Under Ins. Code, § 1758.7 et seq., a self-storage lessor may obtain a license to act as an agent for third party insurance companies offering coverage relating to loss or damage of stored property.  This decision holds that those portions of the Insurance Code do not apply to an indemnification plan that the lessor itself offers to lessees to pay for lost or damaged property.  Furthermore, such a lessor-offered indemnification plan is not “insurance” otherwise regulated by the Insurance Code under the principal object and purpose test that the Court applies in determining whether a contract shifting the risk of loss is insurance.  Here, the principal object and purpose of the transaction is rental of self-storage facilities, as shown by the higher price of rental than protection plan, the fact that one party to the lease also provides the protection plan (rather than a a third party), etc.  The legislative history of Ins. Code, § 1758.7 et seq. shows it wasn’t intended to bar self-storage lessors from offering this sort of risk transfer as an adjunct to the lease. Citing Yamaha Corp. of America v. Board of Equalization (1998) 19 Cal.4th 1, this decision also holds that the Department of Insurance’s interpretation of Ins. Code 1758.7 et seq., not having been adopted in an exercise of formal quasi-legislative rule-making is not entitled to great deference.  And the court rejects the Department’s statutory interpretation, adopting a contrary one.

California Supreme Court (Cantil-Sakauye, C.J.); April 23, 2018; 2018 Cal. LEXIS 2762