Ass'n of Cal. Ins. Cos. v. Jones

Wildfires are a fact of life in California, and so, too, are the threats they pose to people and property. After the 1991 Oakland Hills fire and 2003 Southern California wildfires, legislators discovered through public hearings an additional aspect of the danger wildfires pose to homeowners: underinsurance. In case after case, California residents whose homes had been damaged or destroyed explained why they had believed their homeowners insurance would enable them to rebuild their dwellings. Once they presented their claim to their insurance company, though, these homeowners discovered that their coverage fell well short of what they needed-sometimes by hundreds of thousands of dollars-to rebuild their homes. (Sen. Rules Com., 3d reading analysis of Sen. Bill No. 2 (2005-2006 Reg. Sess.) as amended Aug. 30, 2005, pp. 3-4; Sen. Banking, Finance and Ins. Com., Analysis of Sen. Bill No. 2 (2005-2006 Reg. Sess.) as amended Mar. 29, 2005, pp. 3-6 (Sen. Analysis of Sen. Bill 2); Assem. Com. on Ins., Analysis of Sen Bill No. 1854 (1991-1992 Reg. Sess.) as amended Aug. 11, 1992, pp. 2-3.)

Between 1992 and 2005, the Legislature took several steps to address the divergence between homeowners' expectations of insurance coverage and the actual scope of coverage. (Stats. 2005, ch. 447, § 2, p. 3608; Stats. 2004, ch. 385, § 1, p. 3510; Stats. 2004, ch. 311, § 1, p. 3246; Stats. 1992, ch. 1089, § 1, p. 5031.) Nonetheless, when large wildfires struck Southern California in 2007 and 2008, state officials realized the underinsurance problem persisted. (Dept. of Ins., Market Conduct Div. Summary of Targeted Market Conduct Examination Findings-2007 Wildfires (2010) p. 1; United Policyholders, 2007 Wildfires Insurance Claim Status Survey (2008) pp. 1-8.) The

In response to public comments submitted in writing and at the public hearing, the Commissioner modified the proposed regulations and issued a "final statement of reasons" on November 17, 2010. (Gov. Code, § 11346.9.) The Commissioner also identified the specific statutes authorizing adoption of the regulations and listed the statutory provisions "being implemented, interpreted, or made specific" by each section of the regulations. (Gov. Code, § 11346.2, subd. (a)(2).) On December 29, 2010, the Office of Administrative Law approved the regulations. The regulations became effective on June 27, 2011.

A separate statutory provision applies where the Commissioner believes a method of competition, act, or business practice "not defined in Section 790.03" nonetheless

The Court of Appeal affirmed. The appellate court found it significant that the Legislature had specifically defined the advertising of insurance that the insurer does not sell as "an unfair and deceptive act or practice" (§ 790.036, subd. (a)) but had failed to so define incomplete replacement cost estimates. Invoking the interpretive canon expressio unius est exclusio alterius , the court inferred that the omission "was a deliberate choice" by the Legislature and that "the Commissioner did not have authority to add content and format requirements for replacement cost estimates in homeowner insurance to the list of practices set forth in section 790.03 under the guise of deeming nonconforming estimates misleading under section 790.03, subdivision (b)."

The Court of Appeal believed also that the Commissioner's interpretation of his rulemaking authority would render it needlessly

How much weight to accord the agency's construction depends on the context, a term encompassing both the nature of the statutory issue and characteristics of the agency. ( American Coatings , supra , 54 Cal.4th at p. 461, 142 Cal.Rptr.3d 581 , 278 P.3d 838 .) Among the factors bearing on the value of the administrative interpretation, two broad categories emerge: factors relating to the agency's technical knowledge and expertise, which tend to suggest the agency has a comparative interpretive advantage over a court; and factors relating to the care with which the interpretation was promulgated, which tend to suggest the agency's interpretation is likely to be correct. ( Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1 , 12, 78 Cal.Rptr.2d 1 , 960 P.2d 1031 ( Yamaha ).) Bearing these factors in mind, we retain the ultimate responsibility to decide whether the Regulation falls within the Commissioner's " 'broad discretion to adopt rules and regulations as necessary to promote the public welfare.' " ( State Farm Mut. Auto Ins. Co. v. Garamendi (2004) 32 Cal.4th 1029 , 1040, 12 Cal.Rptr.3d 343 , 88 P.3d 71 .)

