## Facts

- After major California wildfires, regulators found widespread underinsurance: many homeowners’ coverage fell far short of rebuilding costs despite expectations of full replacement coverage.
- The Insurance Commissioner concluded that inaccurate or incomplete replacement-cost estimates prepared by insurers or agents contributed to consumers’ misunderstanding of coverage.
- The Unfair Insurance Practices Act (UIPA), Ins. Code § 790 et seq., prohibits specified unfair or deceptive practices, including misrepresentations about policy benefits and terms.
- Insurance Code § 790.10 directs the Commissioner to promulgate reasonable rules and regulations necessary to administer the UIPA.
- In 2011, the Commissioner adopted a regulation (Cal. Code Regs., tit. 10, § 2695.183) governing the content and methodology of homeowners’ replacement-cost estimates.
- The regulation did not require insurers to provide replacement-cost estimates; it set standards that applied when an insurer chose to provide one.
- The regulation required estimates to account for specified cost components (including labor and materials), consider relevant dwelling and location features, and disclose key assumptions and the methodology used.
- Insurer trade associations challenged the regulation, arguing it treated noncompliant estimates as “misleading” and thereby created new unfair practices beyond those listed by the Legislature.
- The trial court and Court of Appeal invalidated the regulation as exceeding the Commissioner’s authority; the California Supreme Court granted review.

## Issues

1. Whether Insurance Code § 790.10 authorizes the Insurance Commissioner to regulate replacement-cost estimates by prescribing standards designed to prevent estimates from being misleading under the UIPA.
2. Whether treating certain incomplete or non-disclosed replacement-cost estimates as “misleading” impermissibly creates new categories of unfair practices not specified in Insurance Code § 790.03.

## Decision

- The California Supreme Court reversed the Court of Appeal and upheld the regulation.
- The Court held that § 790.10 authorizes reasonable regulations necessary to administer the UIPA, including regulations that give concrete meaning to statutory prohibitions on misrepresentation in a recurring context.
- The Court concluded the regulation implemented existing statutory limits on misleading statements about policy benefits and terms rather than forbidding conduct the statute does not reach.
- The Court accepted the Commissioner’s interpretation as reasonable given the statutory text, consumer-protection purpose, and the factual record concerning underinsurance following wildfires.

## Legal Principles

- Insurance Code § 790.10 grants the Insurance Commissioner rulemaking power to adopt reasonable regulations necessary to administer and enforce the UIPA.
- An agency may issue detailed rules that specify how broad statutory terms (such as “misrepresentation” or “deceptive” practices) apply to particular conduct, so long as the rules remain anchored in statutory prohibitions.
- The Commissioner may not create wholly new categories of prohibited conduct unrelated to the UIPA’s listed unfair practices, but may identify concrete forms of statutory misrepresentation.
- Replacement-cost estimates that omit essential cost components or fail to disclose key assumptions may qualify as misleading statements about policy benefits or terms within the UIPA framework.

## Conclusion

The California Supreme Court held that the Insurance Commissioner acted within UIPA § 790.10 authority by regulating the content and disclosure standards for replacement-cost estimates when insurers choose to provide them, because the regulation reasonably implements existing statutory prohibitions on misleading insurance representations rather than creating new unfair practices.


Ass'n of Cal. Ins. Cos. v. Jones, 2 Cal. 5th 376 (Cal. 2017)