The California Court of Appeal recently affirmed dismissal of a class action suit alleging that an insurer had unlawfully charged service fees to policyholders who paid for their insurance in monthly installments.  A copy of the opinion, rendered in the matter styled In re Insurance Installment Fee Cases, No. D057138 (Calif. App., 4th Dist., Div. 1), is available here.

The service fee, which ranged from $1 to $3 per month, was intended to cover the insurer’s billing and collection costs.  The policyholders alleged, however, that the service fee was already built into the price that the insurer charged for its policies, with the result being that the class members were charged twice for billing and collection costs.  The policyholders further alleged that the monthly service fees were not specified on the subject policies’ declarations pages, as was allegedly required for monies that were properly characterized as an additional premium rather than a service fee.

The trial and appellate courts were unmoved by the policyholders’ allegations.  The appellate panel found that the service fees were not illegal additional premiums, but instead simply costs charged for the convenience of paying monthly.  The court further observed that the subject policies did not provide policyholders with the option of payment premiums in installments, but rather required payment in full at the beginning of the policy periods; in light of this determination, the insurer did not breach the insurance contracts by granting policyholders the option of paying in monthly installments, subject to their agreement to pay the service fees.

Of note, the insurer itself also partially appealed from the otherwise favorable trial court ruling because it believed that the trial court erred in ordering it to bear the significant costs “of providing notice to putative class-member policyholders that plaintiffs sought discovery of their contact information and service charge payment information.”  The appellate panel agreed with the insurer, holding that these costs are the plaintiffs’ responsibility.  The cost issue was remanded for a determination as to the reasonableness of the amount that the insurer claimed to have incurred.