Chang v. Farmers Insurance Company CA2/7

Filed 6/16/23 Chang v. Farmers Insurance Company CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

WILD CHANG et al., B321411

Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. BC650876)
v.

FARMERS INSURANCE
COMPANY, INC. et al.,

Defendants and Respondents.

APPEAL from a judgment of the Superior Court of
Los Angeles County. Teresa A. Beaudet, Judge. Affirmed.
Wild Chang, in pro. per., Kenneth Lo, in pro. per.,
Wild Chang, Jr., in pro. per., for Plaintiffs and Appellants.
Woolls Peer Dollinger & Scher, Gregory B. Scher and
H. Douglas Galt for Defendant and Respondent Farmers
Insurance Company, Inc.
_______________________
 INTRODUCTION

Plaintiffs Wild Chang and Kenneth Lo were insured under
a policy issued by defendant Fire Insurance Exchange. Plaintiffs
submitted a claim under the policy, which plaintiffs allege was
handled in bad faith. Plaintiffs Chang, Lo, and Wild Chang, Jr.
(Chang Jr.), sued Farmers Insurance Company, Inc. (Farmers),
Fire Insurance Exchange, and agent Stacy Chern for breach of
contract, breach of the implied covenant of good faith and fair
dealing, fraud, and other related causes of action. The trial court
sustained Farmers’ demurrer to the third amended complaint
without leave to amend and entered a judgment of dismissal in
Farmers’ favor. We affirm.

FACTUAL AND PROCEDURAL HISTORY

These consolidated actions arise out of an insurance claim
that plaintiffs Chang and Lo submitted for losses caused by a
house fire on December 16, 2014. On February 16, 2017, Chang
and Lo filed their original complaint against Farmers, Fire
Insurance Exchange, Stacy Chern Insurance Agency, and Stacy
Chern.
On August 21, 2017, Chang and Lo filed a second amended
complaint that substituted Farmers Insurance Group of
Companies for Farmers. On January 26, 2018, plaintiffs
voluntarily dismissed the action with prejudice as to Farmers
Insurance Group of Companies.
On January 28, 2021, plaintiffs Chang, Lo, and Chang Jr.
filed a second action against Farmers, Fire Insurance Exchange,
Stacy Chern, and defense counsel Woolls Peer Dollinger & Scher

2
(Woolls Peer). The actions were consolidated and the operative
third amended complaint was deemed filed on July 22, 2021.
In the third amended complaint, plaintiffs allege Farmers
and Fire Insurance Exchange, acting in bad faith, made a grossly
deficient settlement offer for the claim plaintiffs submitted for
their fire loss. Plaintiffs also allege Farmers, Fire Insurance
Exchange, and Chern engaged in a fraudulent scheme to “convert
the ‘insurance’” plaintiffs allegedly purchased from Farmers “into
a mere ‘self-owned membership’ in an unincorporated association,
i.e., [Fire Insurance Exchange] . . . in order to insulate [Farmers]
and its agents from all of the legal liabilities arising from the
deceptive and non-conforming insurance sold to [p]laintiffs.”
The declarations page attached to the third amended
complaint shows the policy was issued by Fire Insurance
Exchange. Plaintiffs allege they never agreed to subscribe to Fire
Insurance Exchange or to obtain coverage from that entity.
Among other things, they never signed a subscription agreement.
Instead, they understood they would be insured by Farmers.
Plaintiffs attach a document entitled “Evidence of Property
Insurance” that identified the “company” as “Farmers Insurance.”
Under the “coverage information” section, plaintiffs are directed
to “remit payment to[] Farmers Insurance.” Plaintiffs allege that
this is a legally binding contract and that they relied on the fact
Farmers Insurance is identified as the insurer in paying the
premiums. Plaintiffs attach numerous documents bearing the
logo of Farmers Insurance Group of Companies or using the term
“Farmers” in connection with the insurance purchased by
plaintiffs.
Plaintiffs allege that Farmers acted as the “principal/agent”
of other defendants, including Fire Insurance Exchange, and that

