JEFFREY ALBERT SJOBRING et al., Plaintiffs and Appellants, v. FIRST AMERICAN TITLE INSURANCE COMPANY et al., Defendants and Respondents.
B293732
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION THREE
Filed 8/24/22
Los Angeles County Super. Ct. Nos. JCCP4751, BC382826, BC329482. Maren E. Nelson, Judge. Reversed.
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(a). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115(a).
APPEALS from judgments of the Superior Court of Los Angeles County, Maren E. Nelson, Judge. Reversed.
The Bernheim Law Firm, Steven J. Bernheim, Nazo S. Semerjian; Shernoff Bidart Echeverria, Michael J. Bidart, Steven M. Schuetze; Friedman Rubin, Richard H. Friedman; The Kick Law Firm and Taras Kick for Plaintiffs and Appellants.
Dentons US, Ronald D. Kent, Joel D. Siegel, Susan M. Walker, Paul M. Kakuske for Defendants and Respondents.
The Insurance Code requires title insurers and title companies to file a schedule of their rates with the Insurance Commissioner before charging those rates to the public. (
These consolidated appeals concern two class action lawsuits brought against defendants and respondents First American Title Insurance Company and First American Title Company (collectively, defendants). One lawsuit was filed by plaintiff and appellant Jeffrey Albert Sjobring. The other lawsuit was filed by plaintiff and appellant Wendy Kaufman. We refer to Sjobring and Kaufman collectively as plaintiffs. Both plaintiffs obtained policies from defendants to insure the title on a recently purchased home: an owner‘s policy to cover their own interest in the title, and a loan policy to cover the mortgage-lender‘s interest. Because title insurance policies like these insure the same property, they are usually less expensive when purchased together. How much less expensive depends on the range of defects they insure against—that is, whether the policies are classified as “standard coverage” or “extended coverage.”
Plaintiffs allege they were overcharged for their title insurance policies. Specifically, Sjobring asserts that defendants’ filed rate for an extended coverage loan policy when sold together with an extended coverage owner‘s policy was $125, not the $563
The trial court granted defendants’ motions for judgment on the pleadings and dismissed both lawsuits. It concluded that plaintiffs’ allegations amounted to an improper challenge to the “use” of a rate and implicates “ratemaking.” Accordingly, defendants were shielded from liability under
On appeal, plaintiffs contend their claims are not barred by
In a recent opinion, the California Supreme Court held that “[t]he statutory immunity for ‘act[s] done ... pursuant to the
PROCEDURAL BACKGROUND
1. Certified Classes and the Operative Pleading in the Sjobring Lawsuit
Sjobring filed his operative fourth amended class action complaint in Los Angeles Superior Court case No. BC329482 on November 15, 2010.
The court certified two classes for the fraud, negligent misrepresentation, and unfair competition claims. As to class one,2 the court certified the following class: “All persons who paid all or part of the premium in a transaction occurring from January 1, 2003 through October 8, 2006, in which the premium paid was more than $125 for any First American concurrent loan policy issued with an Eagle Owner‘s Policy issued without regional exceptions insuring property in California, where the aggregate liability of the loan policies issued did not exceed the aggregate liability of the owner‘s policy.” The court found a
As to class two,3 the court certified the following class: “All persons who paid all or part of the premium in a transaction occurring from January 1, 2003 through October 8, 2007, in which the premium paid was more than 20 percent of ‘Base Rate A’ for a First American first concurrent loan policy insuring property in California, where the aggregate liability under the loan policies did not exceed the liability under the owner‘s policy, excepting those persons who are members of any class that may be certified in Kaufman ... . Class Two may only seek to claim that the rate applied to the lender‘s policy, as issued, was improper and should have been charged at the lower C-5 rate.”
2. Certified Class and the Operative Pleading in the Kaufman Lawsuit
Kaufman filed her operative second amended class action complaint in Los Angeles Superior Court case No. BC382826 on November 15, 2010. After demurrer, five causes of action remained: breach of contract (first cause of action), breach of implied covenant of good faith and fair dealing (second cause of action), fraud and deceit (fourth cause of action), unjust enrichment/restitution (fifth cause of action), and violation of the Unfair Competition Law (seventh cause of action).
