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Shipping Insurance Claims & UCL

Shipping Insurance Claims and the UCL

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Shipping Insurance Claims & UCL

Many companies that offer shipping insurance on e-commerce sites are violating California insurance laws, which have strict requirements about who is allowed to offer insurance and how that insurance can be offered. Moreover, California’s insurance laws can serve as a predicate for civil lawsuits brought under other statutes, including the California Unfair Competition Law (UCL). When it comes to shipping insurance claims and the UCL, there is strong legal precedent in favor of consumers who are charged for insurance by an unlicensed agent. Additionally, the shipping insurance offered by online sellers is often just a surcharge on services already being provided, which is business fraud that can also be the basis for a civil suit.

To learn more about how California consumer protection laws can be used to file a shipping insurance lawsuit against e-commerce sellers, keep reading.

Filing a Shipping Insurance Lawsuit Under California’s Unfair Competition Law (UCL)

Some companies that offer shipping insurance on their e-commerce websites expressly label it as “insurance,” while other companies call it “safe ship” or use another term. In fact, it is common for online sellers to refer to an insurance fee by some other name. For example, the plaintiff in Miller v. Travel Guard Group alleged that the company mislabeled the travel insurance fee on their website in order to get around the state prohibition against unlicensed agents selling insurance. Regardless of what term is used, however, both the California Insurance Code and the Unfair Competition Law (UCL) protect consumers against unlawful offers of insurance.

Section 1631 of the California Insurance Code imposes licensing requirements on any entity that seeks to sell insurance in the state. If a company violates the California Insurance Code by attempting to sell insurance as an unlicensed agent, consumers may be able to bring a UCL claim. Additionally, companies that hide a shipping insurance charge on a purchase could be exposed to lawsuits under the UCL for false, misleading, deceptive, and unlawful marketing and sales practices.

Section 17200 of the UCL

The California Unfair Competition Law (UCL) is set forth in Cal. Bus. & Prof. Code § 17200. The statute defines “unfair competition” as:

  1. Any unlawful, unfair, or fraudulent business act or practice.
  2. Unfair, deceptive, untrue, or misleading advertising.

The UCL is a sweeping law that is meant to protect both consumers and businesses. In fact, the statute has been interpreted broadly by California courts to cover a wide variety of business acts and consumer transactions, including antitrust violations, intellectual property claims, employment claims, misbranded drug products, and disputes over shipping insurance charges.

Both federal and California courts have held that companies may be sued for breach of contract and unfair competition when they violate state insurance laws. In fact, the U.S. Court of Appeals for the Ninth Circuit said that the California Insurance Code can serve as a predicate for a claim brought under the California Unfair Competition Law (UCL) even though the UCL does not explicitly provide for a private right of action for shipping insurance claims. In Miller v. Travel Guard Group, the California Northern District Court went even further by ruling that consumers may bring a claim under the UCL based on both an illegal agent theory and an illegal premium theory when the insurance fee is automatically included in the total price and the customer is not given an opportunity to opt out of paying it.

Only Licensed Agents Can Sell Insurance in California

California has strict laws regulating exactly who can sell insurance. Whether it’s auto insurance, property insurance, health insurance, general liability insurance, or shipping insurance, only licensed agents are allowed to offer insurance to customers. One way that California law protects consumers against insurance fraud is by requiring many types of insurance agents (e.g., home and auto insurance) to file bonds with the state insurance commission.

In order to charge customers for shipping insurance, a company must comply with California’s insurance laws. This means that insurance agents need to be registered with the state. Beyond that, owners, insurance agents, and even non-licensed employees must provide fingerprints that are kept on file with the state. All of this is in addition to standard business certification requirements, such as securing a certificate of good standing if the company is a corporation and a certificate of organization if the company is an LLC.

Friedman v. AARP Established Precedent for Shipping Insurance Claims in California

In Friedman v. AARP, Inc., the Ninth Circuit Court issued an important ruling that set precedent for subsequent cases involving offers of insurance to California consumers. The plaintiff in Friedman was a Medicare recipient who purchased UnitedHealth supplemental health insurance coverage through the AARP (previously known as the American Association of Retired Persons). Since AARP earned a 5% commission on the sale, they were essentially acting as an insurance seller without a license. This would be in direct violation of California Insurance Code § 1631. That statute prohibits anyone from soliciting, negotiating, or effecting an insurance contract unless the person holds a valid license from the California Commissioner of Insurance. California Insurance Code § 1633 goes even further by explicitly prohibiting an unlicensed company from “transacting” insurance regardless of whether the company reports itself as an insurance agent.