3
Fire Insurance Exchange “act[ed] as a ‘veil’” so that Farmers
could limit its liability. The coverage plaintiffs purchased from
Farmers was provided by Fire Insurance Exchange to “insulate
[Farmers] and its agents from all the legal liabilities arising from
the deceptive and non-conforming insurance sold to [p]laintiffs.”
Plaintiffs further allege Fire Insurance Exchange is “only
responsible for the administration of ‘membership’ affairs for the
members . . . [b]ut, in fact, [Farmers] is the real entity that has
financial gains through staffing, managing and controlling the
affairs of [Fire Insurance Exchange].” Plaintiffs also allege Stacy
Chern acted as an agent of Farmers, not Fire Insurance
Exchange.
Plaintiffs allege that, after the fire, defendants failed to
properly investigate the damage caused by the fire, failed to
provide temporary housing as required by the policy, and failed to
provide adequate compensation for the claim. Plaintiffs also
allege defendants threatened to terminate the policy at a time
they knew plaintiffs could not obtain coverage elsewhere.
Defendants took more than a year to complete their investigation
and finally issued a check for the grossly deficient amount of
$19,925.91, even though estimates for repairs exceeded $150,000.
Plaintiffs allege the offer to pay $19,925.91 was made in bad
faith. Plaintiffs rejected the offer, deciding instead to sue.
Plaintiffs also allege that stress from the experience caused
Chang to suffer a stroke, the aftermath of which his minor son,
Chang Jr., witnessed.
Plaintiffs purport to assert causes of action for fraud,
breach of the covenant of good faith and fair dealing, breach of
contract, unfair business practices, professional negligence, and

4
intentional and negligent infliction of emotional distress against
all defendants.
Farmers (along with other defendants) demurred to the
third amended complaint.1 Farmers argued the claims for breach
of contract, bad faith, and unfair competition failed as against
Farmers because Farmers was not a party to the insurance
contract; the claim for fraud failed because plaintiffs did not
allege the elements of fraud with sufficient particularity and did
not allege causation or damages; and the claims for negligence
and negligent infliction of emotional distress failed because
Farmers did not owe plaintiffs any duty and Chang Jr. could not
recover as a bystander. Farmers requested that the court take
judicial notice of, among other things, plaintiffs’ motion for leave
to file a third amended complaint and exhibits thereto; the
company profile for Fire Insurance Exchange from the California
Department of Insurance website; and the license status
information for agent Stacy Chern from that website. The trial
court granted the request for judicial notice.
In opposition to the demurrer as to Farmers, plaintiffs
argued the claims for breach of contract, bad faith, professional
negligence, intentional infliction of emotional distress, and unfair
competition were sufficiently alleged because plaintiffs
contracted with Farmers, as shown by the evidence of property
insurance and other documents, and all defendants acted in
concert with each other in bad faith to deprive plaintiffs of the
benefits of the contract; the claim for fraud was sufficiently
alleged because plaintiffs were told they were buying an

1 Fire Insurance Exchange did not demur to the breach of
contract or the breach of the covenant of good faith and fair
dealing claims.

5
insurance policy from Farmers but received a subscription
agreement from Fire Insurance Exchange; and the claim for
negligent infliction of emotional distress was sufficiently alleged
because Chang Jr. suffered emotional distress when he witnessed
the aftermath of his father’s stroke, which had been caused by
Farmers’ bad faith. Plaintiffs requested that the court take
judicial notice of various court filings, including declarations that
Fire Insurance Exchange had filed in support of an anti-SLAPP
motion, and other documents purportedly related to the purchase
of insurance. The court took judicial notice of the fact the
declarations and certain other documents had been filed but
declined to take judicial notice of the truth of the matters
asserted therein. The court otherwise denied the request.
The court sustained Farmers’ demurrer in its entirety and
entered a judgment of dismissal as to Farmers. The court
concluded the fraud claim failed because it had not been alleged
with sufficient particularity; the claims for breach of contract,
bad faith, intentional infliction of emotional distress, and unfair
competition failed because Farmers was not a party to insurance
contract; the professional negligence claim failed because
Farmers owed no duty to plaintiffs; and the negligent infliction of
emotional distress claim failed because Chang Jr. had not alleged
the elements of a claim based on a bystander theory. The court
denied leave to amend.
Farmers timely appealed.

