CITY OF COMPTON v. BUNNER (1988)

This is an appeal from a judgment dismissing plaintiffs' action after the trial court sustained defendants' demurrers without leave to amend.

 This case involves a constitutional and legal challenge to “redlining,” the practice of territorial calculation of personal automobile liability insurance rates based on the insured's place of residence and garaging of his or her vehicle.   Such territorial calculation of premium engaged in by automobile insurers throughout this state, is expressly authorized by Insurance Code 1 section 11628 ² a statute, the avowed purpose of which is to prevent discrimination.

Plaintiffs are the City of Compton (Compton) suing on its own behalf and as a representative of its residents, the Southern Christian Leadership Conference (SCLC) suing as a representative of its members, and Foster Ricardo, Salvador Mijiares, Merlene Grace, John Krishun, Felicia Johns–Filer, and Brenda Wynne suing in their individual capacities and as taxpayers.

Defendants are Bruce Bunner in his former official capacity as the Commissioner of the California Department of Insurance (Commissioner), the State of California (State), Farmers Insurance Exchange (Farmers), and Does 1 through 100.

On September 5, 1985, plaintiffs filed this action for declaratory and injunctive relief seeking (1) a declaration that section 11628 is unconstitutional and that Farmers' redlining practices are unconstitutional and violative of the Unruh Civil Rights Act (Unruh Act) (Civ. Code, § 51) ³ and for (2) an injunction prohibiting the further implementation of redlining practices.

In their complaint, plaintiffs allege that the territorial assignment of private automobile insurance rates based on the principal place where a vehicle is garaged overnight “ignores the individual characteristics, driving habits and record of individual insureds, relying instead upon gross generalizations and stereotypes imputed to all drivers within that territory solely by virtue of the fact that they live there,” resulting in arbitrary, excessive and discriminatory rates for residents of Compton and predominantly minority and/or poor areas of Los Angeles.

Plaintiffs further allege that the rating territories currently used by insurance companies including Farmers subject to regulation by and supervision of the Commissioner have been arbitrarily and capriciously drawn and are impermissibly and predominantly based on racial and/or economic criteria.

Plaintiffs aver on information and belief that the redlining boundaries “are intentionally based predominantly upon race and/or wealth or that de facto racial and/or wealth discrimination results from such insurance companies' rating practices” and that insurance companies “refuse to issue policies to persons residing in COMPTON and areas of LOS ANGELES County where the population is predominantly comprised of poor persons and/or minorities, or charge such exorbitantly high and excessive premiums so as to discourage business in such territories” and “have few if any, sales offices or sales agents in such territories in a further attempt to discourage business therein.”

Plaintiffs allege further on information and belief that insurance companies, including Farmers, “have been and are continuing to promulgate and charge exorbitant rates in COMPTON and other territories because the majority of residents therein are Black, Hispanic, other racial minorities, and/or poor”;  and that as a result of redlining practices the residents of Compton and other areas of Los Angeles County that are predominantly populated by the poor and/or minorities are forced to pay “arbitrary, excessive, exorbitant, and unfairly discriminatory rates” or forced to drive without insurance as a result of these unaffordable rates.

Under Farmers' redlining practices, allege plaintiffs in their complaint, the individual plaintiffs have been required to pay up to 150 percent more for automobile insurance coverage than they would have to pay if they lived in affluent and predominantly white territories.

On information and belief, plaintiffs aver that redlining practices burden Compton with the cost of repairing damage to city property caused by uninsured motorists, forces residents out of poor and minority areas thereby reducing property values and property tax revenues, encourages businesses in these areas to relocate thereby resulting in a loss of employment opportunities, discourages business in redlined areas thereby resulting in a loss of sales tax revenues.

Plaintiffs further allege that the effects of redlining have been exacerbated by the mandatory insurance law which became effective July 1, 1985.  (See Veh. Code, § 16028 and King v. Meese, supra, 43 Cal.3d 1217, 240 Cal.Rptr. 829, 743 P.2d 889.)   Plaintiffs maintain that residents of Compton and other poor and/or minority areas “must pay the excessive, arbitrary, discriminatory, and exorbitantly high rates charged by defendant FARMERS and other insurance companies or face the loss of their drivers licenses.”

Plaintiffs' first cause of action was for denial of equal protection.   In it plaintiffs stated that section 11628 permits racial and economic discrimination in violation of the California Constitution.   They alleged:  “There is no rational or compelling justification for the difference in treatment of persons of different geographic areas of the State and thus section 11628 (i) denies to plaintiffs equal protection of the laws as guaranteed by Article I, section 7(a) of the California Constitution, (ii) grants privileges and immunities to some citizens which are not granted on equal terms to all citizens in violation of Article I, section 7(b) of the California Constitution, and (iii) violates the requirement of Article IV, section 16(a) of the California Constitution that all laws of a general nature have uniform operation.” ⁴

In their second cause of action, plaintiffs alleged that the redlining practices engaged in by Farmers and other insurance companies discriminate on the basis of race and wealth and hence contravene the provisions of article I, section 7, and article IV, section 16 of the California Constitution.   They allege further in that cause of action that Farmers is governed by these constitutional provisions by virtue of the mandatory automobile insurance law and by virtue of the fact that it is a heavily regulated company doing business in this state pursuant to its certification by the California Department of Insurance.

In their third and last cause of action, plaintiffs alleged that Farmers' redlining practices “constitute arbitrary discrimination by a business establishment” and thus violate the Unruh Act.

They sought a declaration that section 11628 is unconstitutional and an injunction prohibiting the Commissioner and the State from permitting private insurance companies, including Farmers, to redline and prohibiting Farmers from engaging in redlining practices.

With respect to the requirement of exhaustion of administrative remedies, plaintiffs alleged in their complaint that “[t]here is no administrative remedy prescribed by statute, rule, regulation, or otherwise, which provides for or permits the submission, evaluation, and resolution of the claims raised herein.”

Farmers demurred to plaintiffs' complaint on the grounds that plaintiffs failed to exhaust their administrative remedies, failed to state facts sufficient to constitute a cause of action, and lacked the requisite standing to sue.

The Commissioner and the State demurred to plaintiffs' complaint on the grounds that the court had no jurisdiction of the action and that plaintiffs failed to state facts sufficient to constitute a cause of action.

The trial court, while commenting on other perceived deficiencies in the complaint, sustained defendants' demurrers to plaintiffs' complaint without leave to amend because it concluded that “Plaintiffs have failed to exhaust the administrative remedies available to them as provided in Insurance Code section 1858.”

On April 30, 1986, the judgment of dismissal from which this appeal is taken was entered.

PLAINTIFFS' CONTENTIONS

Plaintiffs make the following contentions on appeal:

1. Plaintiffs were not required to submit their claims to the Commissioner under section 1858 as a prerequisite to instituting judicial action.

2. Farmers' redlining practices which are expressly condoned and encouraged by section 11628 violate the equal protection clauses of the California Constitution.

3. Farmers' redlining practices violate the Unruh Act which applies to insurance companies.

4. The individual plaintiffs have standing as taxpayers to challenge the constitutionality of section 11628.

5. The individual plaintiffs have standing under the Unruh Act and the equal protection clauses of the California Constitution to challenge redlining practices.

6. Compton and SCLC have standing to sue in a representative capacity.

DISCUSSION

We start with the premise that “[i]n assessing the sufficiency of a complaint against a general demurrer [an appellate court] must treat the demurrer as admitting all material facts properly pleaded.”  (Gay Law Students Assn. v. Pacific Tel. & Tel. Co. (1979) 24 Cal.3d 458, 465, fn. 4, 156 Cal.Rptr. 14, 595 P.2d 592;  Glaire v. La Lanne–Paris Health Spa, Inc. (1974) 12 Cal.3d 915, 918, 117 Cal.Rptr. 541, 528 P.2d 357;  5 Witkin, Cal. Procedure (3d ed. 1985) Pleading, § 898, p. 338.)

I

EXHAUSTION OF ADMINISTRATIVE REMEDIES

 The exhaustion of administrative remedies doctrine is a fundamental rule of procedure under which a grievant must pursue and exhaust all administrative remedies as a jurisdictional prerequisite to judicial relief.   (Abelleira v. District Court of Appeal (1941) 17 Cal.2d 280, 292–293, 109 P.2d 942;  3 Witkin, Cal. Procedure (3d ed. 1985) Actions, § 234, pp. 264–265;  County of Los Angeles v. Farmers Ins. Exchange (1982) 132 Cal.App.3d 77, 85–86, 182 Cal.Rptr. 879.)

 There are, however, exceptions to the exhaustion doctrine.   It does not apply when an administrative remedy is unavailable or inadequate (Ramos v. County of Madera (1971) 4 Cal.3d 685, 691, 94 Cal.Rptr. 421, 484 P.2d 93), when resort to the administrative agency would be futile (Ogo Associates v. City of Torrance (1974) 37 Cal.App.3d 830, 834, 112 Cal.Rptr. 761), when irreparable injury would be suffered in the absence of judicial relief (Sail'er Inn, Inc. v. Kirby (1971) 5 Cal.3d 1, 7, 95 Cal.Rptr. 329, 485 P.2d 529), when the administrative agency has no jurisdiction over the subject matter of the controversy (Larwood Co. v. San Diego Fed. S. & L. Assn. (1960) 185 Cal.App.2d 450, 454–456, 8 Cal.Rptr. 362), when a statute provides both administrative and judicial remedies and the grievant elects to pursue the latter (City of Susanville v. Lee C. Hess Co. (1955) 45 Cal.2d 684, 689, 290 P.2d 520), when the statute under which an administrative agency operates is being challenged (State of California v. Superior Court (1974) 12 Cal.3d 237, 251, 115 Cal.Rptr. 497, 524 P.2d 1281), or when public rights are involved as to persons who were not parties to any administrative proceeding held (Environmental Law Fund, Inc. v. Town of Corte Madre (1975) 49 Cal.App.3d 105, 114, 122 Cal.Rptr. 282).

Section 1852, a part of the McBride–Grunsky Insurance Regulatory Act (§ 1850 et seq.) (McBride–Grunsky Act), sets forth the standards to be applied in making and using insurance rates.   Subdivision (a) of that section in relevant part states that “[r]ates shall not be excessive or inadequate, as herein defined, nor shall they be unfairly discriminatory.  [¶] No rate shall be held to be excessive unless (1) such rate is unreasonably high for the insurance provided and (2) a reasonable degree of competition does not exist in the area with respect to the classification to which such rate is applicable.”   (Emphasis added.)

Section 11628, the statute which authorizes redlining, provides in part that “[d]ifferentiation in rates between geographical areas shall not constitute unfair discrimination,” but proscribes the use of “race, language, color, religion, national origin, ancestry, or location within a geographic area” as a “condition or risk for which a higher rate, premium, or charge may be required of the insured for such insurance.”

