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California Unfair Competition Law and Its Impact on Tort and Medical Malpractice Claims

California Unfair Competition Law and Its Impact on Tort and Medical Malpractice Claims

Plaintiffs’ lawyers in California have a weapon to use in tort and personal injury cases besides pleading the elements for common law causes of action.  When they combat defendants in insurance, products manufacturing, drugs, and medical devices, they may have a claim under the Unfair Competition Law.

California has a consumer protection law that disallows unfair competition and deceptive trade practices. On August 1, 2013, the California Supreme Court ruled in Zhang v. The Superior Court of San Bernardino County, No. S178542 (Cal. Aug. 1, 2013) that insurance practices violating the California’s Unfair Insurance Practices Act (UIPA) may support a first-party action under the Unfair Competition Law (UCL).  The case spoke on the “unlawful” prong in the UCL.

The UCL codified at California Business and Professions Code § 17200, et seq, prohibits “any unlawful, unfair, or fraudulent business act.” The UCL has the potential to let plaintiffs’ lawyers write causes of actions for common law tort claims and unfair business practices violations.  This may boost a plaintiff’s award of attorneys’ fees and costs when a tort claim does not allow for the recovery of attorneys’ fees and costs.

The majority’s decision in Zhang partly resolved an ambiguity regarding the viability of UCL claims against insurers whose practices allegedly violate the UIPA.

In Zhang, the plaintiff insured purchased a general liability policy from insurer California Capital. After a coverage dispute for fire damage to her commercial property, the plaintiff sued California Capital for breach of contract, breach of the implied convenant of good faith and fair dealing, and violation of the UCL. The plaintiff alleged the insurer “engaged in unfair, deceptive, untrue, and/or misleading advertising” by agreeing to provide timely coverage in the case of a compensable loss, when it had no intention of timely paying the true value of its insureds’ covered claims.

California Business & Professions Code §17200 requires a plaintiff to identify the predicate law on which the claim is based, and allege specific facts demonstrating the challenged business practices of the defendant are forbidden by that law.

A common law violation such as breach of warranty in a products liability case is insufficient to state an unlawful claim, unless the conduct itself is unlawful, unfair, or fraudulent.

In Zhang, a majority of the California Supreme Court concluded the UIPA does not “operate as a shield” to immunize insurers from UCL liability for conduct that may violate other laws in addition to the UIPA. Plaintiff’s claim under the UCL sought to recover from the insurer for allegedly false advertising. It was a bad faith insurance practice that qualified as a statutory form of unfair competition.

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