6
 DISCUSSION

A. Standard of Review
A demurrer tests the legal sufficiency of the factual
allegations in a complaint. “In reviewing an order sustaining a
demurrer, we examine the operative complaint de novo to
determine whether it alleges facts sufficient to state a cause of
action under any legal theory. [Citation.] Where the demurrer
was sustained without leave to amend, we consider whether the
plaintiff could cure the defect by an amendment.” (T.H. v.
Novartis Pharmaceuticals Corp. (2017) 4 Cal.5th 145, 162;
accord, Centinela Freeman Emergency Medical Associates v.
Health Net of California, Inc. (2016) 1 Cal.5th 994, 1010.)
We assume the truth of the properly pleaded factual
allegations and matters of which judicial notice has been taken.
(Lee v. Hanley (2015) 61 Cal.4th 1225, 1230; Evans v. City of
Berkeley (2006) 38 Cal.4th 1, 20; Schifando v. City of Los Angeles
(2003) 31 Cal.4th 1074, 1081 (Schifando); see Code Civ. Proc.,
§ 430.30, subd. (a).) We liberally construe the pleading with a
view to substantial justice between the parties. (Code Civ. Proc.,
§ 452; Schifando, at p. 1081.) “However, the assumption of truth
does not apply to contentions, deductions, or conclusions of law
and fact. [Citations.] Furthermore, any allegations that are
contrary to the law or to a fact of which judicial notice may be
taken will be treated as a nullity.” (C.R. v. Tenet Healthcare
Corp. (2009) 169 Cal.App.4th 1094, 1102.) “‘While the
“allegations [of a complaint] must be accepted as true for
purposes of demurrer,” the “facts appearing in exhibits attached
to the complaint will also be accepted as true and, if contrary to
the allegations in the pleading, will be given precedence.”’”

7
(Moran v. Prime Healthcare Management, Inc. (2016)
3 Cal.App.5th 1131, 1145-1146; accord, Ivanoff v. Bank of
America, N.A. (2017) 9 Cal.App.5th 719, 726.)
We review the trial court’s decision to deny leave to amend
for an abuse of discretion. A trial court abuses its discretion by
sustaining a demurrer without leave to amend where “‘there is a
reasonable possibility that the defect can be cured by
amendment.’” (Loeffler v. Target Corp. (2014) 58 Cal.4th 1081,
1100; accord, City of Dinuba v. County of Tulare (2007) 41 Cal.4th
859, 865.) “‘The plaintiff has the burden of proving that [an]
amendment would cure the legal defect, and may [even] meet this
burden [for the first time] on appeal.’” (Sierra Palms
Homeowners Assn. v. Metro Gold Line Foothill Extension
Construction Authority (2018) 19 Cal.App.5th 1127, 1132; accord,
Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 971.)

B. The Trial Court Did Not Err in Sustaining Farmers’
Demurrers
1. Breach of contract and breach of the implied covenant
of good faith and fair dealing
To establish a cause of action for breach of contract, the
plaintiff must plead and prove (1) the existence of a contract,
(2) the plaintiff's performance or excuse for nonperformance,
(3) the defendant’s breach, and (4) resulting damages to the
plaintiff. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th
811, 821; Maxwell v. Dolezal (2014) 231 Cal.App.4th 93, 97-98.)
“California law recognizes in every contract, including insurance
policies, an implied covenant of good faith and fair dealing.
[Citations.] In the insurance context the implied covenant
requires the insurer to refrain from injuring its insured’s right to

