Coleman v. United Servs. Auto. Ass'n

EILEEN-GAYLE COLEMAN and ROBERT CASTRO, on behalf of themselves andall others similarly situated, Plaintiffs, v. UNITED SERVICES AUTOMOBILE ASSOCIATION andUSAA GENERAL INDEMNITY COMPANY, Defendants.

Case No.: 21-cv-217-CAB-LL

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

June 22, 2021

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS

[Doc. No. 17]

This matter comes before the Court on Defendants United Services Automobile Association and USAA General Indemnity Company's (collectively, "Defendants") motion to dismiss. [Doc. No. 17.] The motion has been fully briefed and the Court finds it suitable for determination on the papers submitted and without oral argument. See CivLR 7.1(d)(1). For the reasons set forth below, the motion is granted in part and denied in part with leave to amend.

I. ALLEGATIONS IN THE COMPLAINT

A. Parties

United Services Automobile Association ("USAA") is a "reciprocal interinsurance exchange" and insurance underwriting company that provides automobile insurance to current and former military members and their families. [Doc. No. 1 ¶ 9.] Specifically, USAA provides automobile insurance policies to commissioned and senior non-commissioned officers in pay grades E-7 or higher. It is also the parent of three other separate insurance companies, each of which insures a different segment of the military or military family members. [Id. ¶¶ 10-11.] USAA and these subsidiary insurers operate under common management and control, and policyholders are automatically placed in one of the four companies based on their military pay grade or familial relationship. [Id.] The only defendants here are: (1) the parent company, USAA; and (2) USAA General Indemnity Company ("GIC"), which insures enlisted people in pay grades E-1 through E-6. [Id. ¶ 11.] According to the complaint, however, USAA "consistently holds itself out as a single entity" and does not provide policyholders in the three companies other than USAA with clear notice that they are being insured by a different company. [Id. ¶ 37.]

Plaintiffs Eileen-Gayle Coleman and Robert Castro (collectively, "Plaintiffs") are both California citizens who have been insured by GIC since 2015 and 2009, respectively, hold GIC automobile insurance policies with collision coverage, and formerly served in some division of the United States military. [Id. ¶¶ 7-8.] Both Plaintiffs qualify as statutory "good drivers" under California law. See CAL. INS. CODE § 1861.025. Plaintiffs purport to represent a class of all presently and formerly enlisted people in pay grades E-1 through E-6 who are California citizens and had collision coverage from GIC at any time during the applicable statute of limitations periods. [Doc. No. 1 ¶ 54.] The complaint further delineates an "Enlisted Policyholders Good Driver Subclass" as those within the class who qualified as statutory "good drivers" and were not offered a "Good Driver Discount policy" from USAA. [Id. ¶ 55.]

B. Plaintiffs' Class Allegations

The crux of Plaintiffs' complaint is that of the two defendant insurers, GIC charges policyholders higher base rates for collision coverage than does USAA. [Id. ¶ 33.] Because enlisted personnel are automatically placed in GIC based on their military status and pay grade, they are consequently charged higher premiums than officers placed in USAA for the same coverage. [Id.]

Plaintiffs first allege that this practice violates California Insurance Code section 1861.16(b), and thereby the Unfair Competition Law ("UCL"), CAL. BUS. & PROF. CODE § 17200 et seq., by denying the subclass of enlisted "good drivers" access to the lowest rates available from the USAA family of insurance companies. The California Insurance Code provides that every person who qualifies as a "good driver"¹ may purchase a "Good Driver Discount policy" from the insurer of their choice that is at least 20 percent less than the rate they would otherwise pay for the same coverage. CAL. INS. CODE § 1861.02. Section 1861.16(b) provides that when multiple insurers operate under common management or control, an agent or representative of any of those insurers must offer (and the insurer must sell) a qualifying "good driver" a "Good Driver Discount policy" from the insurer within the commonly managed group offering the lowest rates for that coverage.² CAL. INS. CODE § 1861.16(b). This requirement "applies notwithstanding the underwriting guidelines of any of those insurers or the underwriting guidelines of the common ownership, management, or control group." Id. Plaintiffs claim that Defendants' practice of insuring enlisted people solely through GIC violates section 1861.16(b) because itresults in enlisted "good drivers" not being offered the lowest rates available within USAA's family of insurers for their collision coverage. [Doc. No. 1 ¶ 27.]