Facts of the Case

The plaintiff in the case was Jerald Friedman. He was one of several AARP members who filed a class action against AARP because the organization allegedly charged inflated insurance rates for Medigap coverage. (Medigap policies provide supplemental health insurance for costs that are not already covered by Medicare.) These exaggerated charges allegedly stemmed from a hidden commission that AARP was collecting.

The lower court in Friedman dismissed a class action brought by the plaintiff under the UCL. The Ninth Circuit then reversed that decision because the federal appellate court determined that AARP’s fee arrangement qualified as a commission on every insurance sale. In other words, AARP was acting as an insurance agent by selling insurance.

UCL Violation

Section 17200 of the California Unfair Competition Law (UCL) explicitly prohibits companies from engaging in “any unlawful, unfair, or fraudulent business act or practice.” AARP was accused of violating the UCL by committing the unlawful act of selling insurance without a license.

Since AARP is not licensed to sell insurance in California, it is unlawful for the group to offer insurance to its California members. AARP marketed the Medigap policy to its members in a number of ways, including television ads, websites, and materials sent directly through the mail. A lot of these advertisements included text reading, “This is a solicitation of insurance.” Although AARP later tried to describe its insurance commission as a “royalty,” the federal government determined that it was still a commission being charged on top of the typical monthly premium. This meant that AARP was essentially acting as an insurance agent despite not having a license to do so in California.

Unlawful to Conceal a Shipping Insurance Charge in California

Under California law, there is an expectation that consumers will be able to provide informed consent for purchases they make online. Unfortunately, some businesses trick customers into paying more for shipping insurance with hidden or confusing features on their e-commerce websites, particularly when it comes to placing and finalizing orders. The businesses generate additional revenues by offering a service that they are not legally allowed to offer without a valid, state-issued license.

Companies that do business in California and use deceptive marketing and sales tactics could be subject to civil suits for violating the UCL. That’s because the statute prohibits false, misleading, deceptive, and fraudulent acts or practices, which may include attempts by the business to deceive customers about hidden shipping insurance fees. An experienced Los Angeles insurance claim lawyer can help consumers bring a lawsuit against companies that violate the UCL by making an unlawful offer of shipping insurance.

UCL Claims

When consumers unknowingly purchase shipping insurance on a website due to misleading and/or deceptive information, they suffer an injury. The Unfair Competition Law can be used as the basis for a shipping insurance lawsuit if the defendant violated the “fraudulent” prong of the statute by misleading customers about the additional charge. In these cases, the plaintiff will need to establish two elements to bring a successful claim: (1) that the company deceived the public in some way either in an advertisement or during the checkout process; and (2) that the consumer relied upon the company’s statements or advertisement.

There are several ways that a company could violate the UCL by attempting to charge customers for shipping insurance:

  • Confusing Language: The company might use ambiguous and confusing language to describe the insurance charge, which means that consumers won’t necessarily understand what it is that they are purchasing.
  • Hiding the Insurance Charge: It’s also possible that the company might hide the total purchase price from the consumer by failing to clearly inform them of the total cost when shipping insurance is included, or by failing to allow the consumer to edit their order once a shipping insurance charge has been added.
  • Lack of Consent: In the most egregious cases, the company might not even give the consumer an opportunity to consent to the shipping insurance charge. There have been cases in which a company automatically charges for shipping insurance unless the purchaser clicks on a random and inconspicuous “decline” button before completing the order.

When a company fails to disclose information that consumers need in order to make informed decisions about a purchase, it could be a violation of the UCL. Whether it’s a misleading advertisement or a concealed charge on a company’s website order form, California consumers may be able to bring a shipping insurance claim under the UCL.

CLRA Claims

This type of conduct by a business might also violate the California Consumers Legal Remedies Act (CLRA), which prohibits certain unlawful acts involving consumers. For example, the CLRA explicitly forbids companies from “advertising goods or services with intent not to sell them as advertised.”

