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Court of Appeal, Fourth District, Division 2, California.

Lorraine GRIEF, et al., Petitioners, v. SUPERIOR COURT of the State of California For the County of San Bernardino, Respondent. Bruce ARMBRUSTER, Real Party in Interest.


Decided: March 14, 1986

Spray, Gould & Bowers, Daniel O. Howard and James S. Link, Los Angeles, for petitioners. Weldon Diggs and Linda M. Wilde-Hamud, Claremont, for real party in interest. No appearance for respondent.


In this action for damages for violation of the Unfair Trade Practices Act (Ins.Code, § 790 et seq.1 ), the motion of defendants Lorraine Grief and Mary Hudson for summary judgment was denied and they petitioned this court for a writ of mandate, contending that as operation level employees of an insurance company employed exclusively and regularly in examining and adjusting claims received by their employer, they are not subject to individual civil liability under the Unfair Trade Practices Act for conduct within the course and scope of their employment.   This court issued an alternative writ and after considering the question, we conclude petitioners are correct and a peremptory writ of mandate should issue.


Bruce Armbruster, plaintiff in the court below and real party in interest here (hereinafter referred to as plaintiff), alleged in his first amended complaint that:  on or about March 1, 1983, he was injured in an accident caused by the negligence of Norman Cluck, the owner and driver of a certain 1972 Volkswagen automobile;  Norman Cluck had insurance coverage under a policy issued by defendant State Farm Mutual Automobile Insurance Company (State Farm);  liability on the part of Norman Cluck was reasonably clear at all times;  plaintiff made a claim against Norman Cluck and ultimately made a formal demand on State Farm to settle the claim for the amount of $4,500;  and that defendants, and each of them, violated their statutory duties under the Unfair Trade Practices Act by “[n]ot attempting in good faith to effectuate a prompt, fair and equitable settlement of plaintiff's claim in which liability [had] become reasonably clear (Insurance Code Section 790.03(h)(5)) in that defendants, and each of them, induced plaintiff to settle his claim for $3,000.00 when said defendants were aware that at all times ․ plaintiff's claim was worth at the very least $4,500.00.”

With respect to the capacity and conduct of Lorraine Grief and Mary Hudson it was alleged that they were employees of State Farm and were at all times acting within the purpose and scope of their employment and that they “participated in processing plaintiff's claim for damages,” including offering him at one time $100 and at a later time $930 in full and complete settlement, before ultimately settling for $3,000.

It was further alleged that “[d]efendants, and each of them, as individuals and entities engaged in the business of insurance in California, are, and at all times herein mentioned, were, members of the class of persons and entities intended to be regulated and, in fact, are regulated by California Insurance Code Section 790.03.”  (Emphasis added, emphasis in orig. deleted.)

In support of their motion for summary judgment, defendants Grief and Hudson submitted virtually identical declarations, except for the lengths of their respective employments and the amounts for which they were authorized to settle claims without obtaining approval of their superiors.   The declaration of Mary Hudson averred in pertinent part that:  she was presently employed and had been employed by State Farm for 15 years;  she was presently employed as a senior claim representative in which capacity she had the duty to gather investigative reports, witness statements, medical reports and other data necessary to evaluate claims presented by insureds and claimants and the duty of evaluating claims to determine their settlement value;  in the performance of her duties she was subject to the control and direction of her supervisors in all matters relating to the handling and settlement of claims;  she had been given authority to settle claims up to a limit of $1,500 without approval from her superiors but she had no authority to settle claims in excess of that amount;  she did not have final authority in setting the dollar evaluation on claims in excess of $1,500;  and that she was required to obtain the approval of her superior for any settlement in excess of that amount.

Finally, Hudson averred that:  she does not collect any premiums from insureds nor issue insurance contracts to insureds;  she does not undertake to make any determination as to who is to be insured or as to any underwriting questions;  no claims are paid with her funds but rather only by draft issued by and with the authority of State Farm;  she is not licensed by the State of California in her capacity as a claim representative or a senior claim representative and she has no license to sell insurance, act as a licensed solicitor, agent or broker or otherwise act as an insurer.

Lorraine Grief's declaration averred all of the same facts except that she had been employed by State Farm for only nine years and her authority to settle claims without the approval of her supervisor was limited to $600 per person and $1,200 per file.

