California Supreme Court Grants Review in Zhang v. Superior Court
On February 10, 2010, the California Supreme Court granted review of the decision rendered by the Court of Appeal (Fourth Appellate District, Division Two), in Zhang v. Superior Court,178 Cal.App.4th 1081 (review granted, ordered depublished February 10, 2010). In Zhang, the Court of Appeal determined that an insured was not precluded from bringing a cause of action under California’s Unfair Competition Law (“UCL”) (Cal.Bus.Prof. §17200, et seq.). This decision directly contradicted insurance companies’ long-standing argument that the California Supreme Court holding in Moradi-Shalal v. Fireman’s Fund Ins. Companies, 46 Cal.3d 287 (1988), precludes all private causes of action against insurers.
In ruling for the insured, the California Court of Appeal determined that Moradi-Shalal did not bar a UCL “fraudulent” prong claim against an insurance company, and on a writ petition, reversed a trial court order holding otherwise. Zhang v. Superior Court, 178 Cal.App.4th 1081 (2009). The Court of Appeal’s decision turned on the allegations of the Plaintiff’s claims that the insured had “made fraudulent misrepresentations and promulgated misleading advertising with respect to its intentions to ‘pay provide coverage in the even the insured suffered a covered loss.’” Id. at 1089.
Should the Supreme Court uphold the Court of Appeal’s decision in Zhang, consumers will celebrate a small victory. Essentially, insurance companies will no longer be protected by such a broad umbrella under Moradi-Shalal, and may be held liable for claims of unfair conduct and false and misleading advertising.
