Insureds May Be Able to Sue the California Department of Insurance For Not Meaningfully Reviewing Consumer Complaints

Our client’s home was totally destroyed in the 2017 Tubbs Fire. After his carrier, Liberty, engaged in unfair claims practices, he filed multiple complaints with the California Department of Insurance (“CDI”). The CDI ignored his complaints for months but pretended it was investigating. Eventually, our client filed suit against Liberty—and the CDI.

Our lawsuit presented what appeared to be a novel theory of liability against the CDI. We asked the court to order the CDI to meaningfully review our client’s consumer complaint. Liberty challenged the validity of our claim, arguing that we failed to even remotely state a legal case against the CDI.¹

In a ruling issued yesterday, June 5, 2020, California Northern District Judge Richard Seeborg agreed with us. Judge Seeborg did not confirm the causes of action would be held valid in later proceedings, but affirmed them for now in the early stages of the case. You can read the court’s opinion here and our briefing on the subject here.

The ruling is a significant step forward for the thousands of consumers who plead with the CDI for help from their carriers’ unfair claims practices. There is a general understanding in the California insurance community that the CDI does not actually care about resolving consumer complaints. Instead, the CDI simply wants to collect data. This does nothing for consumers who are being hurt by their insurance companies.

The CDI’s practice of not adequately addressing consumer complaints leaves California insureds disillusioned. After all, it is a complaint process, not a data survey for a $10 Amazon gift card. Consumers expect protection from their elected officials and taxpayer funded state agencies like the CDI. The CDI not only has the power to take in consumer complaints but the duty to review them meaningfully and take action against the insurer where appropriate. In claims arising out of a state of emergency, the CDI also has the power to compel a carrier to attend a private mediation with the insured, at the carrier’s expense. In many instances, the CDI is required to send the dispute to mediation.² But in our experience, that is rarely and selectively done without any apparent rational basis.

The order issued yesterday by Judge Seeborg is the first judicial authority we are aware of in California indicating that an insured can ask a court to compel the CDI to pay meaningful attention to their consumer complaint. Hopefully we can continue developing this law in a positive manner and encourage the CDI to pay closer attention to consumer complaints.
______________________________
¹ Liberty took this position for strategic purposes. Had they won their motion, they would have been able to use a legal loophole to move the case from our client’s chosen courthouse to the one they prefer.
² These requirements are spelled out in our briefings with the court, which you can find here.