A. Whether the Regulation Exceeded the Authority Granted to the Commissioner by the Legislature

The Commissioner leads an executive agency created by statute. He or she has only as much rulemaking power as that statute invests in the Commissioner.

We construed a very similar grant of regulatory authority in Ford Dealers Assn. v. Department of Motor Vehicles (1982) 32 Cal.3d 347 , 185 Cal.Rptr. 453 , 650 P.2d 328 ( Ford Dealers ). The Legislature had endowed the director of the Department of Motor Vehicles (DMV) with the power to adopt and enforce rules and regulations " 'as may be necessary to carry out the provisions' of the Vehicle Code" ( Ford Dealers , at p. 354, 185 Cal.Rptr. 453 , 650 P.2d 328 , quoting Veh. Code, § 1651 ), and we considered the validity of various regulations designed to implement a statutory bar on making or disseminating untrue or misleading statements. ( Id . at p. 356, 185 Cal.Rptr. 453 , 650 P.2d 328 .) One of the challenged regulations concerned dealer-added charges for services performed by the dealer that are or will be reimbursed by the franchisor. The trial court had found the regulation invalid "as beyond the scope of the authorizing statute." ( Id . at p. 362, 185 Cal.Rptr. 453 , 650 P.2d 328 .) In reversing, we explained that the DMV, which was authorized "to ' "fill up the details" ' of the statutory scheme," had the statutory authority to promulgate a regulation "barring a specific class of misleading statements." ( Id . at pp. 362-363, 185 Cal.Rptr. 453 , 650 P.2d 328 .)

The grant of regulatory authority to the Commissioner in section 790.10 is written in terms of what is necessary to administer the authorizing statute (see also §§ 765, 10199.5, 10234, 10509.918, 10608, 10820, 12129, 12880.5), not what is necessary to carry it out (as in Ford Dealers , supra , 32 Cal.3d 347 , 185 Cal.Rptr. 453 , 650 P.2d 328 ) or implement it. We do not perceive such slight difference in wording to evince any substantial distinction in the power the Legislature conveyed. ( Morris v. Williams (1967) 67 Cal.2d 733 , 741 & fn. 10, 63 Cal.Rptr. 689 , 433 P.2d 697 [explaining that a statute granting the Health and Welfare Agency the power to " 'adopt such rules and regulations as are necessary for carrying out ... the provisions' " of the law "authorized the Administrator of the ... Agency to administer the program"]; see Webster's Collegiate Thesaurus (1976) p. 16 ["administer" is synonymous with "carry out effectively"]; Burton's Legal Thesaurus (4th ed. 2007) p. 16 ["administer" is synonymous with "carry out," "control," and "direct"].) To administer is to

to the question whether the Commissioner had the authority to regulate incomplete replacement cost estimates

Moreover, an enrolled bill report cannot prevail over "more direct windows into legislative intent," such as a committee analysis of the bill. ( Conservatorship of Whitley , supra , 50 Cal.4th at p. 1218, fn. 3, 117 Cal.Rptr.3d 342 , 241 P.3d 840 .) Those sources likewise undermine the Association's reading. One legislative bill summary recited that the proposal to enact section 790.10"gives the Insurance Commissioner the authority to promulgate rules and regulations so that if the need therefor arises, he can, without delay, promulgate necessary rules making such practices definite and specific for the benefit of the public without having to wait for the Legislature to act at a later date." (Assem. Com. on Finance and Ins., summary of Assem. Bill No. 1353 (1971 Reg. Sess.) p. 1 [undated; contained in committee bill file]; see also Legis. Counsel, letter to Sen. Clark L. Bradley, July 14, 1971, p. 2 [the bill authorizes the Commissioner to promulgate rules and regulations "as conditions warrant"]; see generally Tidewater Marine Western, Inc. v. Bradshaw , supra , 14 Cal.4th at p. 576, 59 Cal.Rptr.2d 186 , 927 P.2d 296 ["agencies cannot always respond to changing circumstances promptly if they must ask the Legislature for a statutory amendment"].) As the Legislative Counsel pointed out, the only limitation on the Commissioner's