Section 1858 provides in part:

“Any person aggrieved by any rate charged, rating plan, rating system, or underwriting rule followed or adopted by an insurer or rating organization may request the insurer or rating organization to review the manner in which the rate, plan, system, or rule has been applied with respect to insurance afforded him․  Any person aggrieved by the action of an insurer or rating organization in refusing the review requested, or in failing or refusing to grant all or part of the relief requested, may file a written complaint and request for hearing with the commissioner, specifying the grounds relied upon.   If the commissioner has information concerning a similar complaint he may deny the hearing.   If he believes that probable cause for the complaint does not exist or that the complaint is not made in good faith he shall deny the hearing.   Otherwise, and if he finds that the complaint charges a violation of this chapter [sections 1850–1860.3] and that the complainant would be aggrieved if the violation is proven, he shall proceed as provided in Section 1858.1.”

 By its own terms, section 1858 only provides an administrative remedy against an insurer or rating organization.   It provides no administrative remedy for claims directed against the State or the Commissioner.   Accordingly, in this case, if the exhaustion doctrine applies at all, it will apply only to bar plaintiffs' claims against Farmers, not to bar any of their claims against the State or the Commissioner.

Defendants' reliance on County of Los Angeles for the proposition that that case forecloses an action against the Commissioner or the State without the exhaustion of administrative remedies is thus totally misplaced.   Although the Commissioner had been a party to the proceedings in the trial court, neither the Commissioner nor the Department was a party to the appeal in that case.   Since that issue was not presented to us in the appeal in County of Los Angeles we were not called upon to and did not consider or decide it therein.  County of Los Angeles therefore is obviously not authority on that point.  (Fricker v. Uddo & Taormina Co. (1957) 48 Cal.2d 696, 701, 312 P.2d 1085;  Hart v. Burnett (1860) 15 Cal. 530, 598;  Achen v. Pepsi Cola Bottling Co. (1951) 105 Cal.App.2d 113, 124, 233 P.2d 74;  9 Witkin, Cal. Procedure (3d ed. 1985) Appeal, §§ 783 and 784, pp. 753–756.)   It also follows that the individual plaintiffs' contention that the exhaustion of administrative remedies doctrine is inapplicable to their taxpayers' suit against the State and the Commissioner is well taken.

We hold that the trial court's finding that it had no jurisdiction to entertain plaintiffs' claims against the State and the Commissioner because plaintiffs failed to exhaust the administrative remedies provided in section 1858, was in error.   Whether, however, plaintiffs' complaint alleged facts establishing their standing to sue and stated causes of action against the State and the Commissioner will be discussed later in this opinion.

A

IS PROSECUTION OF PLAINTIFFS' CLAIMS AGAINST FARMERS BARRED BY THEIR FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES?

We now proceed to consider whether prosecution of plaintiffs' claims against Farmers is barred by the exhaustion of administrative remedies doctrine.   With the exception of the claims raised by Compton on its own behalf we shall hold that they are.

 Unless an exception to the exhaustion of administrative remedies doctrine applies, a person who claims that he or she was charged excessive or unfairly discriminatory rates in violation of section 1852's proscription with regard to insurance afforded him or her must first pursue and exhaust the administrative remedies provided in section 1858 against the insurance company involved as a jurisdictional prerequisite to judicial relief against that company.   This is true even though the administrative remedy set forth in section 1858 is posed in permissive language.  (Yamaha Motor Corp. v. Superior Court (1986) 185 Cal.App.3d 1232, 1240, 230 Cal.Rptr. 382.)

Plaintiffs argue that the exhaustion of administrative remedy doctrine is inapplicable in this case because (1) the Insurance Code does not contemplate class or representative actions and there is thus no administrative remedy available;  (2) the Commissioner is precluded under article III, section 3.5 of the California Constitution from declaring section 11628 unconstitutional;  (3) the purported administrative remedy is procedurally inadequate;  (4) sections 11629 and 11629.5 provide direct judicial remedies for their claims;  (5) plaintiffs need not exhaust administrative remedies before pursuing their Unruh Act claims;  and (6) it would be futile to pursue the existing administrative remedy.   Amicus curiae City of Los Angeles contends that administrative remedies need not be exhausted in a case involving significant public policy issues and threats to constitutional rights.   We now examine these contentions.

B

THE CLASS ACTION OR REPRESENTATIVE ACTION CLAIMS

Compton brought this action on its own behalf and as a representative of its residents.   SCLC sued strictly in a representative capacity on behalf of its members.   In their representative capacities, Compton and SCLC contend that the exhaustion of administrative remedies does not apply to bar their representative claims because section 1858 does not provide for class or representative relief.   As to their claims against Farmers, we disagree.   We believe that our opinion in County of Los Angeles which also involved claims of racially discriminatory redlining practices exposes the error of this particular contention against Farmers.

In County of Los Angeles, appellants County of Los Angeles and City of Los Angeles appealed from an order dismissing their complaint against respondents Farmers Insurance Exchange and Interinsurance Exchange of the Automobile Club of Southern California after respondents' demurrers to the causes of action in that complaint against those insurers were sustained without leave to amend on the sole ground that appellants failed to exhaust their administrative remedies.

By their complaint for injunctive and declaratory relief in that case, appellants on behalf of their residents and themselves sought to enjoin numerous alleged unlawful territorial rating (redlining) practices which they alleged resulted in discriminatory and excessive rates for personal automobile insurance based on the insured's place of residence.   In conclusional language appellants therein made complaints similar to those raised in this case.   (County of Los Angeles v. Farmers Ins. Exchange, supra, 132 Cal.App.3d at pp. 80–81, 182 Cal.Rptr. 879.)

On appeal this court concluded that although appellants had initiated administrative remedies they failed to exhaust them and affirmed the judgment of dismissal.   We rejected appellants' contention that there was no adequate administrative remedy available to them and concluded that they could, and had to, pursue the administrative remedies provided in section 1858 through 1858.7, reciting in detail the Commissioner's adequate powers to take corrective action.  (§ 1858.3.)   We concluded moreover that “the Insurance Commissioner and the Department of Insurance possess sophisticated bodies of expertise in this field which make them particularly able to handle these matters.  [Citation.]”  (132 Cal.App.3d at p. 87, 182 Cal.Rptr. 879.)

While we recognized, in County of Los Angeles, that judicial review is not foreclosed if the administrative remedy is inadequate or unavailable we noted that the exhaustion of administrative remedies doctrine “does apply to a class or representative action raising constitutional issues.”  (132 Cal.App.3d at p. 86, 182 Cal.Rptr. 879.)   Appellants simply failed in that case to demonstrate that the remedies provided in section 1858 through 1858.7 were inadequate to deal with their representative claims.

In support of their contention that section 1858 does not contemplate class or representative suits and that County of Los Angeles was therefore incorrectly decided, plaintiffs rely on Ramos v. County of Madera, supra, 4 Cal.3d 685, 94 Cal.Rptr. 421, 484 P.2d 93, and Rose v. City of Hayward (1981) 126 Cal.App.3d 926, 179 Cal.Rptr. 287.

In Ramos, a class action brought by individuals claiming wrongful termination of welfare benefits, the state's high court examined pertinent sections of the Welfare and Institutions Code and opined that they made no provision for class relief.   The Ramos court noted that “[t]he entire fair hearing scheme is premised on an individualized treatment of claims for aid.   Each individual theoretically has different needs, and his claim for aid would be treated separately.   In no section of this chapter (Welf. & Inst. Code, §§ 10950–10965) is there provision for class relief.   It is the individual who must apply for a hearing, regarding his application for or receipt of aid.   He must do so in person or through an authorized representative.   It is clear that the hearing scheme established by the Legislature does not contemplate class actions.”  (4 Cal.3d at pp. 690–691, 94 Cal.Rptr. 421, 484 P.2d 93, emphasis in original.)   The Ramos court then held that there was no failure to exhaust an administrative remedy for class relief that did not exist.  (Id., at p. 691, 94 Cal.Rptr. 421, 484 P.2d 93.)

Rose involved a dispute in the manner in which certain retirement benefits were calculated.   After institution of their suit, plaintiffs, a retired police officer, a retired fire fighter, and the widows of a deceased police officer and a deceased fire fighter, moved for class certification.

On appeal, the Rose court reversed the trial court's order denying class certification finding that “action eminently suitable for class action disposition.”  (126 Cal.App.3d at p. 932, 179 Cal.Rptr. 287.)   The court further concluded that plaintiffs' failure to exhaust administrative remedies would not bar a class action, explaining:  “Here, as in Ramos, the statutory provision for an administrative appeal is premised upon an individual claim and makes no mention of class relief.  Government Code section 20133, which codifies the retirement system's administrative remedy, states:  ‘The board (of administration of the Public Employees' Retirement System) may, in its discretion, hold a hearing for the purpose of determining any question presented to it involving any right, benefit, or obligation of a person under this part․’  (Gov.Code, § 20133.)   The reference to ‘a person’ clearly contemplates individualized treatment of claims for retirement benefits rather than class actions.”  (126 Cal.App.3d at p. 935, 179 Cal.Rptr. 287, emphasis in original.)

 Ramos and Rose clearly stand for the proposition that the exhaustion of administrative remedies is not a jurisdictional prerequisite to resort to the courts in a class action where the applicable administrative remedies do not provide for class relief.   We agree with this proposition.   Our statement in County of Los Angeles that the exhaustion doctrine “appl [ies] to a class or representative action raising constitutional issues” (132 Cal.App.3d at p. 86, 182 Cal.Rptr. 879) is overbroad and is disapproved as to situations necessarily involving individualized treatment of claims.   That statement is true only if the administrative remedy involved affords class relief.   If it does not afford class relief, it is inadequate and resort to the courts is proper.   That, however, was not the case in County of Los Angeles, and it is not the case here.

 Although section 1858 speaks of a “person aggrieved” and does not expressly provide for class relief, it cannot in reason be concluded that it only contemplates individualized treatment of claims for excessive or unfairly discriminatory insurance rates.   Moreover, section 1858 expressly authorizes the Commissioner to deny a grievant's request for a hearing “[i]f the commissioner has information concerning a similar complaint․”

If the sole purpose of section 1858 was to address individualized grievances, the Legislature would not have authorized the Commissioner to deny the hearing if he or she had information concerning a “similar complaint.”   Finally, the validity of the entire practice of territorial rating (redlining) of automobile insurance premiums involves a general inquiry unrelated to an insured's individual characteristics.   The insured's individual record of traffic accidents and citations within the permissible “accountable” period constitutes a separate and distinct individual factor.   This individual record factor is added to the general territorial rating factors issued to fix the individual insured's premium or to determine whether to reject his or her application for automobile insurance.

