Heckart v. A-1 Self Storage, Inc.

a contract of insurance, and because A-1 is not licensed to sell insurance, its sale of this indemnity agreement violates the Insurance Code.

We conclude that A-1's alternative indemnity agreement is not subject to regulation under the Insurance Code. First, the code's provisions that regulate the sale of insurance by self-service storage facilities as agents for licensed insurers ( Ins. Code, § 1758.7 et seq. ; hereinafter Article 16.3; all further statutory references are to this code unless otherwise noted) have no application to A-1's alternative arrangement because A-1 is not acting as an agent for an insurer. Second, the code's definition of insurance (§ 22) has long been understood not to reach indemnification agreements between parties to a transaction if the indemnification agreement is incidental to the principal object and purpose of the parties' transaction, and it does not appear that the Legislature intended through its enactment of Article 16.3 to prohibit such incidental indemnification agreements. Here, the indemnification agreement is incidental to the principal object and purpose of renting storage space, placing it outside the scope of insurance regulation. Therefore, we will affirm the judgment of the Court of Appeal.

"In reviewing a judgment of dismissal after a demurrer is sustained without leave to amend, we must assume the truth of all facts properly pleaded by the plaintiffs, as well as those that are judicially noticeable." (

Law ( Bus. & Prof. Code, § 17200 et seq ; UCL) and the Consumers Legal Remedies Act ( Civ. Code, § 1750 et seq. ; CLRA). He also alleged theories of misrepresentation and civil conspiracy. His claims are based on the allegation that the Protection Plan is a policy of insurance, which A-1 is not licensed to sell.

The operative first amended complaint alleges that Deans & Homer created the Protection Plan, and told A-1 that if A-1 sold the Protection Plan instead of licensed insurance, A-1 "could charge higher rates than approved by the California [Department of Insurance], and avoid the additional administrative costs required if A-1 sold a licensed insurance product." In addition, A-1 "would net nearly twice the revenue from the ... Protection Plan [as] opposed to the sale of insurance." To accomplish this end, Deans & Homer provided A-1 with the language for the Protection Plan and related forms. Deans & Homer also provided policies and procedures related to implementation of the Protection Plan. A-1 consults with Deans & Homer and obtains its approval "before changing any aspect of the Protection Plan...."

"[d]efendants characterize their illegal insurance plan as a 'Customer Goods Protection Plan,' for the sole purpose of collecting insurance premiums while avoiding the requirements of the California Insurance Code." He asserts that A-1 misleads consumers by requiring insurance on stored property, and by failing to disclose that the Protection Plan is unlicensed and illegal insurance, that A-1 does not segregate the payments or maintain

agreements and that the insurer will appoint the

and determined that the agreements at issue were incidental to a different principal object and purpose. For example, in Title Ins. Co., supra , 4 Cal.4th 715 , 14 Cal.Rptr.2d 822 , 842 P.2d 121 , a title company would conduct a title search and prepare a report concerning the conditions under which title insurance would be issued. The title company would then issue a title insurance policy, as an agent for an insurance company. Pursuant to the underwriting agreement, the title company retained most of the insurance premium, and paid the remainder to the insurance company in exchange for its acceptance of the risk of insuring the title. Finally, although the title company was not a party to the insurance policy, the title company was obligated by its underwriting agreement with the insurance company to pay a portion of certain title insurance claims. The Board of Equalization contended that the title company's payment of claims was taxable income to the insurer; otherwise, the Board argued, the allocation of risks between the title insurer and the title company constituted the illegal provision of insurance by the title company.

We concluded that assumption of risk by the title company was not the principal object and purpose of the underwriting agreements. "Their main function is not to require the underwritten title company to provide insurance, either to the title insurer or to the insured, but instead to require the underwritten title company to perform a title search and examination carefully and diligently as well as to carry out the formalities involved in the

We noted that the Cal-Vet protection plan met the criteria for "insurance," and it appeared to be "disability insurance" as that term was defined in the

forestall litigation concerning liability for damages. These additional functions of the Protection Plan further reduce the significance of the element of insurance.

