Quackenbush v. Superior Court of Santa Barbara County

Opinion

GILBERT, J.

Here we hold that Insurance Code section 12389

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does not impose a mandatory duty on the Insurance Commissioner (hereinafter Commissioner) to prohibit an underwritten title company that has violated the Insurance Code from doing business or to warn the public. We issue a writ of mandate directing the trial court to vacate its order overruling the Commissioner’s demurrer to the complaint.

Facts

Francis Kaye Lyons alleged in his amended complaint that Trico Title Insurance Company was an underwritten title company conducting the business of title insurance. (§§ 12340.5, 12340.3.)

In January of 1994, the Commissioner received a report showing that Trico had submitted a falsified financial statement to the Department of Insurance and maintained an underfunded escrow account, both violations of the Insurance Code. The Commissioner took no immediate action.

In April and July of 1994, Lyons deposited funds into escrow with Trico totaling $36,402. In August of 1994, the Commissioner seized Trico.

The complaint alleged that upon discovery of Trico’s improprieties the Commissioner had a mandatory duty under section 12389 either to warn Lyons or immediately stop Trico from doing business. Lyons claimed the failure of the Commissioner to perform the duty resulted in the loss of the funds he placed into escrow.

The Commissioner demurred to the complaint on the ground that section 12389 did not impose a mandatory duty to warn or to stop Trico from doing business. The trial court overruled the demurrer and the Commissioner petitions for a writ of mandate.

Discussion

Government Code section 815.6 provides, “Where a public entity is under a mandatory duty imposed by an enactment that is designed to protect

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against the risk of a particular kind of injury, the public entity is liable for an injury of that kind proximately caused by its failure to discharge the duty unless the public entity establishes that it exercised reasonable diligence to discharge the duty.”