Class Action

Delayed discovery rule applies to UCL "fraudulent" prong claims: Broberg v. The Guardian Life Ins. Co.

By Kimberly A. Kralowec

In Broberg v. The Guardian Life Ins. Co., ___ Cal.App.4th ___ (Mar. 2, 2009), the Court of Appeal (Second Appellate District, Division Seven) held that the delayed discovery rule applies to UCL claims, or at least those based on violation of the "fraudulent" prong:

A claim for unfair competition under Business and Professions Code section 17200 must be brought within four years of its accrual. (Bus. & Prof. Code, § 17208; Grisham v. Philip Morris, U.S.A., Inc. (2007) 40 Cal.4th 623, 639.) The Supreme Court has not yet decided, and the Courts of Appeal are in disagreement, whether the so-called delayed discovery rule applies to claims for unfair competition. (See Grisham, at p. 634, fn. 7; compare Snapp & Associates Ins. Services, Inc. v. Robertson (2002) 96 Cal.App.4th 884, 891 [delayed discovery rule does not apply] with Massachusetts Mutual Life Ins. Co. v. Superior Court (2002) 97 Cal.App.4th 1282, 1295 [delayed discovery rule ?probably? applies to unfair competition claims based on alleged nondisclosure of material information regarding vanishing premium policies].) At least in the context of unfair competition claims based on the defendant?s allegedly deceptive marketing materials and sales practices, which is simply a different legal theory for challenging fraudulent conduct and where the harm from the unfair conduct will not reasonably be discovered until a future date, we believe the better view is that the time to file a section 17200 cause of action starts to run only when a reasonable person would have discovered the factual basis for a claim. (See April Enterprises, Inc. v. KTTV (1983) 147 Cal.App.3d 805, 828 [??[the] nature of the right sued on, not the form of the action . . . determines the applicability of the statute of limitations??]; id. at p. 832 [delayed discovery rule may be applied to breaches of contract that can be, and are, committed in secret and where the harm flowing from those breaches will not be reasonably discoverable until a future time].)

Slip op. at 7-8 (emphasis added).  Coincidentally, as mentioned in Harvey Rosenfield's report on the oral argument in Fairbanks, the opinion also passes on whether insurance is a "good" or a "service" within the meaning of the CLRA (and holds, based on pre-Fairbanks authority, that it is not). 

Full post as published by The UCL Practitioner on March 09, 2009 (boomark / email).