Not so with an interpretive rule that is devoid of any quasi-legislative authority. Such a rule instead represents the agency's understanding of the statute's meaning and effect-consequential, but not an exercise of delegated lawmaking power. ( Yamaha , supra , 19 Cal.4th at p. 11, 78 Cal.Rptr.2d 1 , 960 P.2d 1031 .) A court reviewing the validity of an interpretive rule therefore must consider more than simply whether the rule is within the scope of the authority conferred, and whether the rule is reasonably necessary to effectuate the statute's purpose. Rather, a court must also consider whether the administrative interpretation is a proper construction of the statute. (Gov. Code, §§ 11342.1, 11342.2.) In answering the latter question, the standard of review " 'is one in which the judiciary, although taking ultimate responsibility for the construction of the statute, accords great weight and respect to the administrative construction.' " ( Yamaha , at p. 12, 78 Cal.Rptr.2d 1 , 960 P.2d 1031 .) While the agency's position therefore matters a great deal, its interpretation does not carry with it the dignity of statutes.

Although the characterization of the Regulation as quasi-legislative or interpretive directs the sequence of a reviewing court's analysis, some rules defy easy categorization. ( Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785 , 799, 85 Cal.Rptr.2d 844 , 978 P.2d 2 ( Ramirez ).) It may be helpful instead to imagine "quasi-legislative" and "interpretive" as the outer boundaries of a continuum measuring the breadth of the authority delegated by the Legislature. ( Ibid . ) Thus, in certain circumstances, a regulation may have both quasi-legislative and interpretive characteristics-"as when an administrative agency exercises a legislatively delegated power to interpret key statutory terms." ( Ibid . )

In this instance, we need not decide whether the Regulation's interpretation of

The Association points to the list of unfair acts or practices prohibited by the other subdivisions of section 790.03, including a detailed enumeration of 16 separate unfair claims settlement practices set forth in subdivision (h). Invoking the maxim expressio unius est exclusio alterius , the Association contends that the Legislature's decision not to specifically designate incomplete replacement cost estimates as misleading statements must be viewed as a conscious choice by the Legislature. The Commissioner, in its view, was therefore precluded from promulgating a regulation on the topic of replacement cost estimates. The Association has misconstrued the maxim as well as the interplay between the Commissioner and the Legislature. When the expressio unius canon of construction is applicable, it implies that "the explicit mention of some things in a text may imply other matters not similarly addressed are excluded." ( Howard Jarvis Taxpayers Assn. v. Padilla (2016) 62 Cal.4th 486 , 514, 196 Cal.Rptr.3d 732 , 363 P.3d 628 .) But the fact that the Legislature defined as unfair or deceptive a detailed list of specific unfair claims settlement practices in section 790.03, subdivision (h) -or (as the Court of Appeal pointed out) defined as unfair or deceptive the act of advertising insurance the insurer does not sell (§ 790.036, subd. (a))-does not signal an intent to exempt any particular category of misleading statements from the broad prohibition on such statements in section 790.03, subdivision (b). ( Ibid . ) Rather, it means only that the Legislature did not itself choose to specify the types of statements that must be deemed misleading and entrusted that determination instead to the Commissioner's expertise. ( Ford Dealers , supra , 32 Cal.3d at pp. 362-363, 185 Cal.Rptr. 453 , 650 P.2d 328 ; Credit Ins. Gen. Agents Assn. v. Payne , supra , 16 Cal.3d at p. 656, 128 Cal.Rptr. 881 , 547 P.2d 993 .) That the Legislature entrusted to the Commissioner the application of these and other statutory provisions to specific problems-problems the Legislature did not, and in some cases could not, anticipate-is precisely why enactment of section 790.10 makes sense in the broader statutory scheme.