The only declaration filed in opposition to the motion for summary judgment was that of the plaintiff Bruce Armbruster, who in no way contradicted the declarations of Lorraine Grief and Mary Hudson insofar as their employment and duties were concerned.   It simply averred that on or about March 18, 1983, defendant Grief offered Mr. Armbruster $100 in full and complete settlement of his claim, that thereafter he received further medical care and treatment and that on October 12, 1983, defendant Hudson offered him $930 in full and complete settlement.   Attached to Mr. Armbruster's declaration was a photocopy of a letter on State Farm stationery dated October 12, 1983, addressed to Mr. Armbruster's father and signed by defendant Hudson as “Senior Claim Representative,” offering the sum of $930 in settlement of the claim.   Plaintiff's points and authorities in opposition to the motions conceded Grief and Hudson were employees of State Farm.


Where the right to summary judgment is beyond dispute because no triable issue of fact exists, a trial court's denial of the motion is an abuse of discretion remediable by a reviewing court's peremptory writ of mandate.  (Krasley v. Superior Court (1980) 101 Cal.App.3d 425, 427–428, 161 Cal.Rptr. 629, citing Burke Concrete Accessories, Inc. v. Superior Court (1970) 8 Cal.App.3d 773, 87 Cal.Rptr. 619.)

 Section 790.01, which enumerates those to whom the Unfair Trade Practices Act applies, reads:  “This article applies to reciprocal and interinsurance exchanges, Lloyds insurers, fraternal benefit societies, fraternal fire insurers, grants and annuities societies, insurers holding certificates of exemptions, motor clubs, nonprofit hospital associations, agents, brokers, solicitors, surplus line brokers and special lines surplus line brokers as well as all other persons engaged in the business of insurance.”   Plaintiff of course recognizes that employee claim adjusters of an insurance company are not within any of the specifically enumerated classifications in section 790.01.   He urges, however, that an employee adjuster comes within the final catch-all category, “all other persons engaged in the business of insurance.”   Not so.   Plaintiff's proposed construction of the statutory language would violate at least three well-accepted principles of statutory construction.

First, the statutory enumeration of a class of persons or entities implies the exclusion of those not enumerated.   This principle is codified in Code of Civil Procedure section 1858, which provides in part, “In the construction of a statute ․ the office of the judge is simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted․”   Moreover, this rule has special application where the legislative history reveals the excluded terms originally appeared in early drafts of the statute and were then deleted or modified by amendment.  (Ventura v. City of San Jose (1984) 151 Cal.App.3d 1076, 1080, 199 Cal.Rptr. 216, citing Rich v. State Board of Optometry (1965) 235 Cal.App.2d 591, 607, 45 Cal.Rptr. 512.)   Here, as we shall point out, although the California statute was based on a model statute, the Legislature made specific language deletions directly related to the question of the inclusion or exclusion of persons such as defendants, so the cited rule of statutory interpretation has special significance.

 The second relevant rule of construction is that codified in Civil Code section 3534:  “Particular expressions qualify those which are general.”   In other words, catch-all classifications are generally not to be construed to include persons outside the category delineated by the particular persons and entities expressly enumerated.  (See California Coastal Com. v. Quanta Investment Corp. (1980) 113 Cal.App.3d 579, 606, 170 Cal.Rptr. 263;  Campbell v. Board of Dental Examiners (1975) 53 Cal.App.3d 283, 285, 125 Cal.Rptr. 694.)   All the persons and entities specifically enumerated in section 790.01 must be licensed in some fashion to engage in business.2  (§ 700.)   Plaintiff does not dispute the fact that petitioners, as employee claim adjusters of a single insurer, were neither licensed nor required to be licensed.   Moreover, staff employee claim adjusters like petitioners simply do not qualify as “persons engaged in the business of insurance” within the meaning of section 790.01.   Insurers are engaged in the business of insurance;  their unlicensed employees assigned to the processing and evaluation of claims are not.   They are merely employed in the insurance industry.   In the present case, for example, it is undisputed that petitioners lacked independent authority to settle plaintiff's claim for $3,000 or $4,500.   Grief's settlement limit was $600 per person and $1,200 per claim and Hudson's was $1,500 per claim.   To settle plaintiff's claim each would have had to obtain supervisorial approval.