In Karlin v. Zalta (1984) 154 Cal.App.3d 953, 201 Cal.Rptr. 379, plaintiff in her own behalf and on behalf of a class of persons similarly situated sued a physician, a physicians' organization, and a number of insurance companies.   Plaintiff and her class were consumers of medical services purchased from members of the physicians' organization.   A portion of the price paid for these services included an assessment for the cost of medical malpractice insurance paid by the physicians' organization to Phoenix Insurance Company.   The complaint contained, among other things, allegations of “conspiracy to monopolize the market and restrain trade by unlawfully fixing the price of insurance and splitting excessive insurance premiums among themselves.”  (Id., at p. 960, 201 Cal.Rptr. 379.)

Plaintiff and her class claimed a right to ownership of an approximately $22 million fund, the amount alleged to have been unlawfully obtained by defendants.   The fund was created when a portion of the excess premiums charged was returned to the physicians' organization.

Plaintiff Karlin appealed from a judgment of dismissal entered after the trial court sustained a demurrer to her complaint without leave to amend.   The appellate court specifically rejected her contention that she was not required to exhaust the administrative remedies set forth in the McBride–Grunsky Act (§§ 1850–1860.3) noting that Karlin's reliance on Ramos and Diaz v. Quitoriano (1969) 268 Cal.App.2d 807, 74 Cal.Rptr. 358, “where class actions were brought without exhausting administrative remedies” was not helpful.   The Karlin court stated that “[i]n those cases, sections of the Welfare and Institutions Code were analyzed and it was concluded that the administrative remedies provided required individualized activities.   In each case plaintiff was prosecuting a class action.”  (154 Cal.App.3d at p. 985, 201 Cal.Rptr. 379.)   While noting that in Ramos and Quitoriano, the courts held that there was no failure to exhaust administrative remedies because none existed, the Karlin court stated that “in an appropriate case, proponents of a class action have been required to exhaust administrative remedies.”  (154 Cal.App.3d at p. 985, 201 Cal.Rptr. 379.)

The Karlin court concluded that “Karlin's failure to exhaust McBride Act [section 1850–1860.3] remedies forecloses her resort to the judicial process.”  (154 Cal.App.3d at p. 986, 201 Cal.Rptr. 379.)

We therefore reject plaintiffs' contentions that section 1858 does not allow the representative relief sought in this action by Compton and SCLC.

COMPTON'S CLAIM ON ITS OWN BEHALF

 Compton also sued Farmers on its own behalf.   In that capacity Compton, like the appellants in County of Los Angeles who sued the insurance defendants on their own behalf, did not sue as a “person” to whom insurance had been afforded and who was aggrieved by a rate charged, rating plan or system or underwriting rule followed or applied by an insurer or rating organization.   Rather, in its own behalf, it sued only as a public entity which claimed that the City of Compton itself had suffered irreparable damage as the result of the redlining practices engaged in by Farmers and other insurance companies and practiced on other prospective insureds.

Section 1858 does not provide a remedy for persons or entities who claim injury as the result of redlining practices which others have had to endure.   To the extent that our decision in County of Los Angeles implied the contrary it is wrong and is disapproved.

D

THE UNCONSTITUTIONALITY EXCEPTION

 Plaintiffs next maintain that since they seek a declaration that section 11628 is unconstitutional and since the Commissioner is expressly prohibited from declaring section 11628 unconstitutional by virtue of article III, section 3.5 of the California Constitution,⁵ that provision bars any administrative remedy.   We disagree.

Karlin v. Zalta, supra, 154 Cal.App.3d at pages 980–981, 201 Cal.Rptr. 379, aptly states the California law:

“[T]here is substantial authority which holds that there exist salutary reasons for requiring that the administrative remedy be pursued even though it may not resolve all issues or provide the precise relief requested by plaintiff.  [Citations.]  The exhaustion doctrine is viewed with favor in those cases because it facilitates the development of a complete record that draws on administrative expertise and promotes judicial efficiency.   These aspects were explained in Bozaich v. State of California (1973) 32 Cal.App.3d 688, 698 [108 Cal.Rptr. 392]:  ‘The doctrine of exhaustion of administrative remedies evolved for the benefit of the courts, not for the benefit of litigants, the state or its political subdivisions.   It rests “on considerations of comity and convenience,” and its basic purpose is to secure a “preliminary administrative sifting process” [citation] to lighten the burden of overworked courts in cases where administrative remedies are available and are as likely as the judicial remedy to provide the wanted relief.   [Citation.]’ ”  (See also Westlake Community Hosp. v. Superior Court (1976) 17 Cal.3d 465, 131 Cal.Rptr. 90, 551 P.2d 410.)

In the present case, plaintiffs are challenging section 11628 which authorizes redlining practices.   In pertinent part that section provides that “[d]ifferentiation in rates between geographical areas shall not constitute unfair discrimination.”   Plaintiffs maintain that these geographical areas have been drawn impermissibly on the basis of racial or economic criteria contrary to that portion of section 11628 which states:  “[N]or shall race, language, color, religion national origin, ancestry, or location within a geographic area of itself constitute a condition or risk for which a higher rate, premium, or charge may be required of the insured for such insurance.”

Although it is true that the Commissioner has no power to declare that portion of section 11628 which authorizes redlining to be unconstitutional or unenforceable or to refuse to enforce it (Cal. Const., art. III, § 3.5), the Commissioner does have the power to determine if the differentiation in rates between geographical areas is impermissibly based on racial or economic grounds in direct violation of sections 1852 and 11628.   As we noted in County of Los Angeles, “the Insurance Commissioner and the Department of Insurance possess sophisticated bodies of expertise in this field which make them particularly able to handle these matters.  (See 3 Davis, Administrative Law (1958) § 19.01, p. 6.)”  (132 Cal.App.3d at p. 87, 182 Cal.Rptr. 879.)

We accordingly hold that the Commissioner's inability to declare section 11628 unconstitutional does not excuse the requirement that plaintiffs exhaust their administrative remedies against Farmers.   Proceeding against Farmers before the Commissioner would “promote judicial efficiency by unearthing the relevant evidence and providing a record which the court may review.”   (County of Contra Costa v. State of California (1986) 177 Cal.App.3d 62, 75, fn. 8, 222 Cal.Rptr. 750.)  Tiernan v. Trustees of Cal. State University & Colleges (1982) 33 Cal.3d 211, 188 Cal.Rptr. 115, 655 P.2d 317, and Anton v. San Antonio Community Hosp. (1977) 19 Cal.3d 802, 140 Cal.Rptr. 442, 567 P.2d 1162, upon which plaintiffs rely, do not compel a contrary result.

E

THE CLAIMED PROCEDURAL INADEQUACY EXCEPTION

 Plaintiffs' argument that exhaustion is not required because the administrative remedy is procedurally inadequate likewise fails.   Their reliance on Glendale City Employees' Assn., Inc. v. City of Glendale (1975) 15 Cal.3d 328, 124 Cal.Rptr. 513, 540 P.2d 609, certiorari denied (1976) 424 U.S. 943, 96 S.Ct. 1411, 47 L.Ed.2d 349, is misplaced.

In Glendale, the court found a city grievance procedure to be inadequate in two respects:

“First, the pertinent portion of Ordinance No. 3830 provides only for settlement of disputes relating to the ‘interpretation or application of ․ an ordinance resulting from a memorandum of understanding.’  (Italics added.)   The crucial threshold issue in the present controversy—whether the ratified memorandum of understanding itself is binding upon the parties—does not involve an ‘ordinance’ and hence does not fall within the scope of grievance resolution.

“Second, the city's procedure is tailored for the settlement of minor individual grievances.   A procedure which provides merely for the submission of a grievance form, without the taking of testimony, the submission of legal briefs, or resolution by an impartial finder of fact is manifestly inadequate to handle disputes of the crucial and complex nature of the instant case, which turns on the effect of the underlying memorandum of understanding itself.   (Cf. Martino v. Concord Community Hosp. Dist. (1965) 233 Cal.App.2d 51, 57 [43 Cal.Rptr. 255].)”  (15 Cal.3d at pp. 342–343, 124 Cal.Rptr. 513, 540 P.2d 609, emphasis in original.)

Neither of the two factors which formed the basis of the Glendale court's decision regarding the exhaustion of administrative remedies is involved in this case.   We hold that section 1858 is procedurally adequate to deal with the plaintiffs' claims that Farmers' territorial rating practices are racially and economically discriminatory.

F

THE CLAIMED ALTERNATIVE JUDICIAL REMEDY EXCEPTION

Next, plaintiffs maintain that they need not exhaust the administrative remedies provided by section 1858 et seq. because sections 11629 and 11629.5 provide direct judicial remedies for their claims.

The exhaustion of administrative remedies doctrine does not apply where a statute provides an administrative remedy and an alternative judicial remedy and the person aggrieved elects to pursue the judicial remedy.

Section 11629 provides:

“Each separate act of an insurer or its agent in violation of Section 11628 or 11628.5 shall render the insurer liable in damages in the amount of one hundred dollars ($100), plus a reasonable allowance for attorneys' fees incurred in connection with the prosecution of the action, which may be recovered in an action at law brought for that purpose by the person aggrieved by any such act.”

Section 11629.5 provides:

“Any insurer which has refused to issue an applicant a policy of insurance in violation of Section 11628 or 11628.5 and which has been required to pay damages for the violation pursuant to Section 11629 shall pay as additional damages the amount by which the rates which the applicant found it necessary to pay to obtain other insurance exceed the rates of the insurer.”

 Plaintiffs are seeking the equitable remedies of injunctive and declaratory relief.   Theirs is not an “action at law” brought to recover damages for a violation of section 11628.   Rather it is an action in equity.   Sections 11629 and 11629.5 are therefore not applicable in this case.

Plaintiffs maintain, however, that they should be allowed to amend their complaint to state claims under sections 11629 and 11629.5 and that such allegations, if sufficient, would excuse them from presenting any of their claims against Farmers to the Commissioner.   We disagree.   Insofar as plaintiffs are seeking injunctive and declaratory relief, neither 11629 or 11629.5 obviate the requirement that the administrative remedies provided in section 1858 et seq. be pursued and exhausted.

G

THE UNRUH ACT AND EXHAUSTION OF ADMINISTRATIVE REMEDIES

 Likewise lacking in merit is plaintiffs' contention that the administrative remedies set forth in section 1858 et seq. need not be exhausted prior to pursuing their claims under the Unruh Act.

Section 1860.1, part of the chapter in which the McBride–Grunsky Act is included, prevents plaintiffs from stating a cause of action for violation of the Unruh Act.   Section 1860.1 provides:  “No act done, action taken or agreement made pursuant to the authority conferred by this chapter shall constitute a violation of or grounds for prosecution or civil proceedings under any other law of this State heretofore or hereafter enacted which does not specifically refer to insurance.”

The Unruh Act is a general statute which makes no specific reference to insurance.   It proscribes arbitrary discrimination on the basis of sex, race, color, religion, ancestry, or national origin by all business establishments.   Section 1852 of the McBride–Grunsky Act, the special statute involved here, specifically prohibits insurance rates which are excessive, inadequate or unfairly discriminatory.   Because “[a] special statute dealing expressly with a particular subject controls and takes precedence over a more general statute covering the same subject,” plaintiffs do not have a viable claim under the Unruh Act.  (Marsh v. Edwards Theatres Circuit, Inc. (1976) 64 Cal.App.3d 881, 890, 134 Cal.Rptr. 844.)