In their amended answer, defendants raised an affirmative defense of immunity under
In September 2017, a class was certified for the causes of action for breach of contract, breach of implied covenant of good faith and fair dealing, and violation of the Unfair Competition Law as to: “All persons who paid for a first Eagle loan title policy in a residential real estate sales transaction in California that was issued concurrently with an owner‘s policy during the period October 2, 2006 to October 2, 2007, where the aggregate liability of the loan policies did not exceed the liability of the owner‘s policy.”
The trial court found the following common questions existed:
- Did defendants apply the rate correctly for first concurrent Eagle Loan policyholders during the class period?
- Were defendants permitted to charge an additional premium for a first concurrent Eagle Loan policy during the class period, contrary to defendants’ filed rate with the California Department of Insurance (CDI)?
- Did defendants violate
section 12414.27 by charging a rate that was not filed with the CDI? - Was there a scrivener‘s error in the filed rate by defendants, and if so, what effect, if any, does it have on defendants’ liability under the Insurance Code?
Defendants moved for judgment on the pleadings in both cases. They argued that
Defendants filed requests and supplemental requests for judicial notice in support of their motion. The court granted the requests in part and took judicial notice of the following documents:
- statement of decision in Kirk v. First American Title Co., Los Angeles Superior Court case No. BC372797;
- unpublished appellate opinion in Kirk v. First American Title Company (June 22, 2016, B257508) [nonpub. opn.];
- Sjobring‘s administrative complaint filed with the Department of Insurance on November 16, 2012, which includes, as an exhibit, the schedule of fees on file when Sjobring‘s policies were purchased;
- the existence of defendants’ correspondence with the Department of Insurance amending its fee schedule, but not the truth of the matters therein;
- Plaintiffs’ motions for class certification, including the legal positions and concessions made by Sjobring and Kaufman to secure class certification;
the court‘s orders granting class certification.
The court declined to take judicial notice of the remaining exhibits, ruling they were irrelevant to the issues presented by the motion.
The court granted Kaufman‘s request to take judicial notice in part and took judicial notice of certain legislative history of
- The demurrer to Sjobring‘s Fourth Amended Complaint, filed November 24, 2010;
- Order overruling in part and sustaining in part the demurrer to Sjobring‘s Fourth Amended Complaint, filed February 1, 2011;
- Defendants’ response to Sjobring‘s complaint to the Insurance Commissioner, filed on December 21, 2012.
The court declined to take judicial notice of the remaining exhibits, ruling they were irrelevant to the disposition of the motion and thus moot.
Finally, the court took judicial notice that it had granted certification of two classes in Sjobring and one class in Kaufman. And, on its own motion, the court took judicial notice of the fact that in Kaufman plaintiffs sought to exclude evidence and argument offered to show that the Insurance Commissioner “authorized, ratified, approved or permitted the charges at issue.” Nevertheless, the court explicitly noted that it “express[ed] no view as to whether the facts support [defendants‘] defense.”
The court explained: “Plaintiffs do not contend that [defendants] charged a rate that was not filed and became effective. Instead, they contend that a different rate should have been charged. [¶] The Court recognizes that there is no published case directly on point as to whether a party alleging rate ambiguity may bring a direct action or must challenge the rate under Article 6.5. It is also recognized that there is a factual dispute between the parties as to whether [defendants] in fact charged a rate they filed with respect to the policies at issue. However, resolution of that factual issue requires the Court to interpret the policies and the rates. Under the statutory scheme this is the exclusive function of the CDI in the first instance, subject to review by the Court.”
In particular, as to Sjobring, the court explained “in asserting that [defendants] used the wrong filed rate and asking the Court to determine that his rate is the correct one, Sjobring asks the Court to determine the proper ‘use’ of a rate and to engage in rate regulation. This is the function of the CDI, at least initially.”
As to Kaufman: “In making these determinations the Court is called upon to determine whether the policy sold to Kaufman was a ‘Standard’ or ‘Extended’ policy and to determine what effect, if any, the claimed scrivener‘s error has on the proper rate to be charged, including whether the rate as posted would be
In conclusion, the court held: ”Sjobring and Kaufman as now understood challenge the use of a filed rate and require the Court to engage in rate setting, rate regulation, and a determination of the proper ‘use’ of rates. As the Court understands the statutory scheme and the case law[,] a civil action on this basis is precluded prior to an action brought under Section 6.5 of the Insurance Code.”