 Finally, but perhaps most significantly as to this point, California's Unfair Trade Practices Act derives from model legislation drafted by the National Association of Insurance Commissioners.   Section 2(a) of the model act defines the class of persons regulated as “․ any individual, corporation, association, partnership, reciprocal exchange, interinsurer, Lloyds insurer, fraternal benefit society, and any other legal entity engaged in the business of insurance, including agents, brokers and adjusters.”  (Emphasis added.)   However, in adopting section 790.01 establishing the scope of application of the California statute, the Legislature specifically deleted both the words “individual” and “adjusters.”   It is presumed the Legislature intended to accomplish some change in meaning when it adopted the model legislation only after specific modification of its language.  (See, e.g., Royal Globe Ins. Co. v. Superior Court (1979) 23 Cal.3d 880, 886, 887–888, 153 Cal.Rptr. 842, 592 P.2d 328;  Belli v. Roberts Brothers Furs (1966) 240 Cal.App.2d 284, 289, 49 Cal.Rptr. 625.)

 Plaintiff attempts to circumvent all the foregoing by pointing out that section 790.02 provides in relevant part:  “No person shall engage in ․ [prohibited practices] ․ in the business of insurance.”  (Emphasis added.)   Section 19 of the Insurance Code defines “person” to mean “any person,” i.e., any individual, so plaintiff urges the Act must apply to any person, including an employee adjuster.   However, since section 790.01 specifically delineates the Act's application, it takes priority over general provisions like sections 19 and 790.02.  (See Neumarkel v. Allard (1985) 163 Cal.App.3d 457, 463, 209 Cal.Rptr. 616;  see also Las Virgenes Mun. Wat. Dist. v. Dorgelo (1984) 154 Cal.App.3d 481, 486, 201 Cal.Rptr. 266.)  “No person shall” in section 790.02 must be read, “No person to whom this act applies under section 790.01 shall․”

Plaintiff is also incorrect in contending that authoritative decisional law has determined or indicated that employee adjusters may be held civilly liable in damages under the Unfair Trade Practices Act.   In Royal Globe one of the named defendants was an independent insurance claims adjusting company which was alleged to be the agent of Royal Globe Insurance Company.  (Royal Globe, supra, 23 Cal.3d at p. 884, 153 Cal.Rptr. 842, 592 P.2d 328.)   Although the court in its reasoning indicated an action would lie against the defendants under the Unfair Trade Practices Act, its discussion did not distinguish between the insurance company and the independent adjusting company, nor was the potential liability of the independent adjusting company separately considered.   We observe, however, that unlike defendants Grief and Hudson in the case at bench, the independent adjusting agency named as a defendant in the Royal Globe case was required to be licensed (see § 14000 et seq.) and was apparently deemed to be engaged in the insurance business.  (See Bodenhamer v. Superior Court (1986) 178 Cal.App.3d 180, –––, 223 Cal.Rptr. 486.* )  In any event, Royal Globe in no way held, indicated or suggested that an employee claim adjuster “employed exclusively and regularly by one employer in connection with the affairs of such employer only and where there exists an employer-employee relationship” (§ 14022, subd. (a)) was subject to civil suit under the Unfair Trade Practices Act.

Colonial Life & Accident Ins. Co. v. Superior Court (1982) 31 Cal.3d 785, 183 Cal.Rptr. 810, 647 P.2d 86 is similarly inapposite.   The question involved in that case was the right of a plaintiff in an action under the Unfair Trade Practices Act to discover the names, addresses and records of other claimaints against the defendant insurance company whose claims had been handled by Equifax Inc. and J.T. Sharkey, an independent adjusting firm and one of its employees, respectively.   While Equifax and J.T. Sharkey were named as defendants in the action, the question of their potential liability was not at issue in the decision and was not discussed.   In any event, once again the adjusting firm involved was a licensed independent adjuster apparently engaged in the insurance business.  (Id., 31 Cal.3d at pp. 787–788, 791, fn. 8, 183 Cal.Rptr. 810, 647 P.2d 86.)

Richardson v. GAB Business Services, Inc. (1984) 161 Cal.App.3d 519, 207 Cal.Rptr. 519 not only involved an independent adjusting agency as distinguished from an employee adjuster, but in that case even the independent adjusting agency was held to be not subject to civil action under the Unfair Trade Practices Act because in that case it was adjusting claims not on behalf of an insurer but on behalf of a self-insured business (Safeway) and so was held to be not engaged in the business of insurance.  (Id., 161 Cal.App.3d at pp. 524–525, 207 Cal.Rptr. 519.)