To conclude that these statutory schemes require the Legislature to define in advance every problem it expects an agency to address is to suggest that the Legislature had little need for agencies in

Department asserted it had broad authority to address the issue under Business and Professions Code section 25006, which granted power to " 'adopt such rules ... as will foster and encourage the orderly wholesale marketing and wholesale distribution of beer.' " ( Ralphs Grocery , supra , 69 Cal.2d at p. 174, 70 Cal.Rptr. 407 , 444 P.2d 79 .) The challengers sought to invalidate the regulation by pointing out that the Legislature had separately enacted laws governing quantity discounts on milk and wine and drawing the inference that the Legislature had therefore consciously chosen not to regulate quantity discounts for beer. ( Id . at p. 182, 70 Cal.Rptr. 407 , 444 P.2d 79 .) In rejecting the proposed inference, we declared that the challengers had misapprehended the relationship between specific statutory mandates and general grants of power to an administrative agency. ( Ibid . ) When the Legislature is confident that it has identified a given problem and the best solution, it may enact its specific remedy into statutory law-as it did with unfair claims settlement practices

theoretically possible for a replacement cost estimate that omits consideration of labor costs or the materials used in constructing the home nonetheless to come close to the actual replacement cost if (say) the expected

The replacement cost regulation under review here is codified at California Code of Regulations, title 10, section 2695.183 (the Regulation; further regulation references are to tit. 10 of this code). The Regulation does not require an insurer to set or recommend a policy limit or to provide an estimate of the cost to rebuild or replace a home. (Cal. Code Regs., § 2695.183, subd. (m).) But if the insurer does choose to opine on replacement costs, the Regulation specifies how that estimate is to be calculated and communicated. In particular, it bars the insurer from communicating a replacement cost estimate in connection with an application for or renewal of a homeowners' insurance policy "unless the requirements and standards set forth in subdivisions (a) through (e) below are met." (Cal. Code Regs., § 2695.183.)

Subdivision (a) requires a replacement cost estimate to account for "the expenses that would reasonably be incurred to rebuild the insured structure(s) in its entirety," which must include "at least" the cost of labor, building materials, and supplies; overhead

subd. (j).) Whether an estimate that fails to comply with the other parts of the Regulation is misleading would depend on the circumstances of the particular case. Because the Association has advanced only a facial challenge to the Regulation, its burden was to show, at the least, that a noncompliant estimate would not be misleading in the generality or vast majority of cases. ( Association of California Ins. Cos. v. Poizner , supra , 180 Cal.App.4th at p. 1054, 103 Cal.Rptr.3d 458 ; T.H. v. San Diego Unified School Dist. (2004) 122 Cal.App.4th 1267 , 1281, 19 Cal.Rptr.3d 532 ; see generally

In 1959, the Legislature enacted the Unfair Insurance Practices Act (UIPA) (Ins. Code, § 790 et seq. ). Its purpose is to regulate trade practices in

Finally, the UIPA grants the Commissioner rulemaking power: "The commissioner shall, from time to time as conditions warrant, after notice and public hearing, promulgate reasonable rules and regulations, and amendments and additions thereto, as are necessary to administer this article." (§ 790.10.)

C. The Declaratory Relief Action

A few weeks before the Regulation was to become effective, plaintiffs Association of California Insurance Companies and the Personal Insurance Federation of California (collectively, the Association) filed a complaint for declaratory relief. The action challenged the validity of the Regulation on the ground (1) that the Regulation exceeded the Commissioner's authority by defining a new unfair or deceptive insurance practice; (2) that the Regulation improperly restricted the underwriting of insurance, which the Commissioner lacked authority to regulate; and (3) that the Regulation violated insurers' rights to free speech under the state and federal Constitutions. The parties agreed that the case could be tried based on the rulemaking file, written briefs, and oral argument, without the need for oral testimony.