Fifth, the $10 monthly charge for the Protection Plan is significantly less than the $55 monthly charge for renting space.

based on the principal object and purpose test.

C. Effect of Article 16.3 on the principal object and purpose test

Plaintiff contends that Article 16.3's specific and narrow concern with the sale of hazard insurance by a self-storage facility to renters for loss of or damage to stored property "in connection with, and incidental to, self-service storage rental agreements" (§ 1758.75) reflects an intent to apply insurance regulation to any indemnification contracts that are incidental to self-storage rental agreements. He asserts it would be absurd to interpret the statutory scheme to treat such contracts as insurance if the risk is assumed by a third party insurer, but not if a facility undertakes an indemnification obligation. In his view, a contract cannot constitute insurance when one person is the insurer and not constitute insurance when another person is the insurer, and he asserts that applying the principal object and purpose test in this circumstance puts form over substance. He concludes that where the Insurance Code "expressly prohibits a specific type of company from selling a specific type of contract without regulation, it most certainly prohibits such a company from selling and performing that contract without regulation."

Because the principal object and purpose test applies where a transfer of risk satisfies the elements of insurance, an insurance policy from a third party may be an alternative to an indemnification agreement between the parties. However, there is no principle that precludes parties to a transaction from choosing to adjust risks and provide for indemnification between themselves despite the fact that insurance is available from a third party. Moreover, if the availability of insurance precluded parties to a transaction from adjusting risks between themselves without subjecting their agreement to insurance regulation, insurers could foreclose application of the principal object and purpose test simply by obtaining the approval of the Department of Insurance to market a particular type of insurance policy. Finally, the two alternatives are not the same; as explained above, the adjustment of risk between parties to a transaction may provide an incentive to mitigate the risks and may forestall litigation. For these reasons, whether indemnification with

insurance].) The Legislature has also authorized licenses related to narrow categories of risk. "Travel insurance agents" (§ 1752 et seq.) may sell "insurance coverage for personal risks incidental to planned travel," such as trip disruptions, loss of baggage, and illness or death while traveling. (§ 1753, subd. (c)(1).) A vendor of portable electronics may obtain a license to sell insurance "in connection with, and incidental to, the sale of portable electronics or the sale or provision of accessories or services related to the use of portable electronics." (§ 1758.61.) A rental car company may obtain a license to act as an agent on behalf of an authorized insurer to sell insurance coverage for risks related to the use of a rental car, "in connection with and incidental to rental agreements." (§§ 1758.8, subd. (b); see § 1758.85.) Such provisions appear simply to make readily available an

requirements currently imposed on the car rental industry." (Senate Analysis, supra , p. 4.) The Department also proposed "additional administrative safeguards" such as requiring that a licensee be at least 18 years of age, requiring the submission of training materials with the application for a license, and requiring a licensee to pay the costs of an enforcement action or investigation. ( Id . at p. 4.)

This history reflects that the purpose of the statute was to enable self-storage facilities to act as insurance agents for insurance companies with respect to a narrow category of insurance related to hazards to stored property. There is no express reference in the legislation or its history to risk-shifting between the parties to a storage contract. The legislation's reference to insurance "incidental to" the rental of storage space ( § 1758.7, subd. (b) ), which is the same language used in the articulation of the principal object and purpose test, might suggest that the Legislature had that test in mind when it enacted the legislation. A stronger inference, however, is that the language was taken from the statutory provision on which it was modeled-Article 16.6 of the Insurance Code, which authorizes rental car companies to sell insurance coverage for risks related to the use of a rental car, "incidental to rental agreements." (§ 1758.8, subd. (b).) By the time Article 16.6 was enacted in 1999, Truta, supra , 193 Cal.App.3d 802 , 238 Cal.Rptr. 806 , had applied the principal object and purpose test to car rental companies' use of CDWs, but Article 16.6 makes no mention of this doctrine or of precluding CDWs. In addition, Article 16.1 of the Insurance Code, which allows the sale of insurance "incidental to" the sale of portable electronics, assumes that product warranties, by which manufacturers and sellers themselves provide

noted, the expansion of insurance regulation is a task for the Legislature. Moreover, the Legislature has specifically regulated this industry ( Bus. & Prof. Code, § 21700 et seq. ), and has provided that the regulatory provisions "shall not be construed to impair or affect the right of the parties to create additional rights, duties, and obligations in and by virtue of the rental agreement...." ( Bus. & Prof. Code, § 21713.) If the Legislature perceives a need to regulate these agreements, it can weigh whether to treat them as insurance,