Plaintiffs, however, lose nothing because of our holding that the Unruh Act (Civ. Code, § 51) is inapplicable.   It is clear to us and we hold that sections 1852 and 11628 read together impose on insurance companies fixing their rates and deciding whether to accept persons as insureds, the same antidiscriminatory constraints that the Unruh Act does.   While section 11628 contains no prohibition against sex discrimination, section 1852 specifically prohibits rates that are “unfairly discriminatory” to any classification of persons.   That proscription, of course, also prohibits gender discrimination.

In view of the failure of plaintiffs to exhaust their administrative remedies, however, we do not now pass upon the question of whether the complaint stated sufficient facts to show that Farmers acted in an “unfairly discriminatory” fashion.

 Plaintiffs have cited us to no authority which supports their contention that there is a preexisting common law right to buy insurance from private insurance companies free of discrimination which therefore excuses any requirement of exhaustion.  Tunkl v. Regents of University of California (1963) 60 Cal.2d 92, 32 Cal.Rptr. 33, 383 P.2d 441, cited by plaintiffs, is inapposite.   We therefore reject that contention as meritless.

H

THE FUTILITY EXCEPTION

For the first time in their reply brief, plaintiffs contend that it would have been futile for them to have exhausted their administrative remedies.  “[T]he rule is that points raised in the reply brief for the first time will not be considered, unless good reason is shown for failure to present them before.”   (9 Witkin, Cal. Procedure (3d ed. 1985) Appeal, § 496, p. 484, emphasis in original.)

 Plaintiffs maintain that they inadvertently omitted this futility argument from their opening brief.   Inasmuch as the issue was raised below, it was briefed by amicus curiae City of Los Angeles and defendant Farmers presented legal argument on the issue in its respondent's brief, we will address plaintiffs' futility argument.

“The futility exception to the requirement of exhaustion of administrative remedies is a very narrow one.  ‘Insofar as a “futility” exception exists, as when it can be demonstrated that an agency's decision is certain to be adverse (see Ogo Associates v. Torrance, [supra,] 37 Cal.App.3d 830 [112 Cal.Rptr. 761] ), its application is very limited.   Thus, exhaustion of administrative remedy is required unless the appellant “can positively state that the [administrative agency] has declared what its ruling will be in a particular case.”  [Citations.]’ ”  (County of Contra Costa v. State of California, supra, 177 Cal.App.3d 62, 77–78, 222 Cal.Rptr. 750, emphasis in original.)

Plaintiffs maintain that the trial court erred in denying their request to amend the complaint to allege that resort to the administrative remedy would be futile.   Plaintiffs contend that they can positively state what the Commissioner's determination will be on the issues which they raised.   In support of this assertion, plaintiffs rely on the “Preliminary Results” of an “Availability/Affordability Study of Private Passenger Auto Insurance in Los Angeles County” issued by the Commissioner on November 26, 1985.   In particular, plaintiffs rely on that portion of the report which states that “it appears that the average insurance rates charged by the major automobile insurers are generally reasonable when compared to the relative aggregate loss experience data.”

In further support of their futility argument, plaintiffs rely on the declaration of Lois Salisbury dated September 12, 1985, and filed with the motion for preliminary injunction in King v. Meese (L.A.Sup. Court No. C565 535).   The information contained in that declaration does not establish that the Commissioner's decision will in fact be adverse in this particular case.

We first note that the results of the Commissioner's availability/affordability study were “preliminary.”   The Commissioner also concluded that “the preliminary findings suggest that there are definite and distinct patterns of loss frequency throughout Los Angeles County which generally increases as we move from the less densely populated areas of the County toward the higher density areas of Central Los Angeles, East San Fernando Valley and the Wilshire Corridor.   The population of uninsured motorists likewise increases as we move toward the more densely populated areas.”

The Commissioner noted, however, that “our preliminary findings do indicate that the insurance rate differentials of certain insurers are disproportionate to the expected rate averages developed by this study.   The Department will investigate the propriety of their rate differentials.   Further, we believe the study indicates that insurer competition could be improved in certain areas of the County.”

The question of whether unfair racial and economic rate discrimination is accomplished or aided by territorial rating was brought to the attention of the then Commissioner and Department of Insurance before we decided County of Los Angeles in 1982.  (See King v. Meese, supra, 43 Cal.3d at pp. 1242, 1243, fn. 16, 240 Cal.Rptr. 829, 743 P.2d 88.)   Their failure, despite what we referred to in County of Los Angeles as their “sophisticated bodies of expertise in this field,” to adequately address and finally resolve this issue in the intervening years is most lamentable and makes the decision of this futility question a very close and difficult one.

Should this question come before the court again without there having been a final decision on the subject by the Commissioner and the Department of Insurance we can presently envision no argument which would overcome a claim that the futility exception should be applied to that future continuing failure of the Commissioner and the Department of Insurance to utilize “their sophisticated bodies of expertise” to finally determine this question.   This would be an additional factor the court would have to take into consideration in making its decision on any future futility contention.   It is obvious that no useful purpose is served in having unexercised “sophisticated bodies of expertise that do not resolve issues of claimed unfair racial or economic discrimination.”

The Ogo exception is a “very narrow one” into which the Commissioner and the State by the inaction of the Commissioner and the Department of Insurance have very nearly managed to fit themselves.   Nevertheless based on the record on appeal we conclude that the complaint does not allege the necessary underlying facts and no amendment by plaintiffs could presently show that the position of the Commissioner or the Department is “certain,” within the meaning of Ogo Associates, to be adverse to plaintiffs' position.

We therefore conclude that the trial court did not err in refusing to permit plaintiffs to amend their complaint to allege that it would be futile to exhaust their administrative remedies against Farmers.

I

THE CONSTITUTIONAL AND PUBLIC POLICY EXCEPTION

 We also reject as lacking in merit, amicus curiae's contention that administrative remedies need not be exhausted in this case because it involves constitutional and public policy issues.

We have already noted that the fact that constitutional issues are involved does not, without more, excuse compliance with the exhaustion requirement.   “This rationale is necessary for the exhaustion doctrine to be meaningful.   Without such a rule, persons subject to administrative procedures with claims of unconstitutionality urged on requests for injunctive relief would clog the courts, and administrative agencies would be bypassed and become impotent.”   (Board of Police Commissioners v. Superior Court (1985) 168 Cal.App.3d 420, 432, 214 Cal.Rptr. 493.)

In Lindeleaf v. Agricultural Labor Relations Bd. (1986) 41 Cal.3d 861, 226 Cal.Rptr. 119, 718 P.2d 106, our state Supreme Court, despite the failure of the parties to exhaust their administrative remedies, agreed to address the challenges of the parties on their merits, noting that “we may agree to hear a case involving important questions of public policy.”  (Id., at pp. 870–871, 226 Cal.Rptr. 119, 718 P.2d 106.)   The Lindeleaf court's decision to do so was based on its finding that its “refusal to do so would affect not only the present parties, but also the parties to every nonfinal decision of the ALRB on election challenges that involved hearings and recommendations by an [investigative hearing officer].”  (Id., at p. 870, 226 Cal.Rptr. 119, 718 P.2d 106.)   There is no similarly compelling reason to dispense with the requirement of the orderly exhaustion of administrative remedies in this case.

J

CONCLUSION AS TO NECESSITY OF EXHAUSTION OF REMEDIES AGAINST FARMERS

Compton, in its representative capacity, SCLC, and the individual plaintiffs having failed to demonstrate the applicability of an exception to the exhaustion requirement are foreclosed from seeking judicial relief against defendant Farmers in this action.

In light of this conclusion we need not, and do not, decide whether Compton, in its representative capacity, SCLC and the individual plaintiffs have standing to sue Farmers.

II

STANDING OF PLAINTIFFS TO SUE AND QUESTION OF WHETHER THEY STATED FACTS SUFFICIENT TO CONSTITUTE A CAUSE OF ACTIONATHE INDIVIDUAL PLAINTIFFS

Have the individual plaintiffs alleged facts establishing their standing to sue as taxpayers and, if so, have they stated facts sufficient to state a cause of action for taxpayer relief?

Code of Civil Procedure section 526a ⁶ authorizes a taxpayer to bring an action against officers of a county, town, city, or city and county of the state to restrain and prevent any illegal expenditure, waste of, or injury to its public funds or public property.   State officials also may be sued in a taxpayers' action under Code of Civil Procedure section 526a.   (Blair v. Pitchess (1971) 5 Cal.3d 258, 268, 96 Cal.Rptr. 42, 486 P.2d 1242;  Hooper v. Deukmejian (1981) 122 Cal.App.3d 987, 1019, 176 Cal.Rptr. 569.)

The primary purpose of Code of Civil Procedure section 526a “is to ‘enable a large body of the citizenry to challenge governmental action which would otherwise go unchallenged in the courts because of the standing requirement.’ ”  (Blair v. Pitchess, supra, 5 Cal.3d at pp. 267–268, 96 Cal.Rptr. 42, 486 P.2d 1242, quoting Comment, Taxpayers' Suits:  A Survey and Summary (1960) 69 Yale L.J. 895, 904.)   It also provides “ ‘a general citizen remedy for controlling illegal governmental activity.’ ”  (Van Atta v. Scott (1980) 27 Cal.3d 424, 447, 166 Cal.Rptr. 149, 613 P.2d 210, quoting White v. Davis (1975) 13 Cal.3d 757, 763, 120 Cal.Rptr. 94, 533 P.2d 222.)

Code of Civil Procedure section 526a has consistently been construed in a liberal fashion to achieve its remedial purpose.  (Van Atta v. Scott, supra, 27 Cal.3d at p. 447, 166 Cal.Rptr. 149, 613 P.2d 210.)  “[I]t has never been the rule in this state that the parties in suits under section 526a must have a personal interest in the litigation.”  (Blair v. Pitchess, supra, 5 Cal.3d at p. 269, 96 Cal.Rptr. 42, 486 P.2d 1242.)   Moreover, “taxpayers may maintain an action under section 526a to challenge an illegal expenditure of funds even though persons directly affected by the expenditure also have standing to sue.”  (Van Atta v. Scott, supra, 27 Cal.3d at p. 449, 166 Cal.Rptr. 149, 613 P.2d 210.)   Additionally, taxpayers' suits for declaratory relief have been permitted.  (Ibid.)

 In the present case, all of the individual plaintiffs alleged the facts necessary to establish that they were residents of the County of Los Angeles and the state and that they paid taxes to the state within one year of the commencement of this action, thus sufficiently establishing their standing to sue as taxpayers.   Since, however, they did not allege any facts which establish or indicate that the Commissioner as a state official illegally expended, wasted or injured public funds or property, we conclude that they failed to state facts sufficient to constitute a cause of action for taxpayer relief under Code of Civil Procedure section 526a.  (Blair v. Pitchess, supra, 5 Cal.3d at p. 268, 96 Cal.Rptr. 42, 486 P.2d 1242;  Irwin v. City of Manhattan Beach (1966) 65 Cal.2d 13, 18–20, 51 Cal.Rptr. 881, 415 P.2d 769.)

