Schwartz v. Provident Life & Accident Insurance

Filed 5/21/13 CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

RICK L. SCHWARTZ, Plaintiff and Appellant, A134706 v. PROVIDENT LIFE AND ACCIDENT (City & County of San Francisco INSURANCE COMPANY et al., Super. Ct. No. CGC-05-446073) Defendants and Respondents.

An insured sued disability insurers alleging deceptive claims handling practices in violation of the unfair competition law (UCL) based upon the insurers’ former practice of wrongfully denying benefits to some insureds. (Bus. & Prof. Code, § 17200 et seq.)1 The trial court found that the insured, who was never denied benefits, lacked standing to pursue a UCL cause of action because the insured had not “suffered injury in fact” nor “lost money or property as a result of the unfair competition.” (§ 17204.) The court granted summary adjudication in favor of the insurers on the UCL cause of action. We shall affirm the summary adjudication ruling and subsequent judgment. STATEMENT OF FACTS2 Defendants Provident Life and Accident Insurance Company and related companies (collectively, insurers) sell disability insurance that provides monetary

1 All further section references are to this code except as noted. 2 The statement of facts is drawn from the pleadings and facts stipulated by the parties for purpose of summary adjudication or otherwise undisputed. We deny the insurers’ request for judicial notice of insurance audit reports that were not submitted to the trial court. The proffered materials are not relevant.

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benefits to individuals who, due to injury or illness, are unable to work in their chosen occupations. Plaintiff Rick L. Schwartz is an insured under a policy he purchased in 1988 and maintains to date. Schwartz, a certified public accountant, chose the policy because he believed it was a good idea to “lock in a good premium” at a young age with a “non- cancelable, guaranteed renewable” policy. Schwartz pays a fixed monthly premium of $371.44 in exchange for the insurer’s promise to pay a monthly benefit of $11,220 in the event of disability. Schwartz understood that his insurer would pay him the full benefits due under the policy if he became disabled, but would pay him no benefits and would retain the full amount of premiums paid if he did not become disabled. Schwartz has never become disabled and has never filed a claim for benefits. In October 2005, the Commissioner of the California Department of Insurance (the commissioner) entered into a settlement agreement with the insurers resolving allegations that the insurers wrongly denied benefits to some insureds who had filed claims for benefits. Without conceding fault, insurers paid an $8 million civil penalty and agreed to re-evaluate claims previously denied and to modify their claims handling practices in the future. Later that month, this action was filed on behalf of insureds who had not been denied benefits and therefore received no direct benefits from the settlement agreement. The operative second amended complaint filed by Schwartz pleads causes of action against the commissioner and the insurers. Schwartz alleged that the insurers operated a “systematic scheme” from 1994 to 2005 to deny and terminate legitimate disability claims by policyholders. Schwartz, and the purported class he represents, claimed injury from the alleged deceptive scheme despite no denial of benefits. Schwartz alleged that the insurers’ “systematic scheme to deny and terminate claims eliminated coverage under the disability income polices for all policyholders and, therefore, effectuated a reduction in coverage across the entire policyholder class. As a result, plaintiff and the classes paid premium dollars for units of coverage that were never afforded under the disability income policies, and [the insurers] breached the policies by not providing the units of coverage that plaintiff and the classes purchased with their premium payments.