The first amended complaint further alleges that to cover losses incurred by A-1 under the Protection Plan, Deans & Homer sold A-1 a "Storage Operator's Contract Liability Policy" under which Deans & Homer assumed the liability for all losses under the Protection Plan in excess of $250,000 per year. Thus, A-1 assumed the risk of the first 100 claims per year for losses of $2,500. At any given time, more than 15,000 renters are enrolled in the A-1 Protection Plan. Under the Storage Operator's Contract Liability Policy, Deans & Homer retains the "right to adjust the [Protection Plan] claim directly with the [Protection Plan] customer." The policy requires A-1 to provide monthly reports to Deans & Homer setting forth who is enrolled in the Protection Plan and their coverage dates.

According to the first amended complaint, employees at A-1 facilities are instructed to offer the Protection Plan to each rental customer. They are to tell customers that A-1 does not insure their property, and that the Protection Plan satisfies the insurance requirement of the Rental Agreement. If the customer has insurance, the employee is to "remind them that under [A-1's] plan there is no deductible and since it's not insurance no issues with rate increases etc. [will arise] down the road if there were to be a claim."

Plaintiff alleges that "[t]he A-1 Defendants do not treat their Protection Plan as a part of the Rental Agreement. Defendants operate the Protection Plan, and account for its revenues and costs as an insurance program within A-1 Defendants' self-storage business and computer system." The first amended complaint compares the terms of the Protection Plan to the terms of a storage insurance policy offered by Deans & Homer, and asserts that "[t]he

reserves, that cheaper and more comprehensive insurance is available in the marketplace, that renters are not required to purchase the Protection Plan to rent a storage unit, and that a renter's home or renter's insurance policy might provide coverage for stored property. He alleges that by 2013, A-1 was annually collecting approximately $1.8 million under the Protection Plan, paying Deans & Homer approximately $133,000, and paying approximately $25,000 in claims.

The trial court sustained defendants' demurrer to the first amended complaint based on its conclusion that the Protection Plan is not insurance, and entered judgment for defendants. The Court of Appeal affirmed the judgment. Both lower courts premised their rulings on the "principal object and purpose" test, which excludes from insurance regulation transactions that have an element of insurance, where that element is merely incidental to a different principal object and purpose. The lower courts concluded that the Protection Plan was incidental to the principal object and purpose of the parties' transaction, the rental of storage space.

the named applicant is trustworthy and competent to act as its agent for the limited purpose of offering or selling the types of insurance specified in Section 1758.75 in connection with, and incidental to, self-service storage rental

present should not outweigh all other factors. If attention is focused only on that feature, the line between insurance or indemnity and other types of legal arrangement and economic function becomes faint, if not extinct....' " ( Id . at p. 249, 174 P.2d 625 .)

To determine whether a contract is subject to insurance regulation, we consider "whether, looking at the plan of operation as a whole, 'service' rather than 'indemnity' is its principal object and purpose." ( California Physicians' Service v. Garrison (1946) 28 Cal.2d 790 , 809, 172 P.2d 4 ( California Physicians' Service ).) "[E]ach contract must be tested by its own terms as they are written, as they are understood by the parties, and as they are applied under the particular circumstances involved." ( Jellins, supra , 29 Cal.2d 242 at p. 248, 174 P.2d 625 .)