The trial court invalidated the Regulation on the first ground-i.e., "that the Commissioner exceeded his authority by attempting to define additional acts or practices by regulation rather than by the procedure set out in section 790.06." The trial court reasoned that an estimate of replacement costs is "inherently inaccurate" but could not be deemed misleading, unless one were to claim or imply that the estimate was accurate. Because the Regulation thus expanded the scope of misleading statements beyond that defined in

We granted review to consider the Commissioner's authority to promulgate regulations implementing, interpreting, or making specific the prohibitions in section 790.03, subdivision (b).

The Regulation, like any agency action, comes to the court with a presumption of validity. ( Credit Ins. Gen. Agents Assn. v. Payne (1976) 16 Cal.3d 651 , 657, 128 Cal.Rptr. 881 , 547 P.2d 993 ; Gov. Code, § 11343.6.) The Association contends the Regulation falls outside the lawmaking authority delegated by the Legislature to the Insurance Commissioner, and conflicts with the UIPA. (Gov. Code, §§ 11342.1, 11342.2.) These contentions implicate interpretation of the relevant statutes, which is a question of law on which this

What authority the Legislature conferred here appears to be quite broad: "The Commissioner shall, from time to time as conditions warrant, after notice and public hearing, promulgate reasonable rules and regulations, and amendments and additions

Consider another example. In Moore v. California State Bd. of Accountancy (1992) 2 Cal.4th 999 , 9 Cal.Rptr.2d 358 , 831 P.2d 798 ( Moore ), we upheld a regulation by the State Board of Accountancy specifying that particular titles

In this instance, the Commissioner undertook an investigation into the widespread problem of underinsurance and, in particular, the disconnect between a homeowner's expectation and the actual scope of insurance coverage purchased. Based on that investigation, he determined that an incomplete replacement cost estimate-i.e., an estimate that fails to account for all of the costs necessary to rebuild the structure-qualifies as "a specific kind of misleading statement," and that regulation of any misleading statement "is authorized by the broad statutory prohibition against false and misleading statements" in section 790.03, subdivision (b). ( Ford Dealers , supra , 32 Cal.3d at p. 362, 185 Cal.Rptr. 453 , 650 P.2d 328 .) The Commissioner's determination complied with relevant procedures in the Insurance Code and the Administrative Procedure Act, which require an initial statement of reasons from the agency, a request for public comment, a public hearing, an assessment of alternatives to and the economic impact of the Regulation, and a final statement of reasons and written responses to public input. Even if the statutory prohibition on misleading statements is (as the Association contends) self-executing, an administrative agency nonetheless has authority to promulgate rules and regulations as reasonably necessary to administer it. ( American Nurses Assn. v. Torlakson (2013) 57 Cal.4th 570 , 586, 160 Cal.Rptr.3d 370 , 304 P.3d 1038 ;

Where an agency has been granted both the power to adjudicate and to promulgate rules, we generally defer to the agency's choice of how to proceed. In Agricultural Labor Relations Bd. v. Superior Court (1976) 16 Cal.3d 392 , 128 Cal.Rptr. 183 , 546 P.2d 687 , for example, we upheld the agency's authority to issue a regulation allowing qualified access to agricultural property by farm labor organizers, even though the agency could have filed a complaint and obtained injunctive relief against an employer's interference with the farmworkers' right to organize and bargain collectively. ( Id . at pp. 399-400, 413, 128 Cal.Rptr. 183 , 546 P.2d 687 .) Relying on a "well-settled principle of administrative law," we declared that "in the absence of an express statutory directive to the contrary ... the choice between proceeding by general rule or by ad hoc adjudication 'lies primarily in the informed discretion of the administrative agency.' " ( Id . at p. 413, 128 Cal.Rptr. 183 , 546 P.2d 687 , quoting Securities & Exch. Com. v. Chenery Corp. , supra , 332 U.S. at p. 203, 67 S.Ct. 1760 .) An agency's choice regarding the use of rulemaking or adjudication implicates the expertise and accountability rationales that cut in favor of deference to the agency, and the Association does not contend that any statute expressly limited the Commissioner's ability to choose between rulemaking and adjudication. We therefore defer to the Commissioner's decision to address the problem of underinsurance by rulemaking.

