2018-00225509-CU-MC

Ching Lee vs. Geico General Insurance Company

Nature of Proceeding: Hearing on Demurrer

Filed By: Mooradian, Alina

Defendant GEICO General Insurance Company’s (“Geico”) Demurrer to the Complaint is sustained without leave to amend for failure to state facts sufficient to constitute a cause of action.

The parties’ Requests for Judicial Notice are granted.

Plaintiffs bring this purported class action complaint alleging claims for Violation of Business & Professions Code section 6149.5, Negligence, Breach of Contract on behalf of Third Party Beneficiaries, Unjust Enrichment, California Unfair Competition Law, and Declaratory and Injunctive Relief.

The Proposed Class is: All third-party California claimants who, within the last four (4) years prior to the date of filing of this Complaint, received settlement proceeds from GEICO without receiving the statutorily mandated written notice of settlement from GEICO, in violation of California Business & Professions Code section 6149.5. (Complaint, ¶ 8) Plaintiffs concede that each and every one of their causes of action arise from defendant’s alleged violation of Business & Professions Code Section 6149.5

Business & Professions Code Section 6149.5 provides:

a) Upon the payment of one hundred dollars ($100) or more in settlement of any third-party liability claim the insurer shall provide written notice to the claimant if both of the following apply:(1) The claimant is a natural person.

(2) The payment is delivered to the claimant’s lawyer or other representative by draft, check, or otherwise.

(b) For purposes of this section, “written notice” includes providing to the claimant a copy of the cover letter sent to the claimant’s attorney or other representative that accompanied the settlement payment.

(c) This section shall not create any cause of action for any person against the insurer based upon the insurer’s failure to provide the notice to a claimant required by this section. This section shall not create a defense for any party to any cause of action based upon the insurer’s failure to provide this notice. [emphasis added]

Geico challenges all causes of action based on section 6149.5’s explicit language that bars all causes of action alleged by any person based on the insurer’s failure to provide the notice to a claimant required by this section.

The statutory language is clear and the plain meaning of the statute governs. See, e.g. 1 Witkin Cal. Proc. Attys § 259 [” B. & P.C. 6149.5 does not create a cause of action against the insurer or a defense to any cause of action based on the insurer’s failure to provide the notice.”] The goal of statutory construction is to ascertain and effectuate

the intent of the Legislature. (Hsu v. Abbara (1995) 9 Cal. 4th 863, 871.) “To determine legislative intent, a court begins with the words of a statute, because they generally provide the most reliable indicator of legislative intent.” (Id.) “If it is clear and unambiguous our inquiry ends. There is no need for judicial construction and a court may not indulge in it.” (In re Waters of Long Valley Creek Stream System (1979) 25 Cal. 3d 339, 348.) “If there is no ambiguity in the language, we presume the Legislature meant what it said and the plain meaning of the statute governs.” ( Diamond Multimedia Systems. Inc. v. Superior Court (1999) 19 Cal. 4th 1036, 1047.) We must give the language its usual, ordinary meaning, avoid construing words as surplusage, and interpret the words of a statute in context, internally harmonizing them. (Dyna-Med Inc. v. Fair Employment & Housing Com. (1987) 43 Cal. 3d 1379, 1387-88.)

The Court finds that the language is clear and ambiguous and prohibits any cause of action arising from a violation of this statute.

In opposition, plaintiffs explain that prior to the enactment of the statute there existed a significant problem involving California attorneys absconding with settlement monies paid by insurance companies for the benefit of third-party claimants. Plaintiffs contend, however, that the second sentence of subdivision (c) renders the statute hopelessly ambiguous and even “absurd.” Plaintiffs argue that defendant’s have deliberately “ignored” the second sentence of subdivision (c) in their moving papers. That sentence states “This section shall not create a defense for any party to any cause of action based upon the insurer’s failure to provide this notice.” Plaintiffs contend that this sentence allows them to sue GEICO. Plaintiffs give a strained interpretation of this sentence that renders meaningless the first sentence of the subdivision. Plaintiffs contend that this sentence does not permit Geico from raising the statute as a defense to an action brought by plaintiffs under this section. This interpretation pre-supposes that plaintiffs have the right to bring the action, which they clearly do not, as stated in the previous sentence.

