer would have charged without the discount. The answer to that is clear under the circumstances of this case. No determination whether the discount was afforded is required by either the Insurance Commissioner or a court because it is undisputed that the “good driver” discount provisions have not been implemented. It follows that the rate charged is in excess of the rate which would have been charged without the discount.
The majority claim also that uniformity of decision will be enhanced by an administrative determination of the issues raised in the People’s complaint before a court attempts to grapple with “such a broad-ranging and technical question of insurance law.” But the question whether a driver is entitled to a “good driver” discount under the guidelines adopted by the commissioner involves the application of those guidelines to the circumstances of a particular case. I fail to see how uniformity of decision will be promoted by a preliminary determination of the issue by the commissioner since the fault of each driver depends on the facts relating to a specific
III
Furthermore, there are persuasive policy reasons which militate against application of the primary jurisdiction doctrine in this case.
First, it will not promote judicial economy. In Rojo, we reasoned that a determination by the administrative agency of the issues raised in the complaint would have no beneficial impact on the judicial system because the case must in any event still enter the “judicial pipeline.” (
Moreover, as we also observed in Rojo, requiring the agency to decide the matter would limit the resources available to it for resolution of cases within its jurisdiction. It is no secret that the Insurance Commissioner is understaffed and overburdened with litigation relating to Proposition 103. The Department of Insurance agrees. It supports the position of the People in this case on the ground that the Insurance Commissioner cannot reasonably be expected to respond to all allegations of violations of the Unfair Practices Act, and that requiring the exhaustion of administrative remedies would weaken or destroy the effectiveness of remedies granted thereunder.
By providing in Proposition 103 that both the Insurance Commissioner and the People should have the power to enforce the “good driver” provisions, the voters clearly intended that the People have the right to obtain an expeditious determination before a court whether an insurer is complying with those provisions. They did not contemplate dilatory proceedings and successive decisions on the same issue by the Insurance Commissioner and subsequently by the courts. The holding of the majority violates this intent.
Finally, the opinion dismisses summarily as “unsupported conjecture” the claim that prior resort to the administrative process will unduly delay or frustrate resolution of the issues presented by the People. As the majority concede, however, expense to litigants and delay are factors which militate against application of the doctrine. (See United States v. McDonnell Douglas
It is now three and one-half years since Proposition 103 was enacted, and the voters are still waiting for the enforcement of the discount insurers are required to afford to good drivers. The majority fail to justify the significant and unnecessary delay which their holding is certain to cause in the enforcement of this key provision of Proposition 103.
I would affirm the judgment of the Court of Appeal.
The only California case cited by the majority that even mentions the primary jurisdiction theory is Shernoff v. Superior Court (1975)