8
receive the benefits of the insurance agreement.” (Brehm v. 21st
Century Ins. Co. (2008) 166 Cal.App.4th 1225, 1235.)
The trial court sustained Farmers’ demurrers to the breach
of contract and breach of implied covenant of good faith and fair
dealing causes of action on the ground that Farmers was not a
party to the insurance contract. The declaration page attached
as an exhibit to the third amended complaint shows the coverage
was provided by defendant Fire Insurance Exchange.
Fire Insurance Exchange is a reciprocal insurer, also
known as an interinsurance exchange, governed by Insurance
Code section 1280 et seq. (Tran v. Farmers Group, Inc. (2002)
104 Cal.App.4th 1202, 1210 (Tran).) “An interinsurance
exchange is an unincorporated business organization made up of
subscribers and managed by an attorney-in-fact. The exchange is
the insurer and the subscribers are the insureds. The subscribers
execute powers of attorney appointing the attorney-in-fact to act
on their behalf. The attorney-in-fact executes the exchange’s
insurance contracts.” (Ibid.; see Ins. Code, §§ 1303, 1305; Lee v.
Interinsurance Exchange (1996) 50 Cal.App.4th 694, 702-704
[describing history of reciprocal insurance and structure of
interinsurance exchanges]; Delos v. Farmers Group, Inc. (1979)
93 Cal.App.3d 642, 651 (Delos) [discussing managerial role of
attorney-in-fact].) “The written instrument, in which [the]
contract of insurance is set forth, is the policy.” (Ins. Code,
§ 380.)
Generally, causes of action for breach of contract and for
breach of the implied covenant of good faith and fair dealing will
lie only against the insurer. (Gruenberg v. Aetna Insurance Co.
(1973) 9 Cal.3d 566, 576.) However, under certain circumstances,
the attorney-in-fact for a reciprocal insurer may be held liable for

9
breach of the covenant of good faith and fair dealing. (Tran,
supra, 104 Cal.App.4th at pp. 1218-1219; Delos, supra,
93 Cal.App.3d at p. 652.)
Courts have come to varying conclusions about when a
reciprocal insurer’s attorney-in-fact can be held liable for bad
faith. In Delos, supra, 93 Cal.App.3d at p. 652, the court held
that the attorney-in-fact of a reciprocal insurer could be held
liable for bad faith regardless whether the attorney-in-fact was
an alter ego of the exchange, concluding: “If we were to . . .
adhere to the general rule that ‘bad faith’ liability may be
imposed only against a party to an insurance contract, we would
not only permit the insurer to insulate itself from liability by the
simple technique of forming a management company, but we
would also deprive a plaintiff from redress against the party
primarily responsible for damages.” (Ibid.)
By contrast, in Tran, supra, 104 Cal.App.4th at pp. 1218-
1219, the court concluded “the attorney-in-fact of a reciprocal
insurer is not liable for breach of the covenant of good faith and
fair dealing merely because of its status as the insurer’s
managerial agent.” The court held the attorney-in-fact could be
held liable only where the plaintiff proves the attorney-in-fact is
the alter ego of the reciprocal insurer or where the “single
enterprise” doctrine applies. (Id. at p. 1218 [declining to follow
Delos, supra, 93 Cal.App.3d at p. 652].)
“Two conditions are generally required for application of
the doctrine to two related corporations: (1) such a unity of
interest and ownership that the separate corporate personalities
are merged, so that one corporation is a mere adjunct of another
or the two companies form a single enterprise; and (2) an
inequitable result if the acts in question are treated as those of

10
one corporation alone.” (Tran, supra, 104 Cal.App.4th at
p. 1219.)
In Tran, the plaintiff sued the attorneys-in-fact for two
reciprocal insurance exchanges for bad faith. The trial court
granted summary judgment in favor of the attorneys-in-fact on
the bad faith claims because they were not parties to the
insurance contracts. The Court of Appeal reversed, concluding
the plaintiff had raised a triable issue on the two alter ego
elements quoted above.2
As to the first element, the court stated the defendants had
made “no claim that the unity of interest requirement is not met
in this case.”3 (Tran, supra, 104 Cal.App.4th at p. 1219.) As to
the second, the court rejected the defendants’ contention that “no
inequity would flow from restricting Tran to pursuing her claims
against the exchanges . . . [because] there [was] no showing the
exchanges have inadequate assets to meet any judgment [the
insured] might recover, including punitive damages.” (Ibid.) The
court concluded the mere fact the exchange was adequately
capitalized was insufficient to negate the inequity element of an

2 One of the defendants in Tran and Delos was Farmers
Group, Inc. The defendant here is Farmers Insurance Company,
Inc., a different entity.
3 The court stated: “An interinsurance exchange is ‘owned’
by the subscribers, not by the attorney-in-fact. However, given
that the subscribers are required to appoint the attorney-in-fact
as managerial agent, the ‘ownership’ element of the alter ego
doctrine is not applicable in this context.” (Tran, supra,
104 Cal.App.4th at p. 1219, fn. 7; see also Troyk v. Farmers
Group, Inc. (2009) 171 Cal.App.4th 1305, 1341-43 [attorney-in-
fact can be held liable as an alter ego even though there is no
shared ownership].)