We have applied the principal object and purpose test in a variety of circumstances,

stated that the renter was liable for up to $1,000 in damage to the car regardless of who was at fault, but if the renter chose the CDW option for an additional fee of $6 per day, the renter would not be liable for any damage to the car. The court concluded that "[t]he principal object and purpose of the transaction before us, the element which gives the transaction its distinctive character, is the rental of an automobile. Peripheral to that primary object is an option, available to the lessee for additional consideration, to reallocate the risk of loss (up to the sum of $1,000) to the lessor in the event the vehicle sustains damage during the rental term. Thus, ... after reviewing the entire contract we are satisfied that this tangential risk allocation provision should not have the effect of converting the defendants as contracting lessors into insurers subject to statutory regulation." ( Id . at p. 814, 238 Cal.Rptr. 806 .)

In contrast, in Sweatman v. Department of Veterans Affairs (2001) 25 Cal.4th 62 , 104 Cal.Rptr.2d 602 , 18 P.3d 29 ( Sweatman ), we concluded that an indemnity agreement was not merely incidental to a different object and purpose. In Sweatman , a veteran had purchased a home through the Cal-Vet program pursuant to a contract that required the buyer to make installment payments to the Department of Veterans Affairs. That program also required the buyer to purchase the Cal-Vet home protection plan, through which the Department provided coverage for loss of life and disability. The Department contended that the protection plan was incidental to the Cal-Vet loan contract, the principal object and purpose of which was to finance the home purchase.

California Physicians' Service, supra , 28 Cal.2d 790 , 172 P.2d 4 , a corporation formed by physicians to provide medical care and to spread the cost of the care over the organizations who enrolled their members or employees in the care plan did not assume any risk. ( Id . at p. 804, 172 P.2d 4 .) Therefore, the plan did not satisfy the definition of insurance. We also noted the impelling need to provide adequate medical care to those with little income, and concluded that the Legislature intended to exempt such organizations from insurance regulation. ( Id . at pp. 809-810, 172 P.2d 4 .) As we recognized in Jellins , however, the central focus of our analysis in California Physicians' Service was the principal object and purpose of the contract ( Jellins, supra , 29 Cal.2d at p. 249, 174 P.2d 625 ), which we characterized in California Physicians' Service as a "more compelling reason for holding that the [corporation] is not engaged in the insurance business." ( California Physicians' Service, supra , 28 Cal.2d at p. 809, 172 P.2d 4 ; see also Title Ins. Co., supra , 4 Cal.4th at p. 726, 14 Cal.Rptr.2d 822 , 842 P.2d 121 [summarized California Physicians' Service as holding that the corporation "did not engage in the business of insurance illegally, because the principal purpose or object of the operation was service rather than indemnity"].)

Second, A-1 assumes risks that arise directly from the rental relationship, and it does not provide indemnification beyond damages that might occur to property while it is stored in the rented space. Therefore, the Protection Plan

This contrast tends to establish that the principal purpose of the transaction is the rental of storage space. (Cf. People ex rel. Roddis v. California Mut. Assn. (1968) 68 Cal.2d 677 , 68 Cal.Rptr. 585 , 441 P.2d 97 [some members of a health care association received reimbursement for medical services rather than direct medical services; "where indemnity is a significant financial proportion of the business, the organization must be classified as an 'insurer' for the purposes of the Knox-Mills Plan Act"].) Plaintiff's allegation that A-1 can charge higher rates and net nearly twice the revenue by providing indemnification

the historical limits recognized by the principal object and purpose test, but that is a policy decision for the Legislature to make. As discussed below, the legislative history of Article 16.3 does not reflect an intent to subject to insurance regulation contracts that are outside the reach of insurance regulation

in self-storage facilities. As plaintiff notes, none of the cases that have applied the principal object and purpose test have involved provisions of the Insurance Code that focus on such a narrow type of risk. Therefore, we will consider additional indicia of legislative intent. (See Fluor Corp. v. Superior Court, supra , 61 Cal.4th at p. 1198, 191 Cal.Rptr.3d 498 , 354 P.3d 302 [if statutory language may reasonably be given more than one interpretation, courts may consider extrinsic aids]; Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53 , 61, 124 Cal.Rptr.2d 507 , 52 P.3d 685 [even absent ambiguity in statutory language, "we may observe that available legislative history buttresses our conclusion"].)