It follows then that defendants' demurrers to the individual plaintiffs' purported causes of action for taxpayer relief were properly sustained.   Moreover, since plaintiffs do not allege any facts which show that they could amend the complaint to allege an illegal expenditure or waste of public funds by the Commissioner or the State, we conclude that in that respect the demurrers were correctly sustained without leave to amend.

B

STANDING OF COMPTON, ON ITS OWN BEHALF, TO SUE THE STATE, COMMISSIONER AND FARMERS

 We conclude that Compton lacks the requisite standing to challenge the constitutionality of section 11628 on its own behalf.  “As a political subdivision of the state and not being [a] part[y] who belong[s] to a class allegedly discriminated against [it] lack[s] the standing to make such a challenge.”  (Community Television of So. Cal. v. County of Los Angeles (1975) 44 Cal.App.3d 990, 998, 119 Cal.Rptr. 276.)

To the extent that Compton sues Farmers on its own behalf we also hold that Compton lacks the necessary standing to sue as it has failed to allege, and does not contend that it can amend the complaint to allege, facts which show that it has a right to relief against Farmers based upon an allegation of facts showing that it has been injured as the direct result of any act or omission on the part of Farmers.

STANDING OF COMPTON TO SUE COMMISSIONER AND STATE IN A REPRESENTATIVE CAPACITY

 Does Compton have standing to sue the State and the Commissioner in a representative capacity?   We hold that it does not.

 In order to be an adequate representative, plaintiff must show that its claims are typical of the class of persons it represents.  (Stephens v. Montgomery Ward & Co. (1987) 193 Cal.App.3d 411, 422, 238 Cal.Rptr. 602.)

In this case, Compton, in its representative capacity, is attempting to litigate the personal claims of its residents alleged to be caused by redlining.

It alleges that the redlining practices employed by Farmers and the insurance industry in general force the residents of Compton, as well as residents of other areas in Los Angeles County predominantly populated by poor and minorities to pay excessive and unfairly discriminatory rates for automobile insurance or to go without such insurance.

Compton does not allege, nor does it maintain that it could amend the complaint to allege, that it has been unable to secure insurance or has been required to pay excessive insurance rates as the result of redlining practices.   In short, Compton is not a member of the class it seeks to represent.   In Greater Westchester Homeowners Assn., Inc. v. City of Los Angeles (1970) 13 Cal.App.3d 523, 526, 91 Cal.Rptr. 720, this court stated:  “Appellant cannot give itself standing to sue by purporting to represent a class of which it is not a member or a group of persons not belonging to the class.”   Under the facts of this case, therefore, we hold that Compton does not have the requisite standing to sue the State or the Commissioner as a representative of its residents.

Compton does not contend that it has standing to bring this action against the State and the Commissioner as a representative of its residents under the parens patriae doctrine.   The State defendants, however, argue that it does not.

Our research has not disclosed any case in this state ruling on the issue of whether a city or county may sue in a representative capacity as parens patriae on behalf of its residents.   Cases from other jurisdictions, however, rule that they do not because cities and counties, unlike states, are not independent governmental entities existing by reason of any inherent sovereign authority of their residents, but are merely political subdivisions of the state with only such powers as the state delegates to them.  (See Bd. of Cty. Com'rs v. Denver Bd. of Water Com'rs (Colo.1986) 718 P.2d 235, 241;  In re Multidistrict Vehicle Air Pollution M.D.L. No. 31 (9th Cir.1973) 481 F.2d 122, 131, cert. den., Morgan v. Automobile Manufacturers Assn., Inc., 414 U.S. 1045, 94 S.Ct. 551, 38 L.Ed.2d 336;  United States v. City of Pittsburg, Cal. (9th Cir.1981) 661 F.2d 783, 786–787.)

D

STANDING OF SCLC TO SUE COMMISSIONER AND STATE IN A REPRESENTATIVE CAPACITY

In its commentary, the trial court concluded that SCLC lacked the necessary standing to sue in a representative capacity on behalf of its membership because it failed to set forth facts in the complaint showing “that it was either organized for the purpose of the litigation, was authorized to engage in the litigation by its membership and/or that there is some unity of interest in the harm suffered by the organization and/or its members as a whole from the actions of the defendant.”

This is too narrow a view of SCLC's right to bring this action against the Commissioner and the State.  “In recent years there has been a marked accommodation of formerly strict procedural requirements of standing to sue [citation] and even of capacity to sue [citation] where matters relating to the ‘social and economic realities of the present-day organization of society’ [citation] are concerned.”  (Residents of Beverly Glen, Inc. v. City of Los Angeles (1973) 34 Cal.App.3d 117, 122, 109 Cal.Rptr. 724.)

 A voluntary membership organization may have standing to assert the claims of its members even though the organization itself has not been injured by the challenged statute or activity.  (Citizens Against Forced Annexation v. County of Santa Clara (1984) 153 Cal.App.3d 89, 94–100, 200 Cal.Rptr. 166;  Raven's Cove Townhomes, Inc. v. Knuppe Development Co. (1981) 114 Cal.App.3d 783, 793–796, 171 Cal.Rptr. 334;  Salton City etc. Owners Assn. v. M. Penn Phillips Co. (1977) 75 Cal.App.3d 184, 187–191, 141 Cal.Rptr. 895;  Residents of Beverly Glen, Inc. v. City of Los Angeles, supra, 34 Cal.App.3d at pp. 121–128, 109 Cal.Rptr. 724;  see also Gay Law Students Assn. v. Pacific Tel. & Tel. Co. (1979) 24 Cal.3d 458, 465, fn. 3, 156 Cal.Rptr. 14, 595 P.2d 592.)

In Warth v. Seldin (1975) 422 U.S. 490, 95 S.Ct. 2197, 45 L.Ed.2d 34, the United States Supreme court, discussing the standing of a voluntary association of homeowners to sue as a representative of its members under the federal Constitution, stated:  “Even in the absence of injury to itself, an association may have standing solely as the representative of its members.   [Citation.]  ․  The association must allege that its members, or any one of them, are suffering immediate or threatened injury as a result of the challenged action of the sort that would make out a justiciable case had the members themselves brought suit.  [Citation.]  So long as this can be established, and so long as the nature of the claim and of the relief sought does not make the individual participation of each injured party indispensable to proper resolution of the cause, the association may be an appropriate representative of its members, entitled to invoke the court's jurisdiction.”   (Id., at p. 511, 95 S.Ct. 2197, 45 L.Ed.2d 343.)

In Hunt v. Washington Apple Advertising Comm'n (1977) 432 U.S. 333, 97 S.Ct. 2434, 53 L.Ed.2d 383, the high court reiterated “that an association has standing to bring suit on behalf of its members when:  (a) its members would otherwise have standing to sue in their own right;  (b) the interests it seeks to protect are germane to the organization's purpose;  and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.”

In Brotherhood of Teamsters & Auto Truck Drivers v. Unemployment Ins. Appeals Bd. (1987) 190 Cal.App.3d 1515, 236 Cal.Rptr. 78, the court applied the criteria set forth in Warth and Hunt and concluded that the union had associational standing.  (Id., at pp. 1521–1524, 236 Cal.Rptr. 78.)

 In the present case, the complaint describes SCLC as “a California non-profit corporation whose principal purpose is the elimination of all forms of invidious discrimination.”   The complaint further states that “many of [SCLC's] members reside in predominantly minority or poor areas within Los Angeles County” and that “SCLC brings this action on behalf of its members to prevent the continuing injuries caused by the practices of redlining.”

The complaint also contains the following allegations:

“The practice of redlining results in discriminatorily high private passenger automobile rates for the poor, for Blacks, Hispanics and other minorities, and for the majority of members of SCLC.   It also results in the practical unavailability of automobile insurance for many members of SCLC.

“The practice of redlining in automobile insurance is a matter of grave public concern to SCLC and its members.   The practice directly and adversely affects the economy and welfare of poor and minority communities, by increasing the cost of social services, causing losses of revenues, and contributing to the deterioration of those areas.   SCLC is informed and believe [sic], and on that basis alleges, that if the practice of redlining is stopped, all residents of poor and minority communities within LOS ANGELES County, including COMPTON, will be favorably affected by the resulting availability of fairly and legally priced insurance, the reduction of the number of uninsured motorists, as well as the improvement in the welfare and economy of those communities.”

These allegations are, in our opinion, sufficient to confer standing on SCLC to sue the State and the Commissioner for state constitutional violations resulting from the existence and application of section 11628, the statute which authorizes redlining.   The allegations reflect much more than a mere generalization or abstract concern with eliminating discrimination.   Although SCLC did not allege that its members authorized it to bring this action, such authorization may be reasonably inferred from its purpose and from the fact that SCLC alleged that the majority of its members have been injured by the discriminatory insurance rates caused by redlining and that it was bringing this action on behalf of its members.

“The presumption that one not a member of the represented class cannot adequately and fairly represent its interests cannot apply with full force to an association seeking to represent its membership;  it imports an artificial distinction between the association and its members.   One presumes that an association is typically the embodiment of a community of interest, the form assumed by some conglomerative principle or goal.   True, there are often instances in which, as a result of a divergence of views among the members, the association qua entity no longer is fully representative of the interests of its members, or all of them.   Yet where, as here, the membership is united in a desire to redress alleged grievances common to all, it is disingenuous to attempt a severation of the interests of the association from those of its members.”  (Salton City etc. Owners Assn. v. M. Penn Phillips Co., supra, 75 Cal.App.3d at p. 190, 141 Cal.Rptr. 895.)

We therefore hold that SCLC alleged facts sufficient to establish its standing to sue the State and the Commissioner in a representative capacity.

III

PLAINTIFFS' CONTENTION THAT SECTION 11628 VIOLATES THE EQUAL PROTECTION CLAUSE OF THE CALIFORNIA CONSTITUTION

We begin with the fundamental principle of Griffin v. Illinois (1956) 351 U.S. 12, 76 S.Ct. 585, 100 L.Ed. 891, that justice must be administered to all persons equally.   Simply stated the “ ‘concept of the equal protection of the laws compels recognition of the proposition that persons similarly situated with respect to the legitimate purpose of the law receive like treatment.’  (Purdy & Fitzpatrick v. State of California (1969) 71 Cal.2d 566, 578 [79 Cal.Rptr. 77, 456 P.2d 645].)”  (In re Antazo (1970) 3 Cal.3d 100, 110, 89 Cal.Rptr. 255, 473 P.2d 999.)

