Consumer Watchdog Challenges Court of Appeal Overturning Proposition 103's Provision Guaranteeing Citizens the Right to Challenge Illegal Practices by Insurance Companies.


Proposition 103 provides consumers an unqualified right to go to court and sue insurance companies that break the law. But in 2010, a panel of California Court of Appeal justices in Los Angeles ruled that an insurance company cannot be sued for illegal conduct if it could claim that state employees were aware of the wrongdoing. The case is MacKay v. 21st Century.

Insurance companies have repeatedly asked California courts to bar consumers from challenging unlawful and discriminatory rates and practices in court. In 2005, another panel of appellate justices carefully reviewed Proposition 103 and other laws and concluded that such lawsuits were permitted. (The case was Donabedian v. Mercury Insurance, which you can read more about.)

As Consumer Watchdog explained in our request for depublication of the case:

According to the opinion, an insurance company that engages in an underwriting practice explicitly forbidden by the voters cannot be sued under the [California Unfair Competition Law] so long as the company can claim that the Insurance Commissioner or employees of the California Department of Insurance (DOI) approved a regulatory filing submitted by that company, whether or not the practice was properly disclosed to the Commissioner, the agency staff and the public in that filing, and notwithstanding the Commissioner’s explicit disclaimer to the contrary. The opinion even appears to confer immunity from a UCL action for illegal activity that occurred after the agency notified the insurer that its practices were objectionable and promulgated regulations to prevent subterfuge by the industry.

The opinion would permit insurance companies to evade judicial accountability for unlawful discrimination based on race, sex, religion, gender preference or disability.

The decision conflicts with the plain language of Proposition 103  (§ 1861 et seq.), long-settled, on-point precedent of [The California Supreme] Court, other appellate opinions, and the consistent position of the Commissioner over the preceding twenty-two years. In short, the decision resurrects the statutory immunity scheme that California voters rejected when they passed Proposition 103 twenty-two years ago.

Consumer Watchdog was not involved in the MacKay litigation. But it and more than a dozen civil and consumer rights organizations urged the California Supreme Court to overturn the decision or strike it from the books. 

Unfortunately, the Supreme Court refused to review or strike the decision, leaving conflicting lower court decisions that will have to be resolved by the high court at a later date. 

Read letters to the Supreme Court from civil rights, consumer protection and public interest organizations:

ACLU of Northern California
ACLU of Southern California
ACLU of San Diego and Imperial Counties
Consumer Action
Consumer Federation of California
Consumers for Auto Reliability and Safety
Consumers Union of United States (the non-profit publisher of Consumer Reports)
Disability Rights Education and Defense Fund (DREDF)
Equal Justice Society
Impact Fund
Lambda Legal
Public Advocates
Public Counsel
SCLC-Los Angeles
United Policyholders