We first consider Article 16.3 in the wider context of the Insurance Code. The Legislature has authorized licenses that allow insurance agents to sell broad categories of coverage. (See, e.g., §§ 31 ["insurance agent" may sell on behalf of an insurer all classes of insurance except life, disability, or health insurance], 32 ["life licensee" may sell on behalf of an insurer life, accident, and health

years for two reasons: [¶] 1) coverage helps tenants recover financially when there is a loss. A large number of self-storage tenants do not have personal property insurance. They are either in-transit (between homes) or rent an apartment and fail to insure their property; and, [¶] 2) the courts have relieved self-storage facilities of liability for loss or damage to a tenant's property when there is a loss, if the tenant had been advised that it is his or her responsibility to insure their property, and optional coverage had been offered by the self-storage facility." (Assembly Analysis, pp. 2-3; see also Senate Analysis, p. 4.)

The legislative history reflects that although the Department of Insurance had not received any consumer complaints regarding the storage facilities' activities, the Department's view was that "self-service storage facilities selling insurance on behalf of agents and/or insurers should be also licensed" (Assembly Analysis, supra , p. 3), and the Department had "issued cease and desist orders against several self-service storage facilities. This bill is the industry's response to the [Department's] position. [¶] ... According to the sponsors, this bill is modeled on the law governing the sale of insurance by rental car companies and their agents, with a few modifications." (Senate

indemnity incidental to the sale of their products, will remain available, as the article excludes from its reach "insurance covering a seller's or a manufacturer's obligations under a warranty." (§ 1758.69, subd. (e)(2)(B).) Therefore, it does not appear that the phrase "incidental to" in these various licensing schemes was intended to reference the principal object and purpose test, or to extend their reach to forms of indemnification that are not considered "insurance" under the Insurance Code.

In response to our invitation to address the issues presented, the Insurance Commissioner has urged us to conclude that the Legislature intended to

which would extend numerous regulatory provisions to them and perhaps cause storage companies no longer to offer indemnity, or the Legislature might choose more limited regulation, such as limiting the companies' fees for indemnity and

In its rental agreements with tenants, defendant A-1 Self Storage, Inc. (A-1) states that it shall not be liable for loss of or damage to a tenant's stored property, and it requires the tenant to obtain insurance for such losses. A-1 also offers an alternative to the requirement that a tenant obtain insurance: in exchange for an additional $10 in rent each month, A-1 will reassume the risk of such losses, up to $2,500. Plaintiff Samuel Heckart contends this alternative constitutes

Howard Jarvis Taxpayers Assn. v. City of La Habra (2001) 25 Cal.4th 809 , 814, 107 Cal.Rptr.2d 369 , 23 P.3d 601 .) Therefore, we take the facts from the first amended complaint and matters subject to judicial notice.

Defendant A-1 owns the self-storage facility where plaintiff rented a storage unit. Neither A-1 nor any of the defendants that have an ownership interest in A-1 or assist in its management are licensed to sell insurance

the Unfair Competition

Plaintiff contends that A-1's sale of the Protection Plan violates the Insurance Code because A-1 is not licensed to sell insurance. For the reasons set forth below, we conclude that the challenged transaction does not involve the sale of insurance.

A. Article 16.3

We begin our analysis with Article 16.3 of the Insurance Code, which is entitled "Self-Service Storage Agents." (§§ 1758.7-1758.792.) " ' "As in any case involving statutory interpretation, our fundamental task here is to determine the Legislature's intent so as to effectuate the law's purpose." [Citation.] "We begin with the plain language of the statute, affording the words of the provision their ordinary and usual meaning and viewing them in their statutory context, because the language employed in the Legislature's enactment generally is the most reliable indicator of legislative intent." [Citations.] The plain meaning controls if there is no ambiguity in the statutory language. [Citation.] If, however, "the statutory language may reasonably be given more than one interpretation, ' " 'courts may consider various extrinsic aids, including the purpose of the statute, the evils to be remedied, the legislative history, public policy, and the statutory scheme encompassing the statute.' " ' " [Citation.]' [Citation.]" ( Fluor Corp. v. Superior Court (2015) 61 Cal.4th 1175 , 1198, 191 Cal.Rptr.3d 498 , 354 P.3d 302 .)