Finding otherwise would not only cut against the grain of our previous decisions and the importance they ascribe to the agency's expertise in deciding how it makes policy, but would also eviscerate section 790.10. It is the agency's prerogative to promulgate reasonable rules and regulations "as are necessary to administer" the Unfair Insurance Practices Act (§ 790.10 )-not merely to do so where it cannot otherwise address offending conduct through enforcement actions.

It follows that the Commissioner's authority under section 790.06 to determine what undefined conduct qualifies as unfair or deceptive is irrelevant

If read in the way the Association suggests, the enrolled bill report would be flatly inconsistent with the statutory text. There is nothing remotely resembling a "one time" limitation in section 790.10. Rather, the Legislature provided the Commissioner with authority to promulgate rules and regulations "from time to time as conditions warrant ," as well as "amendments and additions thereto." (§ 790.10, italics added.) Whatever else "from time to time" means, it cannot conceivably mean the opposite of "from time to time":

B. Whether the Regulation Is Consistent With the UIPA

Having concluded that the Regulation fits within the lawmaking authority delegated by the Legislature, we now consider whether the Regulation is "consistent and not in conflict with" the statute and whether it is "reasonably necessary to effectuate the purpose of the statute." (Gov. Code, § 11342.2.) The parties contend that our analysis of those questions depends in part on whether the Regulation is best understood as quasi-legislative or interpretive.

Quasi-legislative rules represent "an authentic form of substantive lawmaking" in which the Legislature has delegated to the agency a portion of its lawmaking power. ( Yamaha , supra , 19 Cal.4th at p. 10, 78 Cal.Rptr.2d 1 , 960 P.2d 1031 ; see

It is the Commissioner who is charged with implementing the UIPA. In doing so

The individual components the Regulation requires were also subject to a brief challenge from the Association. The Association asserts, for example, that a dwelling's age (Cal. Code Regs., § 2695.183, subd. (a)(5)(J)) may have no bearing on the cost to replace the structure, and that the annual requirement to verify and update sources and methods of estimating replacement costs ( id . subd. (e)) may be unnecessary if costs have not changed or have decreased in the interim. As the Commissioner pointed out in his initial statement of reasons, however, a structure's age may help identify the costs of complying with current building code requirements and assess the availability of

The Commissioner enacted the replacement cost regulation by exercising valid authority conferred under section 790.10 of the UIPA. That the Commissioner also possesses authority to enforce the statute through case-by-case adjudication merely underscores that sometimes agencies must make considered judgments about how they will implement a statute. But such authority does not preclude the Commissioner's use of a regulation to address the type of concern that motivated the present measure. Neither the UIPA nor any other statute categorically limits the Commissioner's authority to issue the Regulation. On the contrary: section 790.10 explicitly vests in the Commissioner authority to issue "reasonable rules and regulations" to administer the UIPA. Which is what the Commissioner sought to do here.

Because the Regulation was invalidated below solely under the Administrative Procedure Act, neither the trial court nor the Court of Appeal has yet considered the Association's remaining challenges to the Regulation. We therefore reverse the judgment of the Court of Appeal and remand the matter for further proceedings consistent with our opinion.

We Concur:

Cantil-Sakauye, C.J.

Werdegar, J.

Chin, J.

Corrigan, J.

Liu, J.

Kruger, J.

To address these concerns, the Commissioner proposed new regulations and amendments to existing regulations consistent with the procedures specified in the Administrative Procedure Act (Gov. Code, § 11340 et seq. ). According to the Commissioner's initial statement of reasons, the proposed regulation standardized the components of a replacement cost estimate "to create a more consistent, comprehensive and accurate replacement cost calculation" and clarified that estimates "not comporting with the applicable provision of the regulation will constitute making a statement with respect to

The Commissioner's authority to administer the UIPA thus includes the power to promulgate a rule applying to a specific kind of statement prohibited under section 790.03, subdivision (b). This definition of "administer" is consistent with the scope of the word as used in the statutory definition of "regulation," which provides that an agency's authority to enforce or administer a statute includes the power to adopt a regulation "to implement, interpret, or make specific the law enforced or administered by it." (Gov. Code, § 11342.600.)