The court entered judgments of dismissal from which plaintiffs filed timely notices of appeal.
CONTENTIONS
Plaintiffs contend that immunity under
Defendants contend they are immune from suit under
DISCUSSION
1. Standard of Review
” ‘The standard of review for a motion for judgment on the pleadings is the same as that for a general demurrer: We treat the pleadings as admitting all of the material facts properly pleaded, but not any contentions, deductions or conclusions of fact or law contained therein. ... We review the complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any theory. [Citation.]’ [Citation.]” (Burd v. Barkley Court Reporters, Inc. (2017) 17 Cal.App.5th 1037, 1042.) We will not, however, credit the allegations in the complaint where they are contradicted by facts that either are subject to judicial notice or are evident from exhibits attached to the pleading. (Hill v. Roll Internat. Corp. (2011) 195 Cal.App.4th 1295, 1300.) We review de novo whether a cause of action has been stated as a matter of law. (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125.) We do not review the validity of the trial court‘s
The scope of the immunity provision in
2. Title Insurance Regulation
A “rate” is “the charge or charges ... made to the public by a title insurer, an underwritten title company or a controlled escrow company, for all services it performs in transacting the business of title insurance.” (
As relevant here, article 5.5 (
Recently, in Villanueva, supra, 11 Cal.5th at pp. 117–118, the California Supreme Court rejected a title company‘s expansive view of its immunity from suit under
In Villanueva, the plaintiff and his wife had refinanced the mortgage on their home, with Fidelity National Title Company (Fidelity) providing escrow services. (Villanueva, supra, 11 Cal.5th at p. 111.) For its services, Fidelity charged the couple an escrow fee, an overnight delivery fee, a courier fee, and a fee for preparing a new deed. (Ibid.) Villanueva later sued Fidelity, asserting that the delivery, courier, and draw deed fees were illegal because they had never been filed with the Insurance Commissioner. (Ibid.)
The court granted the motion for class certification, and, following a bench trial, determined that “Fidelity was required to file its rates with the Commissioner, that document delivery was a service for which a rate filing was required, and that Fidelity had not filed its delivery service rate. The court further determined that, for the first two years of the class period, Fidelity had no rate on file for drawing deeds or document preparation, and thus during that period, the fee for drawing up a deed was also illegal.” (Villanueva, supra, 11 Cal.5th at p. 111.)
The court of appeal reversed in part and ordered the trial court to dismiss the suit. (Villanueva, supra, 11 Cal.5th at p. 112.) It concluded that the class claims were barred. First, Fidelity was immune from suit under
The issue, as framed by the Supreme Court, was “whether, if a title insurer charges rates without filing them, a consumer can challenge the charges as unlawful in court.” (Villanueva, supra, 11 Cal.5th at p. 110.) Fidelity argued the answer was no. (Id. at p. 114.) First, Fidelity claimed
As to
As for the scope of that authorization, Villanueva explains that article 5.5 “contemplates that title insurers may: (1) charge a filed rate after its effective date (
3. Types of Title Insurance
Title insurance policies fall into two broad types. An “owner” policy covers the buyer‘s interest in real property. A “loan” or “lender” policy covers a mortgage lender‘s interest in the same property, in the title, and in its lien position.5 The policies
There are two basic forms of title insurance policies available in California: California Land Title Association (CLTA) policies and American Land Title Association (ALTA) policies. The policies are priced based on whether they provide “standard” or “extended” coverage. Defendants classify all CLTA policies and some ALTA policies as standard coverage. Other ALTA policies can be either standard or extended coverage depending on whether they are issued with regional exceptions (standard) or without regional exceptions (extended).7
Defendants also offer a policy called the EAGLE Owner‘s Policy, which is a trade name for the CLTA/ALTA Homeowner‘s Policy. The CLTA/ALTA Homeowner‘s Policy, available to purchasers of owner-occupied family residences of up to four
4. Title Policies at Issue
As we discuss below, because the nature of an owner‘s policy—that is, whether it is a standard coverage policy or an extended coverage policy—determines the price defendants charged for a concurrently-issued lender‘s policy, the fundamental issue in these class actions is whether certain owners’ policies issued by defendants were standard or extended coverage policies. Defendants contend their policy classifications are intrinsic to their filed rates; filed rates are immune from challenge under
4.1. Sjobring
During the Sjobring class period, the cost of an extended coverage lender‘s policy, when purchased with a standard coverage owner‘s policy, was 30 percent of Base Rate A plus $125. Yet when the same policy was purchased with an extended coverage owner‘s policy, the charge was a flat $125.
