The California Supreme Court granted review of the Court of Appeal for the Fourth Appellate District's decision in Zhang v. Superior Ct. (Cal. Capital Ins. Co.). The case includes the following issue, although the Court may address other issues:
Does fraudulent conduct by an insurer, which is connected with conduct that would violate Insurance Code § 790.03 et seq., also give rise to a private civil cause of action under Business and Professions Code Section 17200, et seq. also known as the Unfair Competition Law ("UCL")?
The Court of Appeal reversed an order sustaining California Capital Insurance Company's ("Capital") demurrer to Zhang's complaint and found Zhang's allegations of fraudulent conduct and false advertising in connection with a claim supported a cause of action under the UCL. The Court of Appeal held even though Zhang alleged fraudulent conduct by Capital in violation of Insurance Code section 790.03 (the "Unfair Insurance Practices Act"), Zhang was not barred by the Unfair Insurance Practices Act from alleging a private civil cause of action for fraudulent conduct and false advertising under the UCL. Zhang alleged misconduct related to Capital's handling of her claim and refusal to authorize adequate payment under the policy for repair and restoration of property damaged by a fire.
The Court of Appeal held Zhang's allegations that Capital solicited her business through false advertising and false promises were sufficient to allege a claim under the UCL which was not barred by the Unfair Insurance Practices Act. The Court of Appeal reasoned the UCL applied to all businesses, including insurers, and authorized an injured person to sue for violation of its requirements and/or prohibitions (i.e. unfair competition, which included "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue, or misleading advertising"). The Court of Appeal stated even though the Unfair Insurance Practices Act did not provide a private cause of action for such claims, the UCL provided such a remedy. Since Zhang alleged Capital's conduct, including false advertising and fraudulent misrepresentations, violated the UCL, and was not "merely" a violation of the Unfair Insurance Practices Act, Zhang's UCL cause of action was not barred. Accordingly, the Court of Appeal directed the trial court to reinstate the cause of action.
Due to the Supreme Court's grant of review, the opinion of the Court of Appeal has been superseded and is unavailable for use as legal authority.
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