11
alter ego claim in this context, holding: “When a reciprocal
insurer functions as a mere instrumentality of an attorney-in-fact
in the conduct of a unified insurance business, it would be
inequitable to permit the attorney-in-fact to escape liability for
breach of the covenant of good faith and fair dealing.”4 (Id. at
p. 1220.)
We need not decide whether to follow Delos or Tran
because exhibits attached to the third amended complaint show
that Farmers is not Fire Insurance Exchange’s attorney-in-fact.
Although plaintiffs allege “[Farmers] is the real entity that has
financial gains through staffing, managing and controlling the
affairs of [Fire Insurance Exchange],” exhibits attached to the
third amended complaint show that Fire Insurance Exchange’s
attorney-in-fact is Fire Underwriters Association. “‘While the
“allegations [of a complaint] must be accepted as true for
purposes of demurrer,” the “facts appearing in exhibits attached
to the complaint will also be accepted as true and, if contrary to
the allegations in the pleading, will be given precedence.”’”
(Moran v. Prime Healthcare Management, Inc., supra,
3 Cal.App.5th at pp. 1145-1146.) We accept the representations
in the exhibits that Fire Underwriters Association is the
attorney-in-fact. Plaintiffs have not alleged any relationship
between Farmers and Fire Underwriters Association to support a

4 In concluding a triable issue had been raised, the court
stated: “[Defendants] were managerial agents without whom the
exchanges could not transact their business. Farmers Group,
apparently acting through Truck Underwriters Association in
some instances, made the critical decisions regarding Tran’s
policy for her and for the exchanges, manipulating the exchanges
as parts of a single enterprise.” (Tran, supra, 104 Cal.App.4th at
p. 1220.)

12
conclusion that Farmers should be treated as Fire Insurance
Exchange’s attorney-in-fact.
Nor have plaintiffs sufficiently alleged that Farmers could
otherwise be held liable as an alter ego of Fire Insurance
Exchange on some basis other than as an attorney-in-fact.
Plaintiffs have not sufficiently alleged a unity of interest between
Farmers and Fire Insurance Exchange and have not sufficiently
alleged facts showing the separate existence of the entities would
sanction a fraud or promote injustice. The bare allegation that
Farmers issued the policy through Fire Insurance Exchange “to
insulate [Farmers] and its agents from all of the legal liabilities”
is not sufficient to state a claim based on alter ego theory.
Plaintiffs argue they have adequately alleged they had a
contract with Farmers because Farmers’ agent provided them
with a document entitled “Evidence of Property Insurance” that
lists “Farmers Insurance” as the “company” and directs plaintiffs
to remit their premium payment to “Farmers Insurance.”
Plaintiffs argue the document is a binder as defined in Insurance
Code section 382.5.5 (See Chicago Title Ins. Co. v. AMZ Ins.
Services, Inc. (2010) 188 Cal.App.4th 401, 423 [document entitled
“Evidence of Property Insurance” was a binder under
section 382.5].)
A binder “temporarily obligates the insurer to provide”
insurance coverage described in the binder “pending issuance of
the insurance policy.” (Ins. Code, § 382.5, subd. (a); accord,
Chicago Title Ins. Co. v. AMZ Ins. Services, Inc., supra,

5 The evidence of property insurance does not qualify as a
certificate of insurance under Insurance Code section 384,
subdivision (a). The document does not contain the language
required in that section to constitute a certificate of insurance.

