Plaintiffs Joseph Davis and Shavonda Early brought a class action lawsuit against defendant CSAA Insurance Exchange (CSAA), an automobile insurance company, claiming that automobile insurance rates became excessive during the COVID-19 pandemic when there was less driving and fewer traffic accidents. Plaintiffs alleged that, in 2020 and 2021, CSAA was the fifth largest automobile insurance company in the state and insured over one million California drivers.
The complaint alleged two causes of action under California’s Unfair Competition Law (Bus. & Prof. Code § 17200 et seq.) (UCL) and a cause of action for unjust enrichment. The complaint alleged that, by not unilaterally refunding premiums, CSAA violated Insurance Code § 1861.05, subdivision (a) (section 1861.05(a)).2 This section, titled “Approval of Insurance Rates,” provides that “[n]o rate shall be approved or remain in effect which is excessive, inadequate, unfairly discriminatory or otherwise in violation of this chapter.”
CSAA filed a demurrer, which the trial court sustained with leave to amend. The court interpreted section 1861.05(a)’s language that no excessive rate shall “remain in effect” as applying to the insurance commissioner’s system of approving rates, and meant to “ensure that a previously approved rate does not ‘remain in effect’ if the circumstances have changed.” The court found that the statute allowed for prospective rate reductions when rates become excessive, but not retroactive modifications of previously approved rates.
In their first amended and consolidated complaint, plaintiffs reasserted the UCL claims, and reiterated that CSAA received an “unprecedented windfall” from the COVID-19 pandemic by continuing to charge preapproved rates as driving and traffic accidents decreased dramatically. At the same time, plaintiffs acknowledged that some refunds were given. They recognized that, in April 2020, the insurance commissioner issued a bulletin directing insurers to “make an initial premium” refund for the prior two months. Although CSAA gave a 20 percent refund to policyholders, plaintiffs alleged that this amount was inadequate and the approved rates for this period remained excessive. Plaintiffs also recognized that the commissioner sent additional bulletins extending the directive for refunds. Although CSAA subsequently gave a 10 percent refund for May and June 2020, plaintiffs alleged that the rates were still excessive. According to plaintiffs, in 2021 the commissioner described the premium returns by California insurance companies as “insufficient.”
Plaintiffs asserted that CSAA’s failure to provide sufficient refunds violated section 1861.05(a) and was unfair and unlawful. They sought restitution for the “unearned premiums acquired from [named plaintiffs] and the Class along with CSAA’s investment returns on those unearned premiums.” CSAA again demurred, and this time the trial court sustained the demurrer without leave to amend.
The Court of Appeal affirmed in the published case of Davis v. CSAA Ins. Exchange – A169729 (September 2025).
The central question in this appeal is whether Insurance Code § 1861.05(a) imposes an independent obligation on insurers to refund premiums that were collected under approved rates when those rates later become purportedly excessive.
Section 1861.05(a) was enacted through the passage of Proposition 103 in 1988. Its stated purpose was “to protect consumers from arbitrary insurance rates and practices, to encourage a competitive insurance marketplace, to provide for an accountable Insurance Commissioner, and to ensure that insurance is fair, available, and affordable for all Californians.” Proposition 103 was one of five competing insurance initiatives on the ballot, but the only one that passed.
Proposition 103 required automobile insurance rates to be determined by applying three factors – the insured’s driving safety record, the annual number of miles driven, and the years of driving experience – and it allowed the insurance commissioner to adopt additional factors. It prohibited rates that were “unfairly discriminatory” and specified that the business of insurance was subject to California’s unfair business practice laws. Proposition 103 also designated the insurance commissioner to be an elected official, no longer appointed by the governor.
In arguing that the section imposes an independent obligation on insurers to issue refunds when approved rates become excessive, plaintiffs focus on the language in the first sentence that no “excessive” rate shall “remain in effect.”
Plaintiffs contend that the term “approved” and the phrase “remain in effect” in section 1861.05(a) are two distinct directives, and the latter phrase would be surplusage if the statute were interpreted to impose no obligation on insurers to unilaterally refund previously approved rates when circumstances render them excessive.
After reviewing the parties arguments, and citations supporting these arguments, the Court of Appeal wrote that “we conclude that section 1861.05(a) does not impose an independent obligation on insurers to retroactively refund premiums, based on rates that were approved by the insurance commissioner, when those rates later become purportedly excessive.”
The judgment of the trial court was affirmed.