The EAGLE Owner‘s Policy was not defined as either standard or extended coverage in the schedule of fees filed with
In 2004, Sjobring purchased a home from Patrick Kirk for $650,000. Defendants issued an EAGLE Owner‘s Policy without regional exceptions and policy limits of $650,000, paid for by Kirk. They charged Kirk $1,648, the amount listed in the EAGLE policy fee summary.9 At the same time, defendants issued a 1992 ALTA Loan Policy without regional exceptions and policy limits of $441,000, paid for by Sjobring, to cover the mortgage lender. Defendants’ filed fee schedule classified the ALTA Loan Policy as an extended coverage policy. They charged Sjobring $563 for this policy.
For class one, Sjobring contends that his EAGLE Owner‘s Policy was an extended coverage policy. Because his lender‘s policy also provided extended coverage, he argues he should have been charged $125 rather than $563. Defendants claim that the owner‘s policy was a standard coverage policy, and as such,
For class two, Sjobring contends that if his owner‘s policy is a standard, rather than extended, coverage policy, he was still overcharged. In that case, he argues, the lender‘s policy was not full extended coverage but partial extended coverage.
Partial extended coverage takes a standard coverage policy and removes some, but not all, of the regional exceptions. The total charge for such a policy depends on which regional exceptions are deleted, but the maximum charge is 20 percent of Base Rate A. This is less than the formula for an extended coverage lender‘s policy issued alongside a standard coverage owner‘s policy: 30 percent of Base Rate A + $125. Sjobring alleges that although the partial-extended-coverage rate appears in the fee schedule submitted to the Insurance Commissioner, it does not appear in the fee summaries provided to the public. He also alleges that this rate was available to him, and, had defendants applied it, he would have been charged only $290 rather than $563.
4.2. Kaufman
By the time Kaufman bought her house, defendants had modified their fee schedule. The rates for extended coverage loan policies remained the same as for Sjobring: 30 percent of Base Rate A plus $125 when sold with a standard owner‘s policy but a flat $125 when sold with an extended owner‘s policy. But for standard coverage loan policies sold alongside an owner‘s policy of any type, the filing stated that “there shall be no charge for” the policy. The fee schedule had also been amended to define
In December 2006, Kaufman purchased a Simi Valley home. Defendants issued an EAGLE Owner‘s Policy with limits of $774,000 and an EAGLE Loan Policy with limits of $580,000. Kaufman paid for both policies: $1,284.25 for the owner‘s policy and $710 for the lender policy.
Kaufman contends that both policies are defined in the fee schedule as standard coverage policies. As such, instead of paying $710 for the lender policy, she should have received it for no additional charge.
Alternatively, Kaufman argues that under defendants’ rate filing, there was a less expensive pricing structure available for both her owner‘s and loan policies, found in Section E of the rate schedule.11 She contends she should have been charged these lower rates.
Defendants assert that Kaufman‘s entire case is based on a scrivener‘s error contained in the fee schedule filed in October 2006, in which they erroneously listed the EAGLE Loan Policy as standard rather than extended coverage. They do not separately address her alternative contention about Section E.
section 12414.26 .
As discussed,
Villanueva held that to the extent the statute immunizes conduct other than concerted action, it applies only to activity authorized by articles 5.5 and 5.7. (Villanueva, supra, 11 Cal.5th at pp. 115–116.) As relevant here, article 5.5 provides that insurers may charge a filed rate after its effective date. (
Defendants argue that Villanueva is inapplicable to our facts because it addressed a situation in which rates for the charged fees had not been filed at all. For example, in Villanueva, defendant Fidelity was charging its customers a “delivery service fee” but did not have a charge called “delivery service fee” on file with the Insurance Commissioner. (Villanueva, supra, 11 Cal.5th at p. 111.) Because a title insurer cannot charge a fee before filing it with the Commissioner, Fidelity‘s actions were not authorized under the statute. And because its actions were unauthorized, Fidelity was not immune from suit under
Defendants also assert that article 5.5 allows them to set and file rates, then charge those rates after 30 days. They did so. As such, defendants argue they are immune from plaintiffs’ challenge to their “making and use of [their] filed rates, including these coverage classifications (i.e., ‘Standard’ vs. ‘Extended’ coverage title policies) ... .” Plaintiffs, they claim, are asking us to remake their coverage classifications and filed rates by reinterpreting them.