13
188 Cal.App.4th at p. 423.) “[A] binder shall be valid for [a]
period . . . not exceeding 90 days from the date of execution of the
binder . . . No binder shall remain valid on or after the date the
insurance policy is issued with respect to which the binder was
given.” (Ins. Code, § 382.5, subd. (c).)
Here, even if we were to assume the document was a
binder, it would not provide coverage for the loss at issue here
because the loss occurred more than 90 days after it was issued.
The document was issued on April 29, 2014, with an effective
date of May 5, 2014. Assuming it was a binder, it was valid for a
maximum period of 90 days, until August 3, 2014, at the latest.
(See Ins. Code, § 382.5, subd. (c).) The fire occurred on
December 16, 2014.
Further, the insurance contract issued by Fire Insurance
Exchange superseded the purported binder. Both the binder and
declarations page attached to the third amended complaint list
the same policy number, so it is clear both documents concern the
same contract. The declarations page states: “This Declarations
page is part of your policy. It supersedes and controls anything
to the contrary.” The declarations page makes clear the insurer
is Fire Insurance Exchange and not “Farmers Insurance.”
Plaintiffs have no claim against Farmers for breach of contract or
breach of the covenant of fair dealing based on the fact that
“Farmers Insurance” is the “company” identified in the purported
binder. 6

6 Farmers argues the policy was already in place at the time
the document entitled “Evidence of Property Insurance” was
issued, and therefore the document could not be a binder. In
support of the argument, Farmers identified a declaration page
attached to plaintiffs’ motion for leave to amend reflecting a

14
 In sum, the trial court properly sustained Farmers’
demurrers to causes of action for breach of contract and breach of
the covenant of good faith and fair dealing. Plaintiffs have not
identified any additional facts they would allege against Farmers
that would cure the deficiencies in the claims. The trial court
thus did not abuse its discretion in denying leave to amend.

2. Fraud
To state a cause of action for fraud, a plaintiff must plead
the following elements: (1) misrepresentation, (2) knowledge of
falsity, (3) intent to defraud, (4) justifiable reliance, and
(5) resulting damage. (Charnay v. Cobert (2006) 145 Cal.App.4th
170, 184.) “[F]raud must be pled specifically; general and
conclusory allegations do not suffice.” (Lazar v. Superior Court
(1996) 12 Cal.4th 631, 645.)
Plaintiffs allege Farmers engaged in a fraudulent scheme
to “convert the ‘insurance’ plaintiffs allegedly purchased from
Farmers into a mere ‘self-owned membership’ in an
unincorporated association, i.e., [Fire Insurance Exchange] . . . in
order to insulate [Farmers] and its agents from all of the legal
liabilities arising from the deceptive and non-conforming
insurance sold to [p]laintiffs.” Although the allegations are not
entirely clear, plaintiffs appear to contend Farmers and its
purported agent Stacy Chern represented plaintiffs would be
insured by Farmers, but instead of an insurance policy issued by

policy period from January 30, 2014 to January 30, 2015. The
document contains the notation, “Transaction type: Offer of
renewal.” The court cannot determine from the face of the
document whether the declaration page reflects a consummated
contract or an offer.

15
Farmers they received a subscription agreement with Fire
Insurance Exchange.
This claim fails because, among other things, plaintiffs
have not alleged the purported misrepresentations caused any
damage. The trial court took judicial notice of documents from
the website of the Department of Insurance showing that Fire
Insurance Exchange is duly authorized by the department to
issue insurance contracts to California insureds. The exhibits
attached to the third amended complaint show that the coverage
in the insurance contract issued by Fire Insurance Exchange
matched the coverage set forth in the purported binder.
Plaintiffs do not allege that Fire Insurance Exchange would not
be able to satisfy any judgment or that plaintiffs were otherwise
damaged by being insured by Fire Insurance Exchange as
opposed to any other entity affiliated with the Farmers Insurance
Group of Companies. Plaintiffs have not identified any
additional facts they would allege to show the purported
misrepresentations caused damage if leave to amend were
granted.
Accordingly, the trial court did not err in sustaining
Farmer’s demurrer to this cause of action and did not abuse its
discretion in denying leave to amend.

