Krumme

Insurance Code section 1704 requires that certain kinds of insurance may be sold only by what are known as “appointed agents”— persons for whom the insurer has filed with the Insurance Commissioner a notice of appointment formally designating the person to act on the insurer’s behalf. A trio of related insurers (which for purposes of simplicity will hereinafter be collectively referred to as Mercury) sold policies of automobile insurance within the state through “broker-agents” who are not appointed agents. Suit was instituted to stop this practice, as well as permitting the “broker-agents” to charge consumers broker fees added to the advertised price of insurance. The trial court determined that both of these practices ran afoul of the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.) and permanently enjoined them.

The primary issue pressed by Mercury is whether its practice of employing broker-agents who are not appointed agents has been sanctioned by the Legislature and therefore enjoys a “safe harbor” from liability under the UCL. Although the issue is not free from all doubt, on balance it appears from the governing statutes, particularly section…