Article 16.3 provides that "[a] self-service storage facility ... shall not offer or sell insurance unless it has complied with the requirements of this article and has been issued a license by the commissioner as provided in this article." ( § 1758.7, subd. (a) ; see § 12900 et seq. [regarding insurance commissioner].) The referenced license allows a self-storage facility to "act as a[n] ... agent for an authorized insurer only with respect to the following types of insurance and only in connection with, and incidental to, self-service storage rental agreements: [¶] (a) Insurance that provides hazard insurance coverage to renters for the loss of, or damage to, tangible personal property in storage or in transit during the rental period. [¶] (b) Any other coverage the commissioner may approve as meaningful and appropriate in connection with the rental of storage space." (§ 1758.75, italics added.) An application for such a license must include "[a] certificate by the insurer that is to be named in the self-service storage agent license stating that the insurer has satisfied itself that

applicant to act as its agent in reference to offering or selling those types of insurance if the applicant is licensed by the commissioner." (§ 1758.71, subd. (a)(2).)

These provisions reflect that Article 16.3 addresses the licensing of self-storage facilities to act as agents to sell insurance on behalf of licensed insurers. The same focus is reflected in the rest of the Article, which imposes various requirements and restrictions in connection with a storage facility's actions as an insurance sales agent. (See §§ 1758.72 [training requirements for agent's employees], 1758.73 [employee's conduct shall be deemed conduct of the agent], 1758.74 [penalties for licensee's violations or for acting as an agent without a license], 1758.76 [agent must provide specified information and disclosures], 1758.77 [the insurer represented by the licensee may relieve licensee from requirement that funds be segregated], 1758.78 [prohibited activities of an agent], 1758.78 [insurer that provides insurance through an agent shall file a copy of the policy with the commissioner].)

The allegations of the operative complaint reflect that A-1 is not acting as an agent of an insurance company. Although Deans & Homer has assisted A-1 with the Protection Plan, Deans & Homer does not provide insurance to renters ; rather, the Protection Plan is an agreement between only A-1 and individual renters. Therefore, the procedures and regulations that apply to a self-service storage facility in its role as an insurance agent do not apply to the challenged transaction.

B. The principal object and purpose test

As noted above, Article 16.3 provides that self-storage facilities cannot sell "insurance" unless licensed as an agent for a licensed insurer. ( § 1758.7, subd. (a).) The Insurance Code defines "insurance" as "a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event." (§ 22.) Courts have interpreted section 22 "as requiring 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. [Citations.]' " ( Title Ins. Co. v. State Bd. of Equalization (1992) 4 Cal.4th 715 , 725-726, 14 Cal.Rptr.2d 822 , 842 P.2d 121 ( Title Ins. Co ).) The Protection Plan meets these criteria: A-1 shifts the risk of losses up to $2,500 from a renter to A-1, and distributes that risk among all renters who purchase the Plan.

As the courts below recognized, however, not every contract that meets these criteria is an insurance contract for purposes of regulation by the Insurance Code. "State regulation [of insurance] generally extends to the 'business of insurance'; to the extent a particular contract or transaction is not

the business of insurance, it is outside the scope of state regulation of the insurance industry." (1 New Appleman on Insurance Law (Library ed. rev. 2017) § 1.03[1], p. 1-19.) Therefore, we have long recognized that "a sound jurisprudence does not suggest the extension, by judicial construction, of the insurance laws to govern every contract involving an assumption of risk or indemnification of loss...." ( Transportation Guar. Co. v. Jellins (1946) 29 Cal.2d 242 , 248, 174 P.2d 625 ( Jellins ).) " 'That an incidental element of risk distribution or assumption may be

issuance of a title insurance policy. The indemnification provisions are secondary to the main object and purpose of the underwriting agreements. In fact, the agreements to indemnify appear to be designed, at least in part, to give the underwritten title companies an incentive to perform their title search in a nonnegligent manner, as the title companies are in the best position to eliminate possible risk. Therefore, the title company is not involved in the illegal practice of insurance even if an underwritten title company is deemed to have provided indemnification in connection with the main purpose of its contract with the title insurer." ( Title Ins. Co., supra , 4 Cal.4th at pp. 726-727, 14 Cal.Rptr.2d 822 , 842 P.2d 121 .)