3. Unfair business practices
The trial court also sustained the demurrer to plaintiffs’
claims under the unfair competition law (UCL) (Bus. & Prof.
Code, § 17200 et seq.) Plaintiffs mention this claim only in
passing in their appellate briefs and provide no argument or
authority for why the trial court erred in sustaining the demurrer
to this cause of action. Plaintiffs have thus forfeited any

16
argument as to this claim. (Dinslage v. City and County of San
Francisco (2016) 5 Cal.App.5th 368, 377, fn. 3.) In any event, the
trial court correctly ruled that plaintiffs have not sufficiently
alleged a UCL claim against Farmers.
Unfair competition under the UCL means “any unlawful,
unfair, or fraudulent business act or practice and unfair,
deceptive, untrue, or misleading advertising.” “Written in the
disjunctive, Business and Professions Code section 17200
establishes ‘“three varieties of unfair competition—acts or
practices which are unlawful, or unfair, or fraudulent.”’”
(Ivanoff v. Bank of America, N.A., supra, 9 Cal.App.5th at p. 730,
quoting Cel-Tech Communications, Inc. v. Los Angeles Cellular
Telephone Co. (1999) 20 Cal.4th 163, 180; accord, Kasky v. Nike,
Inc. (2002) 27 Cal.4th 939, 949.) A plaintiff making a claim
under the UCL must plead that the defendant engaged in a
business practice that was either “unlawful (i.e., is forbidden by
law), unfair (i.e., harm to victim outweighs any benefit) or
fraudulent (i.e., is likely to deceive members of the public).”
(Albillo v. Intermodal Container Services, Inc. (2003)
114 Cal.App.4th 190, 206.)
A UCL claim against an insurer may be based on
allegations of bad faith claims handling practices. (Zhang v.
Superior Court (2013) 57 Cal.4th 364, 383.) A plaintiff may also
assert a UCL claim against the attorney-in-fact of a reciprocal
insurance exchange when the unfair, unlawful, or fraudulent acts
fell within the scope of the power of attorney. (Troyk v. Farmers
Group, Inc. (2009) 171 Cal.App.4th 1305, 1337 [“because
[Farmers Group, Inc.], as [Farmers Insurance Exchange’s]
managing agent, was directly involved in the drafting and
execution of the class members’ policies, it must at least share

17
with [Farmers Insurance Exchange] responsibility for the UCL
unlawful business practice resulting from [Farmer Insurance
Exchange’s] violation” of a specified statute]; R&B Auto Center,
Inc. v. Farmers Group, Inc. (2006) 140 Cal.App.4th 327 [a
reciprocal insurance exchange’s attorney-in-fact can be held
liable for unfair, unlawful or fraudulent acts under the UCL or
for breach of fiduciary duty arising out of claims handling if the
attorney-in-fact assumed responsibility for claims handling in the
power of attorney].)
Plaintiffs allege that defendants, including Farmers,
violated the UCL by (1) engaging in the fraudulent bait-and-
switch and issuing a policy underwritten by Fire Insurance
Exchange instead of Farmers Insurance; and (2) failing to adjust
their claim promptly and in good faith. As to the UCL claim
based on the alleged bait and switch, plaintiffs have not alleged
they “suffered injury in fact” or “lost money or property as a
result of the [alleged] unfair competition.” (See Bus. & Prof.
Code, § 17204 [setting forth standing requirements for a UCL
claim].) Thus, plaintiffs lack standing as to this claim.
As to the UCL claim based on bad faith claims handling,
the basis for plaintiffs’ allegations that Farmers was involved in
the claims handling process is unclear. As previously discussed,
any allegation to the effect that Farmers was Fire Insurance
Exchange’s attorney-in-fact or managing agent is contradicted by
the exhibits showing that Fire Underwriters Association is the
attorney-in-fact.7

7 Plaintiffs allege in a conclusory fashion that Farmers acted
as Fire Insurance Exchange’s agent, and state that Jeremy Gump
“from Farmers Insurance” was involved in investigating the
claim. Plaintiffs provide no argument or authority to support the

18
 Plaintiffs have not identified any additional facts they
could allege to save this claim. The trial court properly sustained
the demurrer to the unfair business practices claim as to Farmers
without leave to amend.