Second, Plaintiffs allege that Defendants have made "representations that are untrue, deceptive, and misleading" in violation of California's Unfair Insurance Practices Act (UIPA), CAL. INS. CODE § 790.03(b), thereby violating the UCL. [Id. ¶¶ 32-39.] When policyholders purchase or renew a USAA automobile insurance policy, Defendants send them a packet of documents that includes a handout entitled "Information Used to Determine Your Premium in California." [Id. ¶ 33.] The handout lists twenty-two types of information Defendants allegedly consider when calculating premiums, none of which is a person's military status. [Id.] According to Plaintiffs, however, Defendants do in fact consider military status in determining premiums because they place policyholders in different insurance companies based on their military status (i.e., officers are placed in USAA, whereas those in pay grades E-1 through E-6 are placed in GIC) and charge different premiums in each company. [Id.] Plaintiffs also allege that in communicating with policyholders and the public, USAA "consistently holds itself out as a single entity that it refers to as 'USAA,'" even though it insures policyholders through several companies. [Id. ¶ 37.] Plaintiffs claim Defendants do not notify enlisted policyholders that they are being insured by a company other than USAA, or that they are consequently paying higher rates than USAA policyholders. [Id.] Plaintiffs contend that these representations and omissions violate section 790.03(b) because they are false, deceptive, and misleading as to how Defendants determine insurance premiums. [Id. ¶ 39.]

Finally, Plaintiffs allege that Defendants discriminate against enlisted people based on their military status in violation of the Unruh Civil Rights Act ("Unruh Act"), CAL. CIV. CODE § 51 et seq., and section 394(a) of California's Military and Veterans Code. [Id. ¶¶ 40-45.] Plaintiffs claim that by placing enlisted people in GIC and charging them higher premiums than if they were officers, Defendants "intentionally discriminated against Enlisted Policyholders on the basis of their military status." [Id. ¶ 45.] Further, Plaintiffs allege that Defendants have no "legitimate business interest" in insuring officers andenlisted people through different insurers or in charging enlisted people higher rates. [Id. ¶¶ 97, 108.]

On February 4, 2021, Plaintiffs, on behalf of themselves and all others similarly situated, filed a class action complaint against Defendants based on the above-described practices. [Doc. No. 1.] The complaint asserts six causes of action under California law for violations of: (1) the UCL's prohibition on unlawful business practices, based on a violation of California Insurance Code section 1861.16(b); (2) the UCL's prohibition on unfair business practices, based on a violation of California Insurance Code section 1861.16(b); (3) the UCL's prohibition on unlawful business practices, based on a violation of California Insurance Code section 790.03(b); (4) the UCL's prohibition on unfair business practices, based on a violation of California Insurance Code section 790.03(b); (5) the Unruh Civil Rights Act; and (6) section 394(a) of the Military and Veterans Code. [Id. ¶¶ 70-112.] On April 7, 2021, Defendants moved to dismiss the complaint pursuant to Federal Rules of Civil Procedure 8, 9, and 12(b)(6). [Doc. No. 17.] The motion is now fully briefed and ripe for resolution.

II. LEGAL STANDARD

The familiar standards on a motion to dismiss apply here. To survive a motion to dismiss under Rule 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Thus, the Court "accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the nonmoving party." Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). On the other hand, the Court is "not bound to accept as true a legal conclusion couched as a factual allegation." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). Nor is the Court "required to accept as true allegations that contradict exhibits attached to the Complaint or matters properly subject to judicial notice, or allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir.2010). "In sum, for a complaint to survive a motion to dismiss, the non-conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quotation marks omitted). If a complaint does not survive scrutiny under Rule 12(b)(6), the Court will grant leave to amend unless it determines that no modified claims "consistent with the challenged pleading . . . [will] cure the deficiency." DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th...