Woo Chul Lee v. Interinsurance Exchange of Automobile Club

Three years ago, in Barnes v. State Farm Mut. Auto. Ins. Co. (1993) 16 Cal.App.4th 365 [ 20 Cal.Rptr.2d 87 ] (hereafter, Barnes), this court considered, among other issues, the question of whether a policyholder of a mutual insurance company can object to, or seek judicial assistance to control, the insurer’s maintenance, management and disbursement of surplus funds. We answered that question in the negative. (Id. at pp. 378-380.)

The present action, brought by subscribers and former subscribers of the Interinsurance Exchange of the Automobile Club of Southern California (hereafter, the Exchange), raises essentially the same question. However, unlike the defendant mutual insurer in Barnes , the Exchange is a reciprocal insurer, organized under chapter 3 (§ 1280 et seq., “Reciprocal Insurers,”) of division 1, part 2 of the Insurance Code.

Reciprocal insurers, alternatively called interinsurance exchanges, differ from mutual insurers in some details of structure and legal status. However, as we shall explain, the differences between mutual and reciprocal insurers are not of a kind which justifies different rules respecting their insured’s right to control business…