A report out of the Insurance Journal is predicting more
consumer protection lawsuits against California insurance companies after a
June 15 state appellate decision reinstated a policyholder’s 2009 lawsuit
against Progressive over alleged unfair claims practices.

Chris Hughes sued Progressive after alleging that it neglected to
inform insureds of their right to choose the repair facility of their choice.

According to the Insurance Journal, Hughes had a wreck on Aug. 15, 2005, and told his insurer, Progressive, that he wanted to
have the repairs done at a specific shop that was not a DRP shop for
Progressive. A Progressive rep allegedly told Hughes that the claim would be
approved more easily and the repairs performed more quickly if he took his car
to one of their DRP facilities. Hughes succumbed to the rep’s wishes, unaware
of California’s anti-steering law.

The Insurance Journal article stated that previously, courts
in California had held that there is no private right of action for individuals
to sue over alleged violations of the state’s Unfair Insurance Practices Act
(UIPA). Under the law, those actions were to be litigated by the state
insurance commissioner.

However, a panel of three judges in the California Court
of Appeals interpreted the law differently, writing that "the legislature
intended the insurance commissioner’s authority to use UIPA enforcement powers
to be cumulative, not exclusive."

The panel also addressed a provision in Section 758.5 of
the California Insurance Code that bans insurers from requiring or recommending
specific shops unless policyholders are informed in writing of their right to
select a shop of their choice.

One of the judges wrote, "Even if there is no
private right of action under Section 758.5, it does not expressly bar a UCL
(Unfair Competition Law) claim nonetheless."

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