A

STANDARD OF REVIEW

Plaintiffs' first contention in this regard is that the statutory scheme which allows redlining must be reviewed under the strict scrutiny standard.   Our California Supreme Court has recently reiterated the California law governing part of this subject in King v. Meese, supra, 43 Cal.3d 1217, 240 Cal.Rptr. 829, 743 P.2d 889, a case involving the determination of the validity of the California statute (Veh. Code, § 16028, the so-called mandatory insurance law, more properly known as the Robbins–McAlister Financial Responsibility Act, Stats. 1984, ch. 1322) which requires California drivers stopped for a moving violation to provide proof of financial responsibility on pain of possible fine or suspension of their driver's licenses.⁷  In fact, the failure to have evidence of financial responsibility is itself an offense.   In King, the Supreme Court stated “It is well established in California that the privileges conferred by a driver's license constitute an important property right (Rios v. Cozens (1972) 7 Cal.3d 792 [103 Cal.Rptr. 299, 499 P.2d 979];  Bell v. Burson (1971) 402 U.S. 535 [91 S.Ct. 1586, 29 L.Ed.2d 90] ), although not so fundamental a right as to trigger a strict scrutiny analysis (Hernandez v. Department of Motor Vehicles (1981) 30 Cal.3d 70 [177 Cal.Rptr. 566, 634 P.2d 917] ).”  (43 Cal.3d at p. 1228, 240 Cal.Rptr. 829, 743 P.2d 889.)   That recent pronouncement by the California Supreme Court on this subject is dispositive of plaintiffs' strict scrutiny contention as to the requirement of proof of financial responsibility under the Robbins–McAlister Financial Responsibility Act.   It is not, however, dispositive of the much more serious charge in the complaint that the challenged portion of section 11628 is similarly discriminatory against cognizable racial minorities and the poor and violates the equal protection guarantee of the California Constitution.  “Numerous federal decisions have recognized that the federal courts have applied a different standard of state action in cases presenting procedural due process questions than has been traditionally applied in cases involving discrimination under the equal protection clause (see, e.g., Weise v. Syracuse University (2d Cir.1975) 522 F.2d 397, 403–408;  R.I. Chapter, Assoc. Gen. Contractors v. Kreps (D.R.I.1978) 450 F.Supp. 338, 350, fn. 6 and cases cited), ․”  (Gay Law Students Assn. v. Pacific Tel. & Tel. Co., supra, 24 Cal.3d at p. 474, fn. 9, 156 Cal.Rptr. 14, 595 P.2d 592.)

In other words the complaint challenges, on the basis of race and wealth discrimination, the constitutionality of the sentence in section 11628 which states that a differentiation in rates between geographical areas shall not constitute unfair discrimination.   The complaint alleges that there is no compelling or rational basis for that discrimination.   Strict scrutiny must be the standard of judicial review to be applied to legislation or state action which discriminates against racial groups (a suspect classification) (see, e.g., Reitman v. Mulkey (1967) 387 U.S. 369, 87 S.Ct. 1627, 18 L.Ed.2d 830) or the poor (see, e.g., In re Antazo, supra, 3 Cal.3d 100, 89 Cal.Rptr. 255, 473 P.2d 999) and that is so even if the legislation involved is written in superficially neutral terms (Reitman v. Mulkey, supra, and Hunter v. Erickson (1969) 393 U.S. 385, 89 S.Ct. 557, 21 L.Ed.2d 616).   The result we reach, however, is the same whether we conduct this review under the strict scrutiny, the intermediate basis or the rational basis.

B

STATE ACTION

Unlike the due process and equal protection clauses of the Fourteenth Amendment to the United States Constitution, the due process and equal protection clauses of article I, section 7, subdivision (a) of the California Constitution do not contain an explicit state action requirement.   Article I, section 7, subdivision (a) of the California Constitution provides in pertinent part that “[a] person may not be deprived of life, liberty, or property without due process of law or denied equal protection of the laws;  ․”

Although in Kruger v. Wells Fargo Bank (1974) 11 Cal.3d 352, 366–367, 113 Cal.Rptr. 449, 521 P.2d 441, this state's high court rejected a contention that the state due process clause be interpreted to apply to purely private action without regard to a state action requirement and held that the requirement of state action was implicit in the clause, it was very careful to avoid any implication that the state due process clause would always be interpreted identically with that of its federal counterpart.  (11 Cal.3d at p. 367, fn. 21, 113 Cal.Rptr. 449, 521 P.2d 441.)

In fact, in Garfinkle v. Superior Court (1978) 21 Cal.3d 268, 282, 146 Cal.Rptr. 208, 578 P.2d 925, appeal dismissed 439 U.S. 949, 99 S.Ct. 343, 58 L.Ed.2d 340, our Supreme Court made it clear that California courts “are not bound by federal decisions analyzing the state action requirement” when interpreting the scope of the state due process clause.

In Gay Law Students Assn. v. Pacific Tel. & Tel. Co., supra, 24 Cal.3d 458, 156 Cal.Rptr. 14, 595 P.2d 592, the Supreme Court, this time in a case involving claims of denial of the state equal protection guarantee, stated:  “[A]lthough our court will carefully consider federal state action decisions with respect to the federal equal protection clause insofar as they are persuasive, we do not consider ourselves bound by such decisions in interpreting the reach of the safeguards of our state equal protection clause.   As article I, section 24 of the California Constitution explicitly declares:  ‘Rights guaranteed by this Constitution are not dependent on those guaranteed by the United States Constitution.’ ”   (See also, Darces v. Woods (1984) 35 Cal.3d 871, 201 Cal.Rptr. 807, 679 P.2d 45.)   In short, the federal protection clause provides a floor and not a ceiling to the rights provided under the California Constitution's equal protection clause.   (Cal. Const., art. I, § 7, subd. (a).)

In Moose Lodge No. 107 v. Irvis (1972) 407 U.S. 163, 92 S.Ct. 1965, 32 L.Ed.2d 627, the Moose Lodge, following its established policy, refused service at its dining room to plaintiff Irvis, a black guest of a member.

In an action for injunctive relief, plaintiff Irvis sued Moose Lodge as well as the Pennsylvania Liquor Authority alleging as to the latter defendant, that because it had issued Moose Lodge a license to sell alcoholic beverages on its premises, the organization's refusal to serve him because he was black constituted state action within the meaning of the equal protection clause of the Fourteenth Amendment.   Plaintiff sought revocation of Moose Lodge's liquor license until it ceased its discriminatory practices.

The United States Supreme Court held that Moose Lodge's refusal to serve plaintiff because he was black did not violate the Fourteenth Amendment because it was a purely private club which was not publicly funded.   The symbiotic relationship found to exist between the discriminating private restaurant owner lessee and the state created parking authority which was the owner-lesser of the building in which it was located in Burton v. Wilmington Parking Authority (1961) 365 U.S. 715, 81 S.Ct. 856, 6 L.Ed.2d 45, was found to be lacking in Moose Lodge.

The court in Moose Lodge held further that the mere issuance by the government defendant of a liquor license did not escalate purely private discrimination into state action, stating that it “has never held ․ that discrimination by an otherwise private entity would be violative of the Equal Protection Clause if the private entity receives any sort of benefit or service at all from the State, or if it is subject to state regulation in any degree whatever.”  (407 U.S. at p. 173, 92 S.Ct. at p. 1971.)

The court further stated that its holdings “indicate that where the impetus for the discrimination is private, the State must have ‘significantly involved itself with invidious discriminations,’  Reitman v. Mulkey, [supra,] 387 U.S. 369, 380 [87 S.Ct. 1627, 1634, 18 L.Ed.2d 830] ․, in order for the discriminatory action to fall within the ambit of the constitutional prohibition.”  (407 U.S. at p. 173, 92 S.Ct. at p. 1971.)

The Moose Lodge court nevertheless found state action and a violation of equal protection by virtue of a liquor board regulation which was adopted pursuant to a state statute.   That regulation affirmatively required that “ ‘[e]very club licensee shall adhere to all of the provisions of its Constitution and By–Laws.’ ”  (407 U.S. at p. 177, 92 S.Ct. at p. 1973.)   The nation's high court noted that “[e]ven though the Liquor Control Board regulation in question is neutral in its terms, the result of its application in a case where the constitution and bylaws of a club required racial discrimination would be to invoke the sanctions of the State to enforce a concededly discriminatory private rule.   State action, for purposes of the Equal Protection Clause, may emanate from rulings of administrative and regulatory agencies as well as from legislative or judicial action.”  (407 U.S. at pp. 178–179, 92 S.Ct. at p. 1974.)

Is the equal protection guarantee of the California Constitution violated when, as alleged in the complaint herein, a private insurance company (1) engages in racial and economic discrimination when drawing its territorial rating boundaries and setting different insurance rates in and between geographical areas;  (2) refuses to issue insurance policies in areas of Los Angeles County predominantly populated by poor and minority persons;  and (3) charges excessive, exorbitant and unfairly discriminatory rates to racial minorities and the poor in order to discourage business in territories in which these individuals reside?

In the face of a due process challenge, our Supreme Court in King v. Meese, despite state regulation of insurance, refused to equate the private decisions of insurance companies with state actions, stating:  “In Gay Law Students, we found that a public utility is more akin to a governmental entity than a purely private employer.   As factors leading to that conclusion, we noted the following:  ‘[B]readth and depth’ of governmental regulation;  a regulatory framework establishing that the state ‘expects' a utility to act like a governmental entity, not a private corporation;  the fact that the prices charged for the utility and the standards of the facilities were determined by the state;  the endowment of the utility with a number of the state's sovereign powers;  the guaranteed monopoly status of the utility;  the guaranteed return on investment;  and the public's need to purchase the monopolistic utility's product.  (Id.  [24 Cal.3d] at pp. 469–472 [156 Cal.Rptr. 14, 595 P.2d 592].)   Insurance companies might possess only the last of the foregoing attributes:  the public's need to buy the product.   Without more, that does not approach the situation described in Gay Law Students.”   (See King v. Meese, supra, 43 Cal.3d at pp. 1229–1230, fn. 12, 240 Cal.Rptr. 829, 743 P.2d 889.)

 In view of the express language of King v. Meese and the line of cases preceding it we necessarily hold that the alleged and unproven discriminatory behavior charged to Farmers by plaintiffs in the complaint, although especially repugnant to basic American values, does not constitute state action and therefore does not violate the state Constitution's equal protection guarantee.   This defect cannot be cured by an amendment of the complaint.   We therefore conclude that the trial court did not err in sustaining defendants' demurrers to plaintiffs' claims against Farmers without leave to amend.   The ruling as to SCLC's statement of a cause of action against the Commissioner and the State is a separate matter.

 We do note, however, that state action would, clearly be present if an insurance company's intentional discrimination against racial minorities or the poor in setting its rates or denying coverage was sanctioned by a state law or regulation, even if that law was framed in facially neutral terms.  (See Reitman v. Mulkey, supra, and Moose Lodge, supra.)   In such an instance, the requisite state action necessary to establish a violation of equal protection would emanate, not from the actions of the private insurer, but from the legislative enactment or state regulation which gave the force of law to the insurer's discrimination.   Thus, if the “[d]ifferentiation in rates between geographic areas shall not constitute unfair discrimination” language should prove to have a discriminatory effect against the poor or minorities it cannot be allowed to stand if a proper challenge is brought through the proper exercise of the administrative remedies discussed above.

