Court of Appeal, Second District,

Division 8.

Alan WAYNE et al. Plaintiffs and Appellants,

v.

DHL EXPRESS (USA), INC., Defendant and Respondent.

May 16, 2005.

APPEAL from a judgment of the Superior Court of Los Angeles County. Anthony J. Mohr, Judge. Reversed.

Appellant Alan Wayne filed an action against DHL Express (USA), Inc., contending that DHL violated California laws by offering insurance at excessive rates for shipments made by DHL. DHL moved for judgment on the pleadings. The trial court granted the motion on the ground that appellant’s claims are preempted by federal law. However, the complaint alleges facts which, if true, lead to the conclusion that appellant’s claims are not preempted. Since on a motion for judgment on the pleadings we must accept the allegations of the complaint as true, we reverse.

FACTS

We turn for the operative facts to Wayne’s complaint. (Smiley v.. Citibank (1995) 11 Cal.4th 138, 164 [on a motion for judgment on the pleadings, the facts alleged in the complaint are taken as true for purposes of appeal].)

DHL is the world’s largest air express carrier, servicing over 200 countries. It charges shippers a fee for the shipment of packages.

The complaint alleges that DHL offers shippers the “opportunity to purchase ‘Shipment Insurance’ for packages. DHL’s ‘Shipment Airwaybill[ ]’ … states: ‘Shipment Insurance: 12. We recommend that you insure your shipment with DHL. We can arrange insurance for you for up to U.S. $5 million.’ This ‘Shipment Insurance’ may be purchased by shippers for 70 cents for each $100 of declared value of a package shipped. If a shipper pays the ‘Shipment Insurance’ charge per $100 of value, part or all of the declared value of the package would be paid to the shipper in the event that the package is damaged, lost, or destroyed. [¶ ][ ] DHL solicits and collects from consumers hundreds of millions of dollars per year as premiums for insuring the value of packages. [¶ ][ ] On its own Internet web site, DHL denominates its ‘Shipment Insurance’ as insurance.”

The complaint cites Insurance Code section 22 [FN1] and that insurance rates are regulated so as not to be “excessive, inadequate or unfairly discriminatory.” (Ins.Code, § 1861.05.) The complaint goes on to allege that DHL and it agents are not licensed to sell insurance, [FN2] that DHL does not comply with state laws and regulations regarding insurance, and that DHL charges excessive premiums for its “Shipment Insurance.”

FN1. Insurance Code section 22 states: “Insurance is a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.”

FN2. The complaint cites Insurance Code section 1631 and former section 1633 which respectively provide that insurers must be licensed by the Insurance Commissioner and that anyone who “acts, offers to act, or assumes to act in a capacity” for which an insurance license is required without a valid license is guilty of a misdemeanor. The complaint also cites to Insurance Code section 35 which provides that “transacting” insurance “includes any of the following: [¶ ] (a) Solicitation. [¶ ] (b) Negotiations preliminary to execution. [¶ ] (c) Execution of a contract of insurance. [¶ ] (d) Transaction of matters subsequent to execution of the contract and arising out of it.”

Wayne’s complaint alleges two causes of action. The first cause of action alleges a number of violations of Business and Professions Code section 17200 et seq. The principal violations alleged are that DHL is not licensed to sell insurance, yet markets Shipment Insurance; that Shipment Insurance does not comply with California laws regulating insurance; and that the fee for Shipment Insurance is excessive. The second cause of action alleges violations of California’s Consumers Legal Remedies Act, Civil Code section 1750 et seq. This cause of action alleges that Shipment Insurance is excessive.

Wayne engaged DHL to ship a package and paid $1.40 for Shipment Insurance on a declared value of $200. Two days later, Wayne filed this action, and sought certification as a class action on behalf of all persons residing in this state who purchased Shipment Insurance from DHL.

Wayne’s action was removed to federal court, where the district court granted DHL’s motion to dismiss. On appeal, the circuit court of appeals reversed on the sole ground that the federal court did not have subject matter jurisdiction. The case was remanded to the superior court. In ruling on DHL’s motion for judgment on the pleadings, the trial court rejected Wayne’s contention that DHL is engaged in the business of insurance by selling Shipment Insurance, and concluded that federal law provided the exclusive remedy for Wayne’s claim.

DISCUSSION

Wayne contends that under California Insurance Code section 22, a contract of insurance has two elements, the shifting and the distribution of the risk of loss, and that these elements are found in the Shipment Insurance made available by DHL. [FN3] Wayne contends that for this reason DHL’s Shipment Insurance is subject to California law.