The ordering and check-out processes on some e-commerce websites are confusing and possibly even deceptive. As a result, it’s very possible that consumers are unknowingly purchasing shipping insurance as an upcharge or add-on because websites don’t make the additional charge immediately apparent to site visitors. Moreover, it’s possible that some consumers would not have purchased the product at all if they had known about the shipping insurance charge. Worse yet, many consumers might not become aware of the additional charges until much later when their bank account or credit card is debited for the order.

Contact the Los Angeles False Advertising Lawyers at Tauler Smith LLP

Were you charged for shipping insurance while making a purchase on an e-commerce website? The Los Angeles false advertising lawyers at Tauler Smith LLP represent clients in civil lawsuits and class action lawsuits against companies that commit business fraud, including litigation involving shipping insurance claims against companies that illegally offer shipping insurance in online transactions. Call 310-590-3927 or email us to schedule a free initial consultation.

California Unfair Competition Law

California’s Unfair Competition Law (UCL)

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California Unfair Competition Law

California’s Unfair Competition Law (UCL) is one of the most important consumer protection laws in the country. California courts tend to interpret the UCL broadly so that it applies to a wide range of unethical business practices. The statute explicitly prohibits companies from engaging in unlawful, unfair, or fraudulent business actions. It also prohibits companies from using false advertising. Businesses that violate the UCL may be subject to penalties that include financial compensation, monetary fines, and injunctions to stop committing certain acts. This means that consumers who purchase a product or service from a business that violates the UCL may be able to have an experienced California consumer fraud lawyer file a lawsuit and seek financial restitution.

To learn more about the California Unfair Competition Law, keep reading this blog.

What Is the California Unfair Competition Law?

The California Unfair Competition Law (UCL) is codified in Bus. & Prof. Code section 17200. The UCL protects consumers against business fraud, false advertising, and other deceptive practices by placing limits on companies doing business in California. The statute also protects honest companies and ensures that competition remains fair and strong, with no one company allowed to stifle competition and gain a competitive advantage by breaking the law.

Importantly, the UCL applies to all private companies doing business in California. This means that if a company is based in another state, if they sell to consumers located in the state, or even if they advertise in the state, they can be sued under the UCL.

What Is “Unfair Competition”?

The California Unfair Competition Law defines “unfair competition” as any of the following:

  1. An unlawful business act or practice.
  2. An unfair business act or practice.
  3. A fraudulent business act or practice.
  4. Unfair, deceptive, untrue, or misleading advertising.
  5. Any other act prohibited by the UCL.

Courts have interpreted the UCL broadly so that just about any violation of the law by a business can also constitute a violation, so long as the action or practice injured consumers or gave the business an advantage over its competitors. One of the most common examples of unfair competition in consumer transactions is when a company makes misrepresentations to customers about the type, quality, or cost of a product or service.

Deceptive Advertising

Examples of deceptive advertising that may violate the UCL include robocalling customers, using bait and switch advertising to trick customers, using fake endorsements in ads, exaggerating product descriptions, omitting important information about a product or service in an advertisement, manipulating prices, using false reference pricing in ads, and infringing on another company’s intellectual property.

Unlawful, Unfair, and Fraudulent Business Acts

The UCL defines “unlawful” business acts or practices as any action taken by a company that violates state or federal law. Even if the company committed the unlawful act just once, that can be enough to trigger legal action under the UCL.

An “unfair” business act or practice, as defined by the UCL, is typically committed by either a company or a business competitor. Generally speaking, a company violates the UCL when they attempt to sell goods or services that harm consumers. In the context of a business competitor, it is considered an unfair business act when the company does something that broadly undermines competition in the marketplace.

The UCL also prohibits “fraudulent” business acts or practices, which means any conduct that misleads or deceives consumers. When a consumer relies on false statements made by the company in an advertisement or at the point of sale and subsequently suffers an economic injury, they may be able to bring a UCL claim for restitution.

Private Right of Action Under Section 17200 of the UCL

The California Unfair Competition Law (UCL) allows both private parties and public prosecutors to take legal action against companies that commit fraudulent business acts. In most cases, an individual who has suffered an injury because of unfair competition must have their lawsuit filed by a county or city prosecutor. When the lawsuit is filed as a class action, however, a consumer may bring the action as a private plaintiff.