In fact, the King v. Meese majority, after recognizing that under the mandatory insurance law “failure to have written evidence of financial responsibility is itself an offense,” (43 Cal.3d at p. 1221, 240 Cal.Rptr. 829, 743 P.2d 889) explicitly recognized that “the state's decision to impose a fine or suspend a license [for failure to have automobile insurance] is a state action.”  (43 Cal.3d at p. 1230, 240 Cal.Rptr. 829, 743 P.2d 889.)   The majority then went on to say “We must, therefore, consider what process is due to insure that this limited state action is not performed arbitrarily or capriciously.”  (Ibid.)  The Supreme Court, thus properly concerned that due process be afforded drivers in view of the state action that follows the financial responsibility (mandatory insurance) requirement, agreed with the defendants' contention that one way to meet the state's duty to make insurance available to drivers in a manner that is neither arbitrary nor capricious is through CAARP (California Automobile Assigned Risk Plan).

Following our holding that the Unruh Act (Civ. Code, § 51) is inapplicable, the sole remaining issues are whether SCLC has successfully pled a violation of the equal protection clause of article I, section 7, subdivision (a) of the California Constitution by the Commissioner or the State, by the permissive differentiation-in-rates language of section 11628, whether that equal protection guarantee is violated especially in view of the effect of the mandatory insurance law (Veh. Code, § 16028), whether SCLC should be allowed to amend its complaint to attempt to state a cause of action in the event it has not done so and whether or to what extent private insurance companies are allowed to discriminate in rate setting or in deciding whether to accept or reject a prospective insured.

The Supreme Court King v. Meese majority acknowledged that the so-called mandatory insurance law (Veh. Code, § 16028) gave rise to a duty to afford procedural due process to the plaintiff therein.   It bottomed its holding that procedural due process was afforded (1) by the state's guarantee that insurance is afforded and available to all eligible drivers, (2) by CAARP and (3) by CAARP's requirements that its rates be set by the Commissioner after public hearings.   Having “determined ․ that the acts of private insurers do not constitute state actions” (43 Cal.3d at p. 1231, 240 Cal.Rptr. 829, 743 P.2d 889) the court concluded that it “need not consider CAARP in relation to private insurance.   Rather, [it stated] we must look to CAARP standing alone to determine whether it meets the required procedural due process standards.”   (Id., at p. 1231, 240 Cal.Rptr. 829, 743 P.2d 889.)   It concluded that it did.

King v. Meese, supra, however, was decided on grounds different from those presented to us in this appeal.   As the King majority opinion states in 43 Cal.3d footnote 8 on page 1226, 240 Cal.Rptr. 829, 743 P.2d 889:  “[N]or do [plaintiffs] contend that the 1984 Act denies them substantive due process or equal protection.   Moreover, plaintiffs do not allege that the Commissioner is improperly carrying out his duties or that any insurer is failing to comply with the law.   We also note that plaintiffs do not argue that private insurance rates are actually ‘excessive’ in violation of Insurance Code section 1852.”   By contrast, this case does not involve CAARP.   The plaintiffs in the case at bench do contend that there has been a violation of the equal protection clause, allege that minorities and the poor in certain sections of Los Angeles County are charged arbitrary, excessive and discriminatory rates based on race and wealth discrimination, and they allege that section 11628 itself is unconstitutional in that it violates the equal protection clause (art. I, § 7, subd. (a)) of the California Constitution.

IV

DOES SECTION 11628 PERMIT DISCRIMINATORY REDLINING PRACTICES BASED ON SEX, RACE, LANGUAGE, COLOR, RELIGION, NATIONAL ORIGIN, ANCESTRY OR WEALTH?

 We now examine section 11628 to see whether as plaintiffs claim it gives the alleged racial and wealth discriminatory redlining practices of Farmers and the other automobile insurers the sanction of law.   Under sound rules of statutory construction we hold that it does not.

The language pertaining to and the definition of “geographic area” were added to section 11628 in 1967 by Assembly Bill 2036 which was approved by the Legislature on August 2, 1967, and signed by the Governor on August 28, 1967.   Assembly Bill 2036 was enacted into law as Chapter 1524 of the Statutes of 1967.

As amended in 1967, section 11628 provided in full:  “No admitted insurer, licensed to issue motor vehicle liability policies as defined in Section 16450 of the Vehicle Code shall fail or refuse to accept an application for such insurance, to issue such insurance to an applicant therefor, or issue or cancel such insurance under conditions less favorable to the insured than in other comparable cases, except for reasons applicable alike to persons of every race, color, religion, national origin, ancestry, or the same geographic area;  nor shall race, color, religion, national origin, ancestry, or location within a geographic area of itself constitute a condition or risk for which a higher rate, premiums, or charge may be required of the insured for such insurance.”   (Stats.1967, ch. 1524, § 1, p. 3633.)

The Legislative Counsel's Digest to the final version of Assembly Bill 2036 states that the purpose underlying the 1967 amendment was the eradication of discrimination between persons within a particular geographic area by licensed insurers.   The Legislative Counsel's Digest states:  “With respect to accepting applications for, or issuing or cancelling of, motor vehicle liability insurance, prohibits licensed insurers from discriminating between persons within the same geographic area, and provides that location within a geographic area of itself shall not constitute a condition or risk for which a higher rate, premiums, or charge may be required.   Defines ‘geographic area.’ ”  (Emphasis added.)

Assembly Bill 2036 reflected the culmination of efforts by Civil Rights groups, the insurance industry and the Department of Insurance to eliminate discrimination between persons within the same geographic area.   It appears that the impetus for this concerted endeavor was the insurance industry's practice of charging higher rates to Blacks living in the Watts area after the Watts riots of the mid–1960's.  (Post-enrollment documents regarding Assem. Bill No. 2036 provided by the Legis. Intent Service.)   Assembly Bill 2036's 1967 amendment did not contemplate and was not intended to prohibit racial discrimination between persons in different geographic areas.

In 1977, section 11628 was further amended to prohibit insurers from discriminating against persons on the basis of “language” which was defined as the “inability to speak, read, write, or comprehend the English language.”   (Stats.1977, ch. 914, § 1, p. 2788.)

The Legislative Counsel's Digest to Assembly Bill No. 857, by which the 1977 amendment came to fruition, acknowledges that “[e]xisting law prohibits admitted insurers licensed to issue motor vehicle liability policies from discriminating against persons on the basis of race, color, religion, national origin, ancestry, or location within a geographic area.”

In 1978, section 11628 was once again amended.   By Assembly Bill No. 3596, section 11628 was amended to require insurers to maintain their records of loss experience by zip code within each geographic area so as to insure that homogeneity of loss experience was reflected in the geographic areas used for rating purposes.   Insurers were also required to make such statistical data available for examination by the Insurance Commissioner.

The impetus for this portion of the 1978 amendment was the perception that certain low-risk neighborhoods were included in a rating territory composed primarily of high-risk neighborhoods.   The persons living in low risk areas were hence paying rates that allegedly did not truly reflect their loss experience.  (Analysis of Assem. Bill No. 3596 prepared by the Assem. Com. on Finance, Insurance, and Commerce and post-enrollment documents regarding Assem. Bill No. 3596 provided by the Legis. Intent Service.)   The requirement that insurers maintain their record of loss experience by zip code within each geographic area would more easily permit an inquiry into the validity of rates in specific neighborhoods and a determination as to whether a certain zip code area is misplaced in a larger rating territory.  (Material regarding Assem. Bill No. 3596 from the legis. bill file of the Sen. Com. on Insurance and Financial Institutions and Third Reading analysis on Assem. Bill No. 3596 prepared by the Sen. Republican Caucus provided by the Legis. Intent Service.)

The 1978 amendment also added to section 11628 that language which plaintiffs attack:  “[D]ifferentiation in rates between geographical areas shall not constitute unfair discrimination.”  (Stats.1978, ch. 875, § 1, p. 2749.)

This language expressly authorizes that which the insurance industry has been practicing for decades—i.e., the discriminatory practice of territorial rating.  (Analysis of Assem. Bill No. 3596 prepared by the Assem. Com. on Finance, Insurance, and Commerce provided by Legis. Intent Service.)   Since people, not geographic areas, buy automobile insurance, it is clear that that portion of section 11628 which provides that differentiation in rates between geographical areas shall not constitute unfair discrimination effectively authorizes insurance companies to discriminate by “differentiating” ⁸ between insureds and potential insureds residing in different geographic areas.⁹

At oral argument counsel for defendant Farmers understandably maintained “that there could be a disparity in rates territory versus territory,” but refreshingly, Farmers, the Commissioner and State each conceded, through their respective counsel, that under sections 1852 and 11628, read together, prohibit private insurance companies from discriminating on the basis of sex, race, wealth, language, color, religion, national origin or ancestry when setting their rates or when deciding whether to accept or reject prospective insureds.

Read together with section 1852, section 11628 must be construed to, and we hold, independent of the concessions of the defendants that it does, prohibit private insurance companies, the Commissioner and the State from “differentiating” or “discriminating” or permitting discrimination or differentiation on the basis of sex, race, language, color, religion, national origin, ancestry or wealth, no matter where within the entire state the insured or prospective insured lives.   Nor may such a discriminatory result be accomplished by private insurers under the guise of being supposedly based on “actuarially sound” practices or because of supposedly being based on actual “loss experience” unless the particular insurance company involved in the rate setting decision or in making the decision whether to accept or reject prospective insureds itself has in effect at the time of making that decision a substantial number of private automobile liability policies, exclusive of California Automobile Assigned Risk policies, in that geographical area in which the insured or prospective insured lives.

As stated earlier, section 11628 expressly prohibits insurers from discriminating on the basis of race, language, color, religion, national origin, ancestry or location within a geographic area.

We note that our construction of section 11628, despite the legislative intent reflected in the legislative history is in accord with the plain meaning of the disjunctive language of that statute, which in this part reads:  “[N]or shall race, language, color, religion, national origin, ancestry, or location within a geographic area of itself constitute a condition or risk for which a higher rate, premium, or charge may be required of the insured for such insurance.”  (Emphasis added.)   It is also in accord with the rule of statutory construction that the court first looks to the language of the statute, attempting to give effect to the usual, ordinary import of that language and seeking to avoid making any language mere surplusage.  (Moyer v. Workmen's Comp. Appeals Bd. (1973) 10 Cal.3d 222, 230, 110 Cal.Rptr. 144, 514 P.2d 1224.)