FN3. “The Legislature has defined insurance as ‘a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.’ (Ins.Code, § 22.) Thus, insurance necessarily involves two elements: (1) a risk of loss to which one party is subject and a shifting of that risk to another party; and (2) distribution of risk among similarly situated persons.” (Metropolitan Life Ins. Co. v. State Bd. of Equalization (1982) 32 Cal.3d 649, 654.)

The complaint alleges that Shipment Insurance is insurance and that DHL holds it out to its shippers as insurance. However, the complaint does not stop with the allegation of the ultimate fact that Shipment Insurance is insurance. The complaint goes on to allege both the shifting and distribution of the risk of loss. The complaint alleges that under Shipment Insurance “part or all of the declared value of the package would be paid to the shipper in the event that the package is damaged, lost, or destroyed” and that “DHL solicits and collects from consumers hundreds of millions of dollars per year as premiums for insuring the value of packages.”

Citing Title Ins. Co. v. State Bd. of Equalization (1992) 4 Cal.4th 715, 726, DHL contends that the mere fact that a contract contains the elements of shifting and distribution of risk of loss does not necessarily mean that the agreement constitutes an insurance contract for purposes of statutory regulation. DHL points out that courts will look to the ” ‘principal object and purpose’ ” of the contract to determine whether it is a contract of insurance. This is a correct statement of the law. (Transportation Guar. Co. v. Jellins (1946) 29 Cal.2d 242, 248-249.)

DHL contends that the “principal object and purpose of the Airwaybill is the shipment of a customer’s package.” The trial court agreed with this contention, and found that the main purpose of the Airwaybill is the transportation of cargo. DHL contends that in offering Shipment Insurance, it is doing no more than it is required to do under federal law. [FN4]

FN4. “Under established federal common law, if a carrier wishes to enforce a limited liability provision, its contract must offer the shipper (1) reasonable notice of limited liability, and (2) a fair opportunity to purchase higher liability.” (Read-Rite Corp. v. Burlington Air Express, Ltd. (9th Cir.1999) 186 F.3d 1190, 1198.)

The flaw in DHL’s argument is that it requires us to disregard the plain and unambiguous allegations of the complaint. While it is true that DHL’s Airwaybill complies with federal law in giving reasonable notice of its limited liability, and affords the shipper “a fair opportunity to purchase higher liability,” the complaint alleges that DHL meets the latter requirement by selling insurance. “Like a demurrer, a motion for judgment on the pleadings is confined to the face of the pleading under attack, and the plaintiff’s allegations are accepted as true.” (6 Witkin, Cal. Procedure (4th ed. 1997) Proceedings Without Trial, § 164, p. 577; Code Civ. Proc., § 438, subd. (d) [grounds for motion for judgment on the pleadings must “appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice”].) As noted, the complaint not only alleges that Shipment Insurance is insurance, it also alleges that Shipment Insurance shifts and distributes the risk of loss, which are two primary characteristics of insurance. (Metropolitan Life Ins. Co. v. State Bd. of Equalization, supra, 32 Cal.3d at p. 654.) We must accept these allegations as true. We cannot assume, as DHL would have us do, the diametric opposite of these allegations.

For the same reason, we must disagree with the trial court’s finding that Shipment Insurance is not insurance because the main purpose of the Airwaybill is the transportation of cargo. This finding of fact is not only extraneous to the complaint and is therefore inappropriate on a motion for judgment on the pleading, it is contradicted by the allegations of the complaint. At this point the allegations of the complaint must be accepted as true.

DHL contends that Wayne provides “no support” for the conclusion that DHL provides insurance because the cases that Wayne cites do not apply. [FN5] This argument is without merit. The dispositive fact in this appeal is that the complaint alleges that DHL sells insurance. The facts of other cases are not germane to the allegations of the complaint in this case.

FN5. These are 20th Century Ins. Co. v. Liberty Mut. Ins. Co. (9th Cir.1992) 965 F.2d 747, Grand Rent A Car Corp. v. 20th Century Ins. Co. (1994) 25 Cal.App.4th 1242 and Nathanson v. Hertz Corp. (1986) 183 Cal.App.3d 78.

We note that Wayne refers to an insurance policy purchased by DHL as further evidence that DHL is selling insurance. Since this policy was not incorporated by reference in the complaint, it is inappropriate to take it into account in ruling on a motion for judgment on the pleadings. (Cohen v. Ratinoff (1983) 147 Cal.App.3d 321, 327.)

We decline to express a view on whether, given facts that are not pleaded, the Shipment Insurance made available by DHL is actually insurance. We note the contribution of amicus curiae but, given that in this appeal we must accept the allegations of the complaint as true, the merits of the released valuation doctrine are not before us.

DISPOSITION

The judgment is reversed. Appellant Wayne is to recover his costs on appeal.

We concur: RUBIN, Acting P.J., and BOLAND, J.