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Home protection contract is not insurance



Plaintiffs Gina Chu, et al., Appealed against the decision of the Court of Justice and dismissed with prejudice their allegations against the defendant for breach of the implied good faith and fair trade agreement and breach of the Unfair Competition Act. According to the plaintiff, since the contract they entered into, a home protection contract, is governed by the Insurance Code, including the Unfair Insurance Methods Act (§ 790 et seq.), It should be regarded as liability insurance and their complaint thus stated the allegation of infidelity. Gina Chu et al. v. Old Republic Home Protection Company, Inc., B302792, Court of Appeal of the State of California Second Appellate District Division Five (January 29, 2021), the Court appealed against the difference between insurance and home protection agreements. [19659003] FACTUAL BACKGROUND

The plaintiffs owned a condominium in Los Angeles. On an unspecified date, the defendant issued to the plaintiff a "home protection plan" under which the defendant agreed to "provide services for covered systems and appliances [within the condominium] reported as faulty during the period [contract]…."

During the effective period of the contract The tenant's heating, ventilation and air conditioning system (HVAC) became unusable, the repairs were insufficient and resulted in leakage of Freon which the home protection company failed to repair properly.

After the plaintiffs first made a claim under their homeowners' insurance H system, they kept their own contractor who confirmed that there was a leak in the HVAC system.In July 2019, the plaintiff kept another contractor who agreed that the system had a leak and further announced that the entire system must be replaced. system was $ 8,984.

On the fifth plea in law, the court ruled concluded that a home protection agreement is not an insurance policy and thus maintained demurrer without the right to change. [19659008] Statutory Home Business Regulatory Systems

In the mid-1970s, California companies began marketing contracts for service and repair of certain components or systems in residential structures, usually in conjunction with realtors. The vast majority of such contracts had not been performed as insurance contracts and the vast majority of companies offering such contracts had done business in a capacity other than and had qualified otherwise than as approved insurance companies. But no specific form of government regulation of this developing industry existed in California.

The legislator, indicating concerns, adopted Part 7 of Division 2 of the Insurance Code, beginning with section 12740. The new section defined a home protection agreement as:

any agreement or agreements where, for a predetermined fee, a person undertakes for a specified period of time to repair or replace all or part of components, systems or appliances in a home required by wear and tear, deterioration or inherent defect, or by the inspectorate not discovering the likelihood of such loss. [¶] Such agreement shall include a system of service for carrying out such repair or replacement and shall not include protection against consequential damage from failure of any component, system or apparatus. (§ 12740.)

The section also defined a "home protection company" as "any person licensed under this Part who issues a home protection contract."

Poor claim to faith

It is well known that a union of good faith and fair trade is implicit in every contract. The essence of the implied union is that neither party to an agreement will do anything to harm the other's right to receive the benefits of the contract.

As the good faith and fair trade association is essentially a contractual period aimed at achieving the parties' contractual intentions, compensation for its infringement has almost always been limited to agreements rather than tort remedies.

At present, California recognizes only one exception to the general rule: damages are available for an offense in insurance cases.

Analogy with insurance

The plaintiffs claim that since home protection contracts fall within the insurance code's definition of insurance and companies issuing insurance may be liable for breach of the implied contract, their fifth trial stated a claim for insurance in bad faith. e for regulatory purposes is not the abolition of the issue of liability. Instead, when analyzing whether a particular type of contract constitutes liability insurance, courts must assess whether policy considerations recognized in Community law support the availability of remedies under that type of contract. Tort recovery is considered appropriate in the insurance setting because such contracts are characterized by elements of adhesion and unequal bargaining power, public interest and trustee responsibility.

Here shows an evaluation of the political considerations that form the basis for liability in the traditional insurance context. that home protection agreements are not sufficiently analogous to insurance to support the introduction of liability.

Unlike insurances that protect against disaster or disaster, the home protection agreements in question promise to repair or replace covered home systems, such as the plaintiff's plumbing system or appliances, such as refrigerators, ovens or water heaters. Although a homeowner, by obtaining the benefits of such an agreement as part of a home purchase, can obtain some financial protection against repair or compensation costs, it is not the same protection against the financial dilemma that an insured faces after a catastrophic loss or [19659004] In the latter scenario, California courts apply tort law to indemnify the insurer for the fulfillment of its defense and damages obligations or to fully compensate the insured for an insurer's breach of the implied agreement. On the other hand, if a home protection company breaches its contractual obligation to repair or replace a covered system or appliance that malfunctions, contract damage seems to compensate the homeowner satisfactorily for the type of damage the parties are considering at the time of the contract – in other cases word – repair or replacement costs.

However, the fact that the insurance code can regulate a company is not decisive for whether the company should be subject to the same liability as traditional insurance companies.

A policy that does not include any of the hazards insured against in a standard fire policy should not be included in the definition of insurance for residential properties. [Kaliforniensförsäkringskodavsnitt2071angerstandardformuläretförbrandförsäkringochföreskriverattförsäkringenskaförsäkrasig"motallaförlustervidbrandblixtnedslagochgenomavlägsnandefrånfastighetersomäventyrasavdeförsäkringarsomförsäkrasmotdennapolitikmedundantagavvadsomhädaneftertillhandahålls"[19659004] As a hemskyddsavtal not a "property insurance" does not apply to Regulation 2695.9 of the defendant. Furthermore, because the plaintiff UCL claims based on their claim that the defendant violates various parts of the Regulation 2695.9, fails this requirement as

Because it does not contain the language of the standard fire policy, a home protection agreement does not qualify as insurance. For example, California Insurance Code section 22 provides "Insurance is an agreement where one undertakes to compensate another for loss, damage or liability that arises. as a result of a possible or unknown event. "It seems to be exactly what a home protection agreement does but the court did not agree. It seems so m if the court's argument is sufficient to eliminate the damage of bad faith because insurance appears to adequately compensate the homeowner for the type of damage the parties are considering at the time of procurement – in other words – repair or replacement costs, exactly what is promised by an insurance contract.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to employment as an insurance consultant specializing in insurance coverage, insurance management, insurance fraud and insurance fraud almost equally for insurers and insurers. He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims lawyer and more than 52 years in the insurance industry. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine / ACE Legend Award.

For the past 53 years, Barry Zalma has devoted his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to enable insurers and their claims staff to become insurance claims staff.

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