It is not in accord with the legislative intent as revealed by the legislative history to keep its antidiscriminatory effect within a geographic area.   It is, however, a construction of the statute compelled by reading it together with section 1852, by its plain language and, most importantly by the fact that it is a construction of the statute compelled by and in harmony with the equal protection clause of the California Constitution.   Where a statute is theoretically capable of more than one construction, the “ ‘ “legislation should be construed, if reasonably possible, to preserve its constitutionality ․” and thus [avoid] the constitutional issue inherent in a contrary construction.’  [Citations].”  (Hooper v. Deukmejian (1981) 122 Cal.App.3d 987, 1003, 176 Cal.Rptr. 569.)   Since the enactment of a statute constitutes “state action” (Shelley v. Kraemer (1948) 334 U.S. 1, 68 S.Ct. 836, 92 L.Ed. 1161 and Plyler v. Doe (1982) 457 U.S. 202, 102 S.Ct. 2382, 72 L.Ed.2d 786) section 11628 is, of course, governed by the equal protection clauses of the state and federal constitutions.

As it is unfairly discriminatory for an insurer to charge different rates within the same geographic area on the basis of race or any other impermissible criteria or prohibited classification, so it is also clearly “unfairly discriminatory” within the meaning of sections 1852 and 11628 for Farmers or any insurer to charge different rates in different geographic areas on the basis of such impermissible racial or economic criteria as are charged in the complaint.   In fact, as we have said, we believe and hold that the combined effect of sections 1852 and 11628 is to prohibit private insurance company discrimination based on sex, race, language, color, religion, national origin, ancestry, wealth or location with respect to insurance rates or acceptance or rejection of insureds just the same as does the Unruh Act on business establishments generally.  (Civ.Code, § 51.)   That, however, does not excuse the need to exhaust administrative remedies where these are required.

 In order to preserve the constitutionality of the questioned language of 11628 we also hold that the differentiation in rates between geographical areas permitted by section 11628 is permissible solely when the rate differential is based on substantial, actual and verifiable loss experience in each of the particular geographical areas involved.   Such differentiation constitutes unfair discrimination in violation of the combined effect of sections 1852 and 11628 if it is based on any of the aforementioned prohibited factors.

That portion of section 11628 which authorizes differentiation in rates between geographical areas cannot be construed to allow any insurance company to engage in invidious discrimination of any kind.

Unlike the regulation under attack in Moose Lodge, however, section 11628 does not give the sanction of law to the alleged acts charged to Farmers of racial and economic discrimination, nor, under the holding in King v. Meese, supra, does any action of the Commissioner or the Department of Insurance do so.   SCLC has simply failed to allege facts sufficient to constitute a cause of action.

We conclude, therefore, that the trial court properly sustained defendants' demurrers to plaintiffs' constitutional claims against the state and the commissioner without leave to amend.

Farmers' request for imposition of sanctions against plaintiffs for prosecution of a frivolous appeal (Code Civ. Proc., § 907;  Cal.Rules of Court, rule 26(a)) is denied.

The judgment is affirmed.

FOOTNOTES

FN1. All statutory references herein are to the Insurance Code unless otherwise noted.Amicus curiae City of Los Angeles requests this court to take judicial notice of (1) the proposed findings and recommendations of the Insurance Commissioner's hearing panel relating to automobile insurance territorial classifications (Dec. 1979);  (2) the complaint in King v. Meese (1987) 43 Cal.3d 1217, 240 Cal.Rptr. 829, 743 P.2d 889;  (3) the summary of the study of California driving performance, a research project of the Rate Regulation Division, California Department of Insurance (Nov. 1979);  (4) excerpts from the Study of California Driving Performance (Phase II), California Department of Insurance (Nov. 1979);  (5) Bulletin No. 78–5, issued by the Insurance Commissioner (Feb. 17, 1978);  (6) Bulletin No. 85–5, issued by the Insurance Commissioner (Mar. 28, 1985);  (7) excerpts from Comparative Premium Survey of Automobile Insurance for California, published by Consumer Affairs Division, Department of Insurance;  and (8) the clerk's transcript in County of Los Angeles v. Farmers Ins. Exchange (2d Civ. No. 63101).Plaintiffs join in the amicus curiae's request for judicial notice and further request this court to take judicial notice of (1) the preliminary results of the Department of Insurance's Availability/Affordability Study of Private Passenger Auto Insurance in Los Angeles County, (2) the declaration of Lois Salisbury dated September 12, 1985, filed with the motion for preliminary injunction in King v. Meese, supra, 43 Cal.3d 1217, 240 Cal.Rptr. 829, 743 P.2d 889 and (3) the “Study of the Availability and Affordability of Automobile Insurance in Los Angeles County,” a research project of the California Department of Insurance dated July 1987.Defendant Farmers requests this court to take judicial notice of excerpts from the petitioner's reply brief in King v. Meese, supra, 43 Cal.3d 1217, 240 Cal.Rptr. 829, 743 P.2d 889.Each of the foregoing requests is granted..  FN1. All statutory references herein are to the Insurance Code unless otherwise noted.Amicus curiae City of Los Angeles requests this court to take judicial notice of (1) the proposed findings and recommendations of the Insurance Commissioner's hearing panel relating to automobile insurance territorial classifications (Dec. 1979);  (2) the complaint in King v. Meese (1987) 43 Cal.3d 1217, 240 Cal.Rptr. 829, 743 P.2d 889;  (3) the summary of the study of California driving performance, a research project of the Rate Regulation Division, California Department of Insurance (Nov. 1979);  (4) excerpts from the Study of California Driving Performance (Phase II), California Department of Insurance (Nov. 1979);  (5) Bulletin No. 78–5, issued by the Insurance Commissioner (Feb. 17, 1978);  (6) Bulletin No. 85–5, issued by the Insurance Commissioner (Mar. 28, 1985);  (7) excerpts from Comparative Premium Survey of Automobile Insurance for California, published by Consumer Affairs Division, Department of Insurance;  and (8) the clerk's transcript in County of Los Angeles v. Farmers Ins. Exchange (2d Civ. No. 63101).Plaintiffs join in the amicus curiae's request for judicial notice and further request this court to take judicial notice of (1) the preliminary results of the Department of Insurance's Availability/Affordability Study of Private Passenger Auto Insurance in Los Angeles County, (2) the declaration of Lois Salisbury dated September 12, 1985, filed with the motion for preliminary injunction in King v. Meese, supra, 43 Cal.3d 1217, 240 Cal.Rptr. 829, 743 P.2d 889 and (3) the “Study of the Availability and Affordability of Automobile Insurance in Los Angeles County,” a research project of the California Department of Insurance dated July 1987.Defendant Farmers requests this court to take judicial notice of excerpts from the petitioner's reply brief in King v. Meese, supra, 43 Cal.3d 1217, 240 Cal.Rptr. 829, 743 P.2d 889.Each of the foregoing requests is granted.

2.   Section 11628, otherwise known as the Rosenthal–Robbins Auto Insurance Nondiscrimination Law, in pertinent part provides:“(a) No admitted insurer, licensed to issue and issuing motor vehicle liability policies as defined in Section 16450 of the Vehicle Code, shall fail or refuse to accept an application for such insurance, to issue such insurance to an applicant therefor, or issue or cancel such insurance under conditions less favorable to the insured than in other comparable cases, except for reasons applicable alike to persons of every race, language, color, religion, national origin, ancestry, or the same geographic area;  nor shall race, language, color, religion, national origin, ancestry, or location within a geographic area of itself constitute a condition or risk for which a higher rate, premium, or charge may be required of the insured for such insurance.“As used in this section ‘geographic area’ means a portion of this state of not less than 20 square miles defined by description in the rating manual of an insurer or in the rating manual of a rating bureau of which the insurer is a member or subscriber․  A record of loss experience for such geographic area, including such statistical data by zip code area, shall be submitted annually to the commissioner for examination by each insurer․  Differentiation in rates between geographic areas shall not constitute unfair discrimination.”

3.   Civil Code section 51 provides:  “This section shall be known, and may be cited, as the Unruh Civil Rights Act.  [¶] All persons within the jurisdiction of this state are free and equal, and no matter what their sex, race, color, religion, ancestry, or national origin are entitled to the full and equal accommodations, advantages, facilities, privileges, or services in all business establishments of every kind whatsoever.  [¶] This section shall not be construed to confer any right or privilege on a person which is conditioned or limited by law or which is applicable alike to persons of every sex, color, race, religion, ancestry, or national origin.”

4.   Article I, section 7 of the California Constitution in pertinent part provides:  “(a) A person may not be deprived of life, liberty, or property without due process of law or denied equal protection of the laws;  ․  [¶] (b) A citizen or class of citizens may not be granted privileges or immunities not granted on the same terms to all citizens.   Privileges or immunities granted by the Legislature may be altered or revoked.”Article IV, section 16, subdivision (a) states:  “All laws of a general nature have uniform operation.”

5.   Article III, section 3.5 of the California Constitution provides:  “An administrative agency, including an administrative agency created by the Constitution or an initiative statute, has no power:  [¶] (a) To declare a statute unenforceable, or refuse to enforce a statute, on the basis of it being unconstitutional unless an appellate court has made a determination that such statute is unconstitutional;  [¶] (b) To declare a statute unconstitutional;  [¶] (c) To declare a statute unenforceable, or to refuse to enforce a statute on the basis that federal law or federal regulations prohibit the enforcement of such statute unless an appellate court has made a determination that the enforcement of such statute is prohibited by federal law or federal regulations.”

6.   Code of Civil Procedure section 526a, in pertinent part provides:  “An action to obtain a judgment, restraining and preventing any illegal expenditure of, waste of, or injury to, the estate, funds, or other property of a county, town, city or city and county of the state, may be maintained against any officer thereof, or any agent, or other person, acting in its behalf, either by a citizen resident therein, or by a corporation, who is assessed for and is liable to pay, or, within one year before the commencement of the action, has paid, a tax therein.   This section does not affect any right of action in favor of a county, city, town, or city and county, or any public officer;  provided, that no injunction shall be granted restraining the offering for sale, sale, or issuance of any municipal bonds for public improvements or public utilities.”

7.   As pointed out in the concurring opinion in King v. Meese, supra, the purchase of an automobile liability insurance policy, is in practical fact, compulsory, since the other forms of proof of financial responsibility are unavailable to the individual urban poor.  (43 Cal.3d at p. 1237, fn. 4, 240 Cal.Rptr. 829, 743 P.2d 889.)

8.   Webster's New Collegiate Dictionary defines the word “differentiate” as follows:  “dif fer en ti ate 1:  to obtain the mathematical derivative of 2:  to mark or show a difference in 3:  to develop differential characteristics in 4:  to cause differentiation of in the course of development 5:  to express the specific difference of:  DISCRIMINATE vi 1:  to recognize a difference 2:  to become distinct or different in character 3:  to undergo differentiation.”

9.   Although section 11628 was amended again in 1982, 1984, and 1986, the substance of these amendments is not essential to a determination of this case.

McCLOSKY, Associate Justice.

WOODS, P.J., and GEORGE, J., concur.