The only case cited by plaintiff which considered and purported to decide the question of an employee adjuster's amenability to civil suit under the Unfair Trade Practices Act was Reasoner v. Aetna Life Ins. Co. (S.D.Cal.1984) 600 F.Supp. 278.   Insofar as it is here relevant, the Reasoner case involved a motion by Aetna Life Insurance Company to dismiss the Doe defendants from an action brought under the Unfair Trade Practices Act.   The Doe defendants were identified in the complaint as “ ‘agents, employees or servants' of a defendant and as ‘individuals and entities engaged in the business of insurance.’ ”  (Id., 600 F.Supp. at p. 279.)   Some of the Doe defendants were said to be claims processors for Aetna (id.).   The United States District Court, after expressly noting that no California state court had squarely addressed the question of whether such persons were subject to civil suit under the Unfair Trade Practices Act, proceeded to prognosticate what a California state court would hold if presented with the question.   Although the court correctly noted that its function was to interpret the statute, it did not really do so;  it based its prognostication on two California decisions, the Colonial Life decision which we have already explained had no bearing whatever on the question, and Johnson v. Threats (1983) 140 Cal.App.3d 287, 189 Cal.Rptr. 447, which the Reasoner court appears to have misinterpreted.   The result was that its prognostication was incorrect.

The plaintiff in the Johnson case filed an action for damages for personal injuries arising out of a motor vehicle accident, naming as defendants the adverse driver and also the driver's insurer and two of the insurer's employees.   The counts against the insurer and its employees were counts 3, 4, 5, 6 and 7, which sought relief on account of alleged violations of the Unfair Trade Practices Act.  (Id., 140 Cal.App.3d at pp. 288–289, 189 Cal.Rptr. 447.)   On the motion of the defendants the superior court struck those counts and the Court of Appeal held that “the superior court properly struck counts three, four, five, six and seven of plaintiff's complaint,” albeit on the ground that under Royal Globe no such action could be combined with an action against the allegedly negligent insured.   The court nevertheless went on to remand the case to the superior court because it felt the plaintiff might be able to amend his complaint to plead the invalidity of a release he had signed which would otherwise have barred his action against the adverse driver.  (Id., 140 Cal.App.3d at pp. 290–291, 189 Cal.Rptr. 447.)   Any such amendment of course could not have purported to state a cause of action against the insurer or its employees under the Unfair Trade Practice Act, because such an action, as the Johnson court expressly recognized, could not under Royal Globe be combined with an action against the insured.

This court is of course not bound to follow the decision of a federal district court, although such a decision if well reasoned may be persuasive.  (See Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 299–300, 216 Cal.Rptr. 443, 702 P.2d 601;  Ferruzzo v. Superior Court (1980) 104 Cal.App.3d 501, 503, 163 Cal.Rptr. 573.)   As already indicated, we do not find the Reasoner decision persuasive.   It made no real attempt to interpret the language of the statute nor did it consider the California Legislature's deletion of the terms “individual” and “adjusters” contained in the model act.   Further, it misanalyzed and misinterpreted the two California state decisions on which it relied.


Let a peremptory writ of mandate issue to the San Bernardino Superior Court commanding it to vacate its order of August 14, 1985, denying the motion of Lorraine Grief and Mary Hudson for summary judgment and to enter a new and different order granting said motion and thereafter to render and enter summary judgment in their favor.   Petitioners shall recover their costs of this proceeding.


1.   All statutory references will be to the Insurance Code unless otherwise specified.

2.   The entities listed in section 790.01 are required to be licensed by the following sections, respectively:  reciprocal and interinsurance exchanges, § 1350;  Lloyds insurers, § 700;  fraternal benefits societies, §§ 11013 and 11014;  fraternal fire insurers, § 9080.1;  grants and annuities societies, §§ 11520 and 11520.5;  insurers holding certificates of exemption, § 700;  motor clubs, § 12160;  nonprofit hospital associations, § 11504;  agents, brokers, and solicitors, §§ 31–33 and 1631 et seq.;   surplus line brokers and special lines surplus line brokers, § 1765.

FOOTNOTE.   First Appellate District, Div. 4, A032656, filed 2/28/86, 86 Daily Journal D.A.R. 718.

KAUFMAN, Associate Justice.

RICKLES, Acting P.J., and McDANIEL, J., concur.