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Can I sue my insurer under California's unfair competition law? – Blog for the law on property insurance



California's statutory law known as the Unfair Competition Law ("UCL") prevents "any illegal, unfair or fraudulent business act or practice" and gives courts the power to create relief where money alone will not suffice. Of course, this raises the question: Can an insured sue his insurer for violating UCL? A recently announced federal district court says no, at least when the case is a direct breach of contract and a case in bad faith.

In Benn v. Allstate Insurance Company breach of contract, bad faith and breach of UCL. The insured claimed that Allstate wrongly denied her claim for damage and theft of personal property by accusing her of not disclosing the personal property in the bankruptcy application and by allegedly inventing the existence of security footage showing that the insured had damaged her property. In addition to claiming damages from Allstate for failing to pay the claim and acting in bad faith, the insured also requested an injunction under the UCL and a decision to "disgorge" Allstate of the money owed on the claim.

Allstate moved . for the assessment of the pleadings concerning UCL's claim. In other words, Allstate argued that the insured could not file a claim for relief under UCL. According to the district court, a UCL claim as one for "fair" relief, the insured had to show that mere damages in money would not be sufficient. The district court quoted a case from the 1

930s and noted: "Justice follows the law."

The district court found that the insured would receive reasonable compensation if they won their claim for breach of contract and bad faith. The court held that the request for "disgorgement" was really only a breach of contract claim in disguise. The court ruled that a UCL "disgorgement" claim requires one party to return money to the other. This process, known as "restitution", differs from the concept of money "damages". Here, the court found it impossible to "disgorge" claims that were never taken from the insured by Allstate in the first place. "In short, sine qua non for a claim for repayment under section 17200 is that (1) the defendant obtained something to which he or she was not entitled and (2) the plaintiff gave up something to which he or she was entitled to retain." The court noted that the only thing Allstate took was the premium payments and held that "there is nothing illegal about the collection of premiums. Without the collection of premiums, there would be no insurance."

from doing so against other insured persons was unnecessary as these insured persons may also sue for breach of contract or bad faith, or perhaps under UCL if the circumstances are unique. " breach of contract or bad faith. Or, if an insured person has an injury that cannot be remedied through normal compensation, he or she is free to seek UCL assistance. ” Furthermore, the court held that "California law prevents a court from ordering an injunction to prevent breach of contract" under Code Civ. Proc. § 526 (b) (5).

The court also considered that such an injunction would be too heavy for a court:

Here it would be an administrative nightmare to formulate an injunction and settle disputes between Allstate and its policyholders. Benn wants the court to issue an injunction that apparently requires Allstate to handle claims in good faith. It is difficult to imagine how a court would write – let alone execute – an injunction that (i) applies indefinitely; (ii) applies to thousands of future, individual insurance claims; and (iii) prescribes, however vaguely, how these individual claims will be adjusted. There is no precedent for such an injunction. The court refuses to exercise its fair jurisdiction where, as here, the requested relief would involve the court in guarding a member of a tightly regulated industry through its fair powers.

Consequently, the opinion in case
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1 Benn v. Allstate Ins. Co. no. d, 2021 WL 5049101 (C.D. Cal., October 29, 2021).


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