In the course of addressing the principal object and purpose of the underwriting agreement in Title Ins. Co ., we noted other cases in which risk-shifting was only a secondary purpose of a contract, including Truta v. Avis Rent A Car System, Inc . (1987) 193 Cal.App.3d 802 , 238 Cal.Rptr. 806 ( Truta ). In Truta , the plaintiff challenged a rental car company's "collision damage waiver" (CDW) option as a sale of insurance by a company not licensed to sell insurance. The rental car agreement

Therefore, we will apply the principal object and purpose test to evaluate whether the Protection Plan is incidental to a different principal object and purpose of the parties' transaction. As explained below, various factors lead us to conclude both that the rental of storage space was the principal object and purpose of the parties' transaction, and the Protection Plan was incidental to that purpose. (See Jellins, supra , 29 Cal.2d 242 at p. 248, 174 P.2d 625 ["each contract must be tested by its own terms"].)

First, the Protection Plan adjusts risks between the parties to the Rental Agreement; A-1, not a third party, indemnifies the renter. Although a third party's agreement to provide indemnity with respect to risks arising from a transaction might be viewed as incidental to the transaction, a third party's indemnity agreement is not incidental to a different object or purpose of the third party indemnitor . As the court explained

has no purpose independent of the Rental Agreement, and is purely incidental to the Rental Agreement. In contrast, the coverage for loss of life or disability at issue in Sweatman, supra , 25 Cal.4th 62 , 104 Cal.Rptr.2d 602 , 18 P.3d 29 , was a type of indemnification that a person might purchase regardless of whether he or she was purchasing a home, because the risk of death or disability existed independent of the purchase of property.

Third, not only is the Protection Plan dependent on the Rental Agreement, the Protection Plan is optional. Although A-1 requires renters to arrange for indemnification with respect to property stored in its facilities, it does not require that the coverage be obtained from A-1. The fact that storage space may be rented without purchasing the Protection Plan tends to establish that the rental of space rather than indemnification is the principal purpose of the parties' transaction. (See Sweatman, supra , 25 Cal.4th 62 , 73, 104 Cal.Rptr.2d 602 , 18 P.3d 29 [citing the fact that the disability coverage was not optional in support of the conclusion that the coverage was not merely incidental to a different principal object and purpose].)

Fourth, the Protection Plan extends only to risks over which A-1 has some control, such as fires, roof leaks, criminal activity, and damage to the building. A-1 can reduce these risks by taking steps to prevent fires or the spread of fires, to increase security, and to strengthen the building. Therefore, the Protection Plan serves an additional purpose of providing an incentive to minimize the risks to stored property. (See Title Ins. Co., supra , 4 Cal.4th at p. 727, 14 Cal.Rptr.2d 822 , 842 P.2d 121 [title company's agreement to indemnify title insurer for a portion of title insurance claims gave the title company an incentive to perform title searches in a nonnegligent manner].) By addressing risks that are inherent in the transaction, and by placing the risks on the party best able to mitigate them, the parties may accomplish more than indemnification, as these contractual provisions might improve the service for which the parties are contracting and might

extend insurance regulation beyond

Analysis, supra , p. 4; see § 1758.81 et seq. [provisions governing sale of insurance by rental car companies].)

There was no opposition to the bill (Assembly Analysis, supra , p. 4; Senate Analysis, supra , p. 4; Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis of Assem. Bill No. 2520, as amended July 22, 2004, pp. 4-5), but the Department of Insurance commented on the legislation. According to an analysis for the Senate Committee on Insurance, the Department "stated that a limited agent license for self-service storage facilities should not have to meet all of the