The California Supreme Court overturned lower courts’ rulings that blocked a plaintiff from suing State Farm, finding claim denial allegations had a four-year statutory limitation under the state’s Unfair Competition Law rather than just one.
Chief Justice Patricia Guerrero wrote the unanimous opinion, filed July 18, which reversed the ruling of San Francisco County Superior Court Judge Anne-Christine Massullo, as well as a split decision from a California First District Appellate Court panel.
The Supreme Court's ruling has prompted a warning from legal reform advocates that the action will further harm California's already troubled insurance markets, leading to fewer options for Californians who may already be struggling to find insurance coverage for their homes.
According to court records, Katherine Rosenberg-Wohl sued State Farm Fire and Casualty Company in October 2020, alleging the company improperly denied her August 2019 claim for expenses incurred fixing a staircase found to be responsible for causing a neighbor to fall.
State Farm removed one of Rosenberg-Wohl’s two lawsuits to federal court, where a judge granted a motion to dismiss claims for breach of contract and the implied covenant of good faith and fair dealing based on policy language granting only a year from the incurrence of a loss to file a lawsuit.
Her other lawsuit remained in state court. That complaint invoked the False Advertising and Unfair Competition laws, alleging State Farm routinely denies claims without sufficient investigation and said it “has a practice of obfuscating and regularly fails to make clear precisely what the basis is for its denials.”
Guerrero noted the complaint did not assert a claim for damages, only judicial action and compensation for legal fees.
During a hearing on State Farm’s motion to dismiss, Rosenberg-Wohl abandoned the false advertising claim. When Judge Massullo agreed with State Farm on the statutory limitation, she noted that although Rosenberg-Wohl wasn’t seeking policy benefits, she was still suing about her policy itself and she failed to do so within a year of the claim denial. The majority appellate panel opinion affirming the initial ruling also noted Rosenberg-Wohl would lack standing unless she sought to recover policy benefits.
Guerrero also explained the appellate minority’s dissent and noted the Supreme Court’s position that Rosenberg-Wohl’s lawsuit qualifies for the longer statutory window of the Unfair Competition Law.
California Attorney General Rob Bonta filed a support brief backing Rosenberg-Wohl’s stance that her litigation challenged not just an individual policy but State Farm’s general business practices.
The Supreme Court found Rosenberg-Wohl is pursuing “only broad declaratory relief pertaining to State Farm’s alleged claims-handling practices and an injunction that would require State Farm to ‘give at least as much consideration to the interests of its insured as to its own interests.’ These requests for declaratory and injunctive relief do not directly or indirectly pursue the recovery of benefits under plaintiff’s insurance policy, or for that matter any financial recovery for plaintiff.”
Rejecting State Farm’s arguments about legislative intent in crafting state insurance law and the ripeness of the litigation, Guerrero wrote Rosenberg-Wohl met her burden of showing the conduct she alleged would continue without judicial intervention. She also said every case State Farm invoked as precedent “involved attempts to recover damages owing to an assertedly improper failure to provide benefits under an insurance policy” rather than “an allegedly unfair and widespread business practice.”
The court further rejected the appellate majority’s position on Rosenberg-Wohl’s standing, saying that position relies on improperly perceiving the claim under the Unfair Competition Law. It remanded the complaint to the appellate court with instructions for a remand to superior court for further proceedings.
Rosenberg-Wohl is represented by Hershenson Rosenberg-Wohl and David M. Rosenberg-Wohl, of San Francisco.
State Farm is represented by Horvitz & Levy, of Burbank.
The Civil Justice Association of California filed a support brief on behalf of State Farm through Gutierrez, Preciado & House. The president and CEO of that organization, Kyla Christoffersen Powell, released the following statement:
“CJAC is deeply concerned by the California Supreme Court’s decision in Rosenberg-Wohl v. State Farm. This ruling disregards the clear legislative intent behind Insurance Code section 2071, which specified a one-year limitation period for claims of this nature. By favoring the four-year limitation in the Business and Professions Code instead, the court has overstepped its bounds and created uncertainty in the insurance market. This decision may have far-reaching consequences, potentially making it even more challenging for California homeowners to secure affordable insurance coverage. CJAC believes this ruling undermines the established principle of allowing insurers to rely on reasonable, shortened limitation periods in their policies — a practice that has served insurers and policyholders well.”