As explained by Geico, the language stating this section shall not create a defense was included in the statute to prevent insurance companies from raising a defense to a proceeding of a governmental entity such as the Department of Insurance, which is permitted to regulate insurance companies. The Legislative History Excerpt states that the statute “further specifies that an insurance carrier’s failure to comply with the rule does not create a new cause of action or defense to a party, but neither does it exonerate an insurer from appropriate action by a state regulatory or licensing agency.” RJN Ex. C page A-11 [emphasis added]

Parenthetically, as noted in Pacific Palisades Bowl Mobile Estates, LLC v. City of Los Angeles, (2012) 55 Cal. 4th 783, even were the Court to find an ambiguity, ‘As in any case involving statutory interpretation, our fundamental task here is to determine the Legislature’s intent so as to effectuate the law’s purpose.’ ” (In re C.H. (2011) 53 Cal.4th 94, 100.) “ ‘If the statute’s text evinces an unmistakable plain meaning, we need go no further.’ ” (Ibid.) But where, as here, a statute’s terms are unclear or ambiguous, “we may ‘look to a variety of extrinsic aids, including the ostensible objects to be achieved, the evils to be remedied, the legislative history, public policy, contemporaneous administrative construction, and the statutory scheme of which the statute is a part.’ ” (In re M.M. (2012) 54 Cal.4th 530, 536.” The meaning of a statute may not be determined from a single word or sentence. Tonya M. v. Superior Court (2007) 42 Cal. 4th 836. Its words must be construed in context, (Id.) keeping in mind

the nature and obvious purpose of the statute where they appear (People v. Cottle (2006) 39 Cal. 4th 246) so as to make sense of the entire statutory scheme. Grafton Partners L.P. v. Superior Court (2005) 36 Cal. 4th 944).

Plaintiffs’ objection to the Reply RJN is overruled. This is not “new evidence.” In fact, Plaintiffs failed to include the first four pages of the Legislative History document that they attached to their Request for Judicial Notice as Ex. C. Specifically, plaintiffs failed to attach the portions of the document that state “An insurer who fails to comply with the notice requirement cannot be held liable.” (See Supplemental RJN Ex., E, page PE 7)

As stated above, the Court must “give the language its usual, ordinary meaning, avoid construing words as surplusage, and interpret the words of a statute in context, internally harmonizing them. (Dyna-Med Inc. v. Fair Employment & Housing Com. (1987) 43 Cal. 3d 1379, 1387-88.) In considering the legislative history provided by both parties, the two sentences of subdivision (c) are not ambiguous, therefore the Court rejects plaintiff’s argument that subdivision (c) must not be enforced due to the rarely invoked “absurdity rule” acknowledged by California case law. (See In re Jesse S. (2017) 12 Cal.App.5th 611, 621; Unzueta v Ocean View School Dist. (1992) 6 Cal.App.4th 1689, 1699.

Since plaintiffs’ complaint arises only out of the alleged violation of section 6149.5, and because plaintiffs have not pointed to any other possible statute or law that could support any cause of action against Geico, no leave to amend is granted. Because the express language of B&P § 6149.5 bars any cause of action against the insurer arising from a violation of the statute, no cause of action is stated against GEICO.

A court may sustain a demurrer with or without leave to amend. CCP 472a(c). Leave to amend a defective complaint should be denied where, as in this case, no liability exists under substantive law. Rotolo v San Jose Sports & Entertainment, LLC (2007) 151 Cal.App.4th 307, 321.

A demurrer must be sustained without leave to amend absent a showing by plaintiff that a reasonable possibility exists that the defect can be cured by amendment. Blank v Kirwan (1985) 39 Cal.3d 311, 318. The burden of proving such reasonable possibility rests squarely on the plaintiff. Torres v City of Yorba Linda (1993) 13 Cal.App.4th 1035, 1041. Plaintiff has not met that burden. The Court finds no reasonable possibility that the defect can be cured by amendment. (Wennerholm v. Stanford University School of Medicine, (1978) 20 Cal.2d 713, 717.)