4. Professional negligence
To state a cause of action for professional negligence, a
plaintiff must allege the following elements: “(1) the duty of the
professional to use such skill, prudence, and diligence as other
members of his profession commonly possess and exercise; (2) a
breach of that duty; (3) a proximate causal connection between
the negligent conduct and the resulting injury; and (4) actual loss
or damage resulting from the professional’s negligence.” (Paul v.
Patton (2015) 235 Cal.App.4th 1088, 1095, quotation marks
omitted.)
“‘The threshold element of a cause of action for negligence
is the existence of a duty to use due care toward an interest of
another that enjoys legal protection against unintentional
invasion.’” (Giacometti v. Aulla, LLC (2010) 187 Cal.App.4th
1133, 1137 (Giacometti), quoting Bily v. Arthur Young & Co.
(1992) 3 Cal.4th 370, 397.) “Where there is no legal duty, the
issue of professional negligence cannot be pled because with the
absence of a breach of duty, an essential element of the cause of
action for professional negligence is missing.” (Major Clients
Agency v. Diemer (1998) 67 Cal.App.4th 1116, 1132.)

conclusion that a plaintiff may assert a claim for violation of the
UCL against an agent of an insurer (other than an exchange’s
attorney-in-fact), and plaintiffs do not contend on appeal that
they have stated a valid UCL claim because Farmers acted as an
agent of Fire Insurance Exchange.

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 Here, plaintiffs have not adequately alleged that Farmers
owed them any duty. While an attorney-in-fact of a reciprocal
insurance exchange owes limited fiduciary duties to insureds
(Tran, supra, 104 Cal.App.4th at pp. 1213-1215), again the
exhibits attached to the third amended complaint show that
Farmers is not the attorney-in-fact. Plaintiffs also appear to
allege that Farmers acted as Fire Insurance Exchange’s agent in
investigating and otherwise responding to plaintiffs’ claim, but
Farmers owed no duty to plaintiffs in acting in that role. (See
Sanchez v. Lindsey Morden Claims Services, Inc., supra,
72 Cal.App.4th at pp. 254-255 [agents of insurers involved in the
claims handling process owe no duty to insureds and are not
liable to insureds for economic loss].)
The trial court properly sustained the demurrer to this
cause of action without leave to amend.

5. Emotional distress
Plaintiffs appear to base their claim for emotional distress
on two different theories. First, they contend Farmers is liable
for intentional infliction of emotional distress because it “failed to
adjust and pay the full value of [p]laintiffs’ claim.” This claim
fails because, as discussed, Farmers was not the insurer or the
attorney-in-fact and owed no duty to plaintiffs with respect to the
handling or payment of the claim.
Second, plaintiff Chang Jr.8 appears to contend Farmers is
liable for negligent infliction of emotional distress because
Farmers’ actions caused Chang to suffer a stroke, and Chang Jr.
suffered emotional distress when he could not wake his father.

8 Chang Jr. is not an insured on the policy.

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This theory fails for many reasons. Farmers cannot be held liable
for any adverse effects flowing from alleged deficiencies in the
claims handling process because it owed no duties to plaintiffs.
Moreover, even if Farmers did have a duty to the policyholders
and even if plaintiffs had adequately alleged Farmers’ actions
caused Chang to suffer a stroke, Chang Jr. would still not have a
claim for negligent infliction of emotional distress. “[A] plaintiff
may recover damages for emotional distress caused by observing
the negligently inflicted injury of a third person if, but only if,
said plaintiff: (1) is closely related to the injury victim; (2) is
present at the scene of the injury-producing event at the time it
occurs and is then aware that it is causing injury to the victim;
and (3) as a result suffers serious emotional distress.” (Thing v.
La Chusa (1989) 48 Cal.3d 644, 667-668.) Here, the alleged
“injury-producing event[s]” are Farmers’ alleged actions with
respect to the claims. Chang Jr. does not allege that he was
present for those events or that Farmers’ actions
contemporaneously caused the stroke. Further, Chang Jr. does
not allege that while he was witnessing any act by Farmers he
simultaneously knew the acts were causing his father to have a
stroke. Chang Jr. has no claim against Farmers based on a
bystander theory.
The trial court properly sustained the demurrer to this
claim without leave to amend.

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 DISPOSITION

The judgment is affirmed. Farmers shall recover its costs
on appeal.

ESCALANTE, J.*

We concur:

SEGAL, Acting P. J.

FEUER, J.

* Judge of the Los Angeles County Superior Court, assigned
by the Chief Justice pursuant to article VI, section 6 of the
California Constitution.

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