Only months after the U.S. Court of Appeals for the Ninth Circuit reinstated a complaint alleging that AARP, through its arrangement with United Healthcare Insurance Company for "Medigap" health insurance, was transacting insurance without a license in violation of the California Insurance Code, the U.S. District Court for the Central District of California refused to dismiss the case on the ground that it was barred by the "filed-rate" doctrine.

The Case

In 2011, Jerald Friedman purchased a type of health insurance policy known as a "Medigap" policy that was endorsed by AARP, Inc., with United Healthcare Insurance Company as the insurer.

Mr. Friedman subsequently filed a putative class action against AARP, AARP Services Inc., AARP Insurance Plan, UnitedHealth Group, Inc., and United Healthcare Insurance (collectively, the "Defendants"), alleging that AARP had improperly acted as an unlicensed insurance agent in actively soliciting insurance purchases for Medigap policies on behalf of UnitedHealth.

AARP was not a licensed insurance agent in California but, Mr. Friedman alleged, for every AARP/UnitedHealth Medigap policy sold, AARP received a payment of 4.95 percent of the amount paid by the insured individual. That payment, according to Mr. Friedman, was "an unlawful insurance commission" paid to AARP for its role in "selling" the Medigap policies.

Mr. Friedman alleged that although the Defendants had disclosed the existence of a payment in general to AARP, which they termed a "royalty" paid for the use of AARP's intellectual property, the Defendants had not disclosed that the cost of AARP Medigap insurance included a "percentage-based commission to AARP" that was "funded by consumers, in addition to the insurance premium paid to UnitedHealth for coverage."

As a result, Mr. Friedman contended, he paid more for his Medigap policy than he would have paid if he had known that 4.95 percent went to an illegal commission. Mr. Friedman further alleged that other insurance companies offered comparable plans at lower cost because the premiums for those plans did not include an unlawful 4.95 percent commission. He contended that this arrangement violated various provisions of the California Insurance Code and, therefore, that he had a basis to bring an Unfair Competition Law ("UCL") claim under California Business & Professions Code § 17200 et seq.

The district court dismissed the complaint, but the Ninth Circuit reversed and remanded.

The Defendants again moved to dismiss, arguing that Mr. Friedman's claims were barred by the California filed-rate doctrine, under which rates duly adopted by a regulatory agency are not subject to collateral attack in court.

The District Court's Decision

The district court denied the motion to dismiss.

In its decision, the district court found that even assuming that a state filed-rate doctrine existed in the insurance context, it did not bar Mr. Friedman's claims because his claims were more akin to challenges to the Defendants' alleged misrepresentations, rather than challenges to the approved rate or challenges to whether the rate was reasonable in light of the statutorily prescribed loss ratios for Medigap insurance.

The district court explained that Mr. Friedman's complaint alleged that the Defendants' "misrepresentations and omissions" regarding AARP Medigap constituted "an unfair, deceptive, and misleading practice" under the UCL. The district court pointed out that Mr. Friedman claimed that if the Defendants had disclosed the fact that the "member contribution amount" included an embedded commission payment to the AARP, he would have sought out another Medigap policy offering the same services for a lower rate.

Accordingly, the district court concluded that addressing Mr. Friedman's claims "would not usurp the authority of the DOI to determine the reasonableness of filed rates."

The case is Friedman v. AARP, Inc., No. 14-00034 DDP (PLA) (C.D. Cal. Jan. 16, 2018). Attorneys involved include: For Jerald Friedman, Individually and on Behalf of All Others Similarly Situated, Plaintiff: Christopher Collins, Frank J Janecek, Jr, LEAD ATTORNEYS, Robbins Geller Rudman and Dowd LLP, San Diego, CA USA; Michael F Ghozland, LEAD ATTORNEY, Ghozland Law Firm, Los Angeles, CA USA; Sean Kennedy Collins, LEAD ATTORNEY, Sean K. Collins, Attorney at Law, Boston, MA USA; Christopher C Gold, Dorothy P Antullis, Mark J Dearman, Stuart A Davidson, PRO HAC VICE, Robbins Geller Rudman and Dowd LLP, Boca Raton, FL USA. For Aarp Inc, Aarp Services Inc, Aarp Insurance Plan, Defendants: Brian Recor, LEAD ATTORNEY, Recor Rieber PA, Miami, FL USA; Alec W Farr, Heather S Goldman, PRO HAC VICE, Bryan Cave LLP, Washington, DC USA; Darci F Madden, PRO HAC VICE, Byran Cave LLP, St. Louis, MO USA; Gregory J Sachnik, PRO HAC VICE, Bryan Cave LLP, Dallas, TX USA; Jeffrey S Russell, PRO HAC VICE, Bryan Cave LLP, St Louis, MO USA; Sarah Burwick, Bryan Cave LLP, Santa Monica, CA USA. For Unitedhealthgroup Inc, Unitedhealthcare Insurance Company, Defendants: Brian David Boyle, LEAD ATTORNEY, O'Melveny and Myers LLP, Washington, DC USA; Christopher Brendan Craig, O'Melveny and Myers LLP, Los Angeles, CA USA; Meaghan VerGow, PRO HAC VICE, O'Melveny and Myers LLP, Washington, DC USA.