Solicitations dressed as invoices can violate California law

Rierson v. Meritplan Insurance Co., 2006 WL 2338162 (Cal. App. 4 Dist.)

Plaintiff alleged that, in a scheme to take advantage of another insurer’s exit from the California home insurance market, defendants sent insurance policies, along with solicitations for insurance that were disguised as invoices for money already due, to her and 74,000 other similarly situated homeowners. First defendants sent an unsolicited policy, then bills and requests for payments; then they cancelled the policy for nonpayment prior to the end of its effective date, and sent an additional bill for coverage prior to cancellation; this last bill, plaintiff paid. (Did they threaten her credit?) This, she claimed, violated both specific provisions of California law prohibiting false invoices and general tort and consumer protection law. The trial court dismissed almost all of plaintiff’s claims, but the court of appeals reinstated some.

The court of appeals agreed that the defendants’ conduct didn’t violate California law about letting consumers keep unsolicited merchandise or services, because insurance policies aren’t either. Because plaintiff properly alleged a violation of Civil Code § 1716, however, her claims for unjust enrichment, unfair competition, and false advertising were also resurrected to the extent they tracked the violation of the law. That provision bars solicitations that are designed to look like bills or invoices and requires prominent, conspicuous disclosures for solicitations. The trial court had ruled that, because defendants actually provided insurance, they weren’t engaged in the fraudulent conduct the law was designed to stop, but the court of appeals pointed out that the abuses justifying the enactment of that provision had included invoices for “directories” that the sellers actually provided. It’s not the failure to deliver the goods, but the fact that the solicitation deceptively pretends to be carrying out a previous agreement, that the law targets.

The decision also addresses what’s necessary to plead damages for purposes of the law; plaintiff adequately alleged damages in the form of higher premiums as a result of the policy cancellation, effort investigating the invoices, and inflated premiums for defendants’ policies.