Standing to sue under the UCL can be established by showing that the plaintiff sustained an economic injury because of the business’ conduct. If the plaintiff bought an item from the business, then this would be enough to meet the UCL standing requirement.

False advertising claims brought under the UCL must establish that the plaintiff sustained economic injury because the defendant company engaged in misleading advertising of goods or services. Basically, this means that the consumer needs to show that they purchased an item or service and that they did so because of a deceptive advertisement.

Strict Liability

Section 17200 of the Unfair Competition Law imposes strict liability on businesses that commit fraud, which means that it does not matter whether they intended to commit fraud. The mere fact that their actions were unlawful, unfair, or fraudulent is enough to violate the statute. Additionally, it is not a defense against a UCL claim that the company’s ad was true or accurate. That’s because the plaintiff in a UCL case merely needs to show that the ad was likely to mislead consumers.

Moreover, it is important for businesses to understand that they can be sued under the UCL even if their actions are not technically unlawful. That’s because the statute explicitly prohibits “unfair” business acts and practices.

Restitution and Damages Available in UCL Claims

There are two remedies available to plaintiffs in an Unfair Competition Law claim:

  1. Actual economic damages, which means the defendant company is ordered to pay back any money received from the consumer.
  2. An injunction ordering the defendant to stop committing the fraud.

There are no punitive damages allowed in UCL cases. This is one reason that individual consumers often join forces to file a UCL claim as a class action, which can make it harder for the defendant to avoid paying a large damages award. A knowledgeable California UCL attorney can help the plaintiffs determine if it would be better to bring a class action lawsuit.

What Is the Statute of Limitations for UCL Claims?

The statute of limitations for a UCL claim is four (4) years, with the clock starting as soon as the business commits the fraudulent act or as soon as the plaintiff discovers the fraud. The standard used in these cases is a reasonable person standard, which means that the court will ask whether a person who exercised reasonable diligence would have discovered the unlawful business act when the statute of limitations period started to run.

Consumer Fraud Defense: Answering UCL Claims

Sometimes, a consumer brings a UCL claim against a company without merit. These claims can be tricky for businesses to answer because the statute is interpreted broadly by courts, and plaintiffs are typically given wide latitude to prove their case. If you have been sued in state court for allegedly violating the Unfair Competition Law, you need to speak with a knowledgeable consumer fraud defense lawyer immediately.

Related Laws: CLRA, ARL, and FTC Act

There are a few other related statutes that California consumers should be aware of when deciding whether to file a UCL claim.

CLRA Claims

Unfair Competition Law claims are often accompanied by claims under the California Consumers Legal Remedies Act (CLRA). The CLRA is more limited than the UCL because the CLRA includes protections for specific actions by businesses, whereas the UCL applies broadly to business fraud. It may be in the best interests of a plaintiff to bring a claim under both statutes because the remedies are cumulative. Beyond that, only the CLRA allows for punitive damages to be imposed against the defendant. Additionally, the CLRA allows plaintiffs to recover attorney’s fees.

ARL Claims

It is also possible for California consumers to use the Unfair Competition Law to bring a private civil action against companies that violate California’s automatic renewal laws. This is significant because the California ARL does not allow for a private right of action, which means that consumers who are deceived into signing up for an auto-renewal subscription may still be able to sue for full restitution under the UCL.

Federal Laws

There are also federal laws, such as the Federal Trade Commission Act (FTC Act), that protect California consumers against business fraud and false advertising. One advantage for plaintiffs filing a UCL claim is that the state statute has broad consumer protections that go beyond the protections provided under federal law.

Keep in mind that defendants may argue that more lenient federal law should apply in a particular case instead of the stringent California state law. That’s why it is important to have a skilled Los Angeles false advertising attorney on your side throughout the case.

Contact the California Consumer Protection Attorneys at Tauler Smith LLP

Tauler Smith LLP is a Los Angeles law firm that represents consumers in civil litigation, including class actions based on UCL violations. Our Los Angeles consumer protection lawyers understand the nuances of the California Unfair Competition Law, and we can help you get financial restitution from a company that used fraudulent business practices. Call us today at 310-590-3927 or email us to discuss your case.