No act done, action taken, or agreement made pursuant to the authority conferred by Article 5.5 (commencing with Section 12401) or Article 5.7 (commencing with Section 12402) of this chapter shall constitute a violation of or grounds for prosecution or civil proceedings under any other law of this state heretofore or hereafter enacted which does not specifically refer to insurance.
Articles 5.5 and 5.7 of the Insurance Code relate to ratemaking rules for title insurers, including the requirement to file those rates with the California Insurance Commissioner.
Significantly, the same operative language in Section 12414.26 is used in parallel statutes for other types of insurance. (See e.g., Ins. Code § 1860.1 [casualty insurance]; Ins. Code § 11758 [workers’ compensation insurance].) This means the Villanueva decision will likely reach other types of insurance as well.
The underlying facts in Villanueva are straightforward. When the plaintiff, Manny Villanueva, and his wife refinanced their home’s mortgage, the defendant, Fidelity National Title Company (Fidelity), handled the escrow while Fidelity National Title Insurance Company supplied title insurance. For its services, Fidelity charged an overnight delivery fee, courier fee, and a fee for preparing a new deed.2 The plaintiff sued Fidelity under California’s unfair competition law arguing these fees were illegal because Fidelity never filed them with the insurance commissioner as required by Section 12401.7.3 Following a bench trial, the trial court concluded that Section 12414.26 provided immunity for only those actions that are authorized by relevant provisions of the Insurance Code. Because those provisions do not authorize charging unfiled rates, immunity did not apply to Fidelity.
The Court of Appeal disagreed with the trial court and found that immunity under Section 12414.26 extended to all ratemaking activities, including the charging of unfiled rates. The Court of Appeal further held that a proceeding before the commissioner, pursuant to Article 6.7 of the title insurance chapter, was the exclusive remedy for consumers who were charged unfiled rates.
The California Supreme Court reversed the Court of Appeal on both points. The court first looked to the statutory language of Article 5 and reasoned, “[t]his statutory immunity does not extend to the charging of unfixed rates because those articles confer no such authority; on the contrary, the referenced articles expressly prohibit the charging of unfiled rates.”
The court then analyzed the statute’s legislative history. The court explained that Section 12414.26 and the related immunity provisions were originally created “to ensure that insurers would not be subject to antitrust liability for consulting with each other before establishing their rates.” That history, however, did not reflect an intent to “categorically immunize all ratemaking activity — even unauthorized activity — from suit.”
Next, the court looked to the views of the insurance commissioner who, for decades, “has consistently maintained the view that section 12414.26 and its parallel statutes do not immunize against civil suit the charging of unauthorized rates, but rather are aimed at concerted activities that would otherwise be susceptible to challenge under the antitrust laws.”
Fidelity relied on the Court of Appeal decision in Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26 for a broad application of immunity under Section 12414.26 to any conduct related to ratemaking, even if that conduct was not authorized by Article 5.5 or 5.7. The court explained that Fidelity “overreads Quelimane by a fair stretch,” because that decision “did not purport to cast aside the actual terms of the statute.” Rather, the Quelimane court simply identified a necessary condition for immunity under Section 12414.26 — that the challenged conduct relate to ratemaking. But a necessary condition is not also a sufficient one: “Even so, Fidelity would read Quelimane as establishing not just a necessary condition for immunity, but a sufficient one: so long as the alleged conduct relates to ratemaking in some way … Quelimane said no such thing, and overreading it in this fashion would lead to results Quelimane surely did not intend.”4
As for Fidelity’s exclusive remedy argument, the court again looked to the statutory language, which did not expressly suggest that a complaint to the commissioner was an exclusive remedy for consumers. The court also discussed other laws where exclusive remedy language is clear and noted that “[t]he language of these statutes shows that the Legislature knows how to prescribe exclusivity when it so intends.” The court further explained that an incomplete remedial scheme offers some insight into whether the legislature intended an administrative forum to be an exclusive remedy. In this case, the plaintiff sought restitution on a class-wide basis but the statutory scheme offers the commissioner no authority to issue restitution to aggrieved individual consumers, let alone a class of them.
The Villanueva decision dealt specifically with title insurance, but its ramifications will extend to other lines of insurance as well. As noted above, the same operative language in Section 12414.26 affecting title insurers appears in parallel statutes concerning other insurance. The Villanueva decision may have also opened the door for further attempts to limit insurer immunity under California’s ratemaking statutes. For now, it will be important for insurers to keep in mind that the immunity afforded under California’s ratemaking statutes does not provide blanket protection and extends only to conduct expressly authorized by those statutes.