Consumer Watchdog – Safeco Must Disclose Who It Surcharged for Auto Insurance, Court Rules

Lawsuit Seeking Refunds for Violations of Proposition 103 Will Proceed
 
Santa Monica, CA ­– Safeco Insurance Company will be required to disclose which customers it surcharged due to their lack of prior continuous automobile insurance coverage, the California Court of Appeal in Los Angeles has ruled.  Plaintiffs allege that such unapproved and undisclosed surcharges violate Proposition 103, the landmark insurance regulation initiative approved by California voters in 1988.
 
“This is an important victory for Safeco policyholders who paid hundreds of dollars more for auto insurance because Safeco knowingly broke the law and hid its lawbreaking from its customers and state regulators,” said Harvey Rosenfield, author of Proposition 103 and attorney for Consumer Watchdog, a California-based non-profit organization. “Because Safeco concealed these surcharges, only Safeco knows who it overcharged, and this decision means that those people can have their day in court.”
 
In 2002, after investigating Safeco’s auto insurance application process, Consumer Watchdog sued the company in Los Angeles Superior Court for violating California Insurance Code section 1861.02(c), which forbids insurers from surcharging or refusing to insure motorists just because they previously did not have insurance. The suit also charges that Safeco failed to disclose its practices to the Insurance Commissioner – a separate violation of the law.  
 
In 2004, a coalition of insurance companies and other business groups sponsored a successful ballot measure, Proposition 64, which they claimed would stop frivolous lawsuits – but Safeco argued that under that measure, Consumer Watchdog could not bring this lawsuit on behalf of the public. A volunteer stepped forward to continue the suit, but the trial court determined that she was not a proper plaintiff.
 
That led to the present appeal. Because there was no way a Safeco customer could determine whether he or she had been surcharged, Plaintiffs’ counsel asked the Los Angeles Superior Court to order Safeco to provide a list of the people who were surcharged, so they could have an opportunity to participate in the litigation.  After reviewing evidence, including internal Safeco documents that remain under court seal, Los Angeles Superior Court Judge Anthony Mohr issued the order based, at least in part, on “what appears to be direct evidence, to the effect that the defendant had a surcharge policy based on a lack of prior insurance. . . This justifies allowing the discovery plaintiff seeks.”  Safeco appealed.
 
In the ruling, issued yesterday, the Court of Appeal rejected Safeco’s arguments and confirmed that the lower court order was appropriate.
 
The team of lawyers suing Safeco includes Theodore J. Pintar, Thomas R. Merrick and appellate law specialist Kevin K. Green of the firm Coughlin, Stoia, Geller, Rudman & Robbins, based in San Diego; Jay Angoff, the former Insurance Commissioner of Missouri and now of counsel to the Washington, D.C. based Mehri & Skalet, who argued the case before the Court of Appeal; and Consumer Watchdog’s Pam Pressley (Litigation Director), Todd Foreman and counsel Harvey Rosenfield.
 
For More Information
 
Read the Court of Appeal’s 4-30-09 decision.
Read our brief before the Court of Appeal.
Read the original complaint by the Proposition 103 Enforcement Project.
Read about Proposition 103’s protections.
 
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Consumer Watchdog, formerly The Foundation for Taxpayer and Consumer Rights, is a nonpartisan, nonprofit organization.