Defendants’ argument rests on the premise that they, in fact, classified plaintiffs’ policies the way defendants claim. First, as to Sjobring, they contend they classified his owner‘s policy as standard coverage, and he is seeking to reclassify it as extended coverage. But that is not Sjobring‘s argument. He does not assert that defendants misclassified the policy; he contends that the policy was always classified as extended coverage, and they charged him for the wrong thing.
Second, as to Kaufman, and discussed in more detail below, defendants assume that her owner‘s policy was classified as extended coverage in the filed rate schedule and contend that Kaufman wants to reclassify it as a standard policy. But that is not Kaufman‘s argument. Her argument is that the fee schedule itself—the schedule defendants prepared and filed—classifies the policy as a standard policy. She seeks only to hold defendants to their filing.
More importantly, there is a difference between challenging a filed rate with the Insurance Commissioner and challenging the amount charged to an individual consumer for a particular policy by contending that the rate charged to the individual exceeded the filed rate. These lawsuits do not challenge defendants’ act of filing any rate with the Commissioner. Nor do they challenge the amount of any filed rate. Instead, they contend that defendants unlawfully charged plaintiffs more than the filed rates. And determining whether the underlying policies are standard or extended coverage policies does not involve rate setting; the determination involves questions about the nature of the policies, which in turn establishes what should have been charged.
Defendants also suggest that it is irrelevant whether the amounts they ultimately charged for various policies were for the amounts listed for those policies in the schedule of fees because
We also note that plaintiffs’ claims do not rest on the premise that defendants violated any statute contained in article 5.5 or article 5.7. Instead, plaintiffs argue defendants violated
6. Whether defendants charged Kaufman the correct rate and whether they committed a scrivener‘s error are disputed factual issues.
As we explained before, Kaufman purchased an EAGLE Loan Policy alongside her EAGLE Owner‘s Policy. The fee schedule classified that policy as a standard coverage policy. And, according to the fee schedule, “there shall be no charge for” a standard coverage loan policy when purchased with an owner‘s policy of any type. Instead of providing the loan policy at no additional charge, however, defendants charged Kaufman $710. Accordingly, defendants did not charge their filed rate for the policy, and, under Villanueva and
Defendants’ argument to the contrary—that they in fact charged Kaufman their filed rate—rests on the premise that the loan policy was an extended coverage policy, and they committed a scrivener‘s error when they classified the policy as standard coverage. Neither the complaint nor the judicially noticed facts establish this premise, however.
7. The Insurance Commissioner does not have exclusive jurisdiction over this matter.
Finally, defendants contend that the administrative process in article 6.7 (
As Villanueva explains: “Article 6.7 (
Villanueva reasoned that comparable statutes “show[ ] that the Legislature knows how to prescribe exclusivity when it so intends. The Legislature used no comparable language here. In
Furthermore, as in Villanueva, the parties here seek “restitution on a classwide basis, but ... the statutory scheme grants the Commissioner no power to issue restitution to aggrieved individual consumers, never mind a class of them. The only relief the Commissioner can provide is an order prohibiting the unlawful rate or suspending or revoking the insurer‘s license. [Citations.] To interpret article 6.7 as supplying consumers’ sole avenue of recourse would leave them unable to obtain restitution of, or have the insurer disgorge, illegal overcharges. It would, as the Commissioner argues, undermine the stated overarching goal of ensuring that insurers do not impose excessive or unfairly discriminatory rates. (
In sum, Villanueva is clear on this point, and we are bound by its holding.
The judgments are reversed and the matter is remanded for further proceedings consistent with the views expressed in this opinion. Plaintiffs and appellants Jeffrey Albert Sjobring and Wendy Kaufman shall recover their costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
LAVIN, Acting P. J.
WE CONCUR:
EGERTON, J.
ADAMS, J.*
* Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.