Relying on a series of arguments based on the structure of the UIPA, the Association contends that the grant of regulatory authority here should be construed more narrowly than in Ford Dealers and Moore . The Association points out that the UIPA either defines or provides for the determination of unfair or deceptive acts or practices. (§ 790 ["The purpose of this article is to regulate trade practices in the business of insurance ... by defining, or providing for the determination of, all such practices ... which constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined"].) From this, the Association reasons that the Legislature reserved to itself the power to define unfair or deceptive acts (as, for example, in § 790.03 ) and to set forth a procedure by which conduct not statutorily defined as unfair or deceptive could be determined (using the order to show cause procedure in § 790.06) to be so. In the Association's view, the Regulation is either unnecessary (in that the subject of the Regulation has already been defined as unfair in § 790.03 ), or it represents an unlawful expansion of the Commissioner's power by purporting to reach conduct not otherwise defined as unfair or deceptive without complying with the order to show cause procedure in section 790.06.

The dichotomy posited by the Association is incomplete. Yes, the Legislature "defined" untrue, deceptive, or misleading statements with respect

A survey of the agency's legal authority and role readily shows why. As the Association concedes, the Commissioner could certainly have brought an enforcement action against an insurer's use of misleading replacement cost estimates under section 790.05, which permits an agency to address unfair practices defined in section 790.03 on a case-by-case basis even in the absence of a specific regulatory rule. What this enforcement power does not imply is that the Commissioner was disabled from addressing the problem posed by such estimates through regulation. A key part of the expertise an agency brings to bear on its administrative function is its assessment of the tradeoffs inherent in deciding whether to enforce a statutory mandate by way of an adjudication against a regulated entity or through a generalized rule. (Shapiro, The Choice of Rulemaking or Adjudication in the Development of Administrative Policy (1965) 78 Harv. L.Rev. 921 ; see generally

Finally, we reject the Association's assertion that the Commissioner's regulatory

We similarly reject the suggestion by amicus curiae Pacific Association of Domestic Insurance Companies that the disclosure form mandated by section 10102 impliedly restricted the Commissioner's authority to specify the content of a replacement cost estimate. The form, which must be provided prior to or concurrent with an application for or renewal of residential property insurance (§ 10102, subds. (a), (d)), warns the applicant of the risks of underinsurance, advises that "[t]he coverage limit on the dwelling structure should be high enough so you can rebuild your home if it is completely destroyed," and directs the insured to contact the agent, broker, or insurance company "if you believe your policy limits may be inadequate." (Stats. 2010, ch. 589, § 2 [residential dwellings coverage form].) Far from being inconsistent or in conflict with the disclosure form, the Regulation works in a complementary fashion with it. Once the disclosure form leads the applicant to inquire further about coverage limits, the Regulation helps ensure that any replacement cost estimate supplied by the insurer is high enough that the coverage secured will allow the property owner to rebuild the dwelling even if it is completely destroyed.

The trial court reasoned that a replacement cost estimate-as an estimate -is inherently inaccurate and therefore cannot be deemed "misleading" within the meaning of section 790.03, subdivision (b). But the defect sought to be remedied by the Regulation is not the possibility that actual costs, for unforeseeable reasons, may not align with estimated costs. Rather, the Regulation seeks to reduce the possibility that an estimate would be misleading by ensuring that the estimate include all that is reasonably knowable about actual costs at the time the insurance contract is executed. It may be

Finally, we reject the Association's challenge to the parts of the Regulation detailing the format of the replacement cost estimate, the means by which such estimates are to be communicated to the applicant or insured, and how records shall be maintained. (Cal. Code Regs., § 2695.183, subds. (g)-(i).) The Regulation deems misleading only those estimates that fail to comply with the content requirements of subdivisions (a) through (e). ( Id .,