Life Insurance

California Supreme Court rules insurers are not immune to lawsuits over excessive insurance costs

The California Supreme Court has ruled that insurance companies cannot avoid lawsuits filed by consumers over excessive title insurance costs – a ruling which could set an important precedent for all personal insurance lines, a consumer advocate says.

In the case Villanueva v. Fidelity National Title Company, the court rejected Fidelity Insurance Company’s argument that consumers have no right to go to court to challenge overcharges in connection with a sale or refinance of their homes. Previously, a court of appeal had sided with Fidelity Insurance, citing anti-trust immunity laws – which authorize insurers to share claims and pricing data with each other – that practically invalidate Proposition 103 and consumers’ rights to sue insurers.

Proposition 103 is a state law which gives Californian consumers protections against insurance pricing abuse. One of its provisions repeals the insurance industry’s exemption from state anti-trust laws.

But the Supreme Court’s decision reversed the court of appeal, determining that the title insurance immunity laws do not obstruct a consumer from going to court to challenge excessive fees.

According to non-profit Consumer Watchdog, most people are not aware of the hidden fees associated with title insurance – many allegedly excessive and unfair – until they sign the papers to close the loan.

Consumer Watchdog believes that while the California Supreme Court’s decision only addressed title insurance, the ruling’s legal analysis of the immunity statutes’ meaning and purposes applies equally to the nearly identical statutes in other Proposition 103 cases.

“Insurance companies must be brought to justice when they violate the law,” said Consumer Watchdog founder and author of Proposition 103 Harvey Rosenfield.

“The Supreme Court’s decision should clear away the confusion created by the insurance industry over whether citizens can sue an insurance company for overcharging them, discriminating against them or other violations of Prop 103 and California’s consumer protection laws.”

Rosenfield had submitted a “friend of the court” brief in the Villanueva v. Fidelity National Title Company case, on behalf of Consumer Watchdog and the Consumer Federation of America and the Consumer Federation of California.

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