People ex rel. Allstate Insurance Company v. Choe, Case No. RG10-510153 (Alameda Superior Court, June 12, 2013): A California Superior Court recently held that California’s anti-SLAPP statute did not immunize an attorney against allegations that he violated the California Insurance Frauds Prevention Act, California Insurance Code section 1871 et seq (IFPA), by submitting allegedly fraudulently insurance claims even though his claims submissions constituted protected pre-litigation conduct.
In Choe, Allstate Insurance Company (Allstate) brought a qui tam action alleging that defendants participated in a scheme to submit false claims to auto insurance companies. Allstate amended its complaint to substitute attorney William L. Berg (Berg) for a Doe defendant and alleged that Berg submitted the allegedly fraudulent insurance claims. Berg moved to strike the substitution under the anti-SLAPP statute, California Code of Civil Procedure section 425.16, claiming that his allegedly fraudulent demand letters to Allstate constituted protected pre-litigation conduct. Allstate responded that: (1) the action was exempt from the protections of the anti-SLAPP statute because it was an “action brought solely in the public interest or on behalf of the general public;” (2) Berg’s conduct was not protected activity because it was per se illegal; (3) Berg’s conduct was not protected activity because he submitted the insurance claims in the ordinary course of business; and (4) even if Berg’s conduct was protected activity, Allstate had established the “minimal merit” necessary for the case to proceed.
First, the court held that the action was not exempt from the protections of the anti-SLAPP statute. The court found that because the qui tam relator was the harmed insurer (Allstate) and sought relief that was different from, and exceeded, the relief sought on behalf of the public, the action was not brought “solely” in the public interest.
Second, the court held that Berg’s conduct was not per se illegal because Allstate did not establish “conclusively as a matter of law” that Berg submitted fraudulent claims.
Third, the court held that Berg’s insurance claims submissions constituted protected activity under the anti-SLAPP rule. The court distinguished a recent case, The People ex rel. Fire Insurance Exchange v. Anapol, 211 Cal. App. 4th 809 (Dec. 6, 2012), in which a California appellate court found that an attorney’s insurance claims submissions were not protected activity because the claims were submitted in the ordinary course of business. In Anapol, the attorneys submitted insurance claims on behalf of their clients pursuant to insurance policies that required the insureds to present their claims. The attorneys did not know whether the claims would be adjusted or disputed and thus had no reason to anticipate litigation. The claimants here, however, were not required to submit claims to their insurers. They chose to submit through their attorneys letters to Allstate outlining the basis of their potential claims and demanding payments. Accordingly, although Berg admitted that he sent the letters to avoid litigation, the court concluded that the letters were not ordinary course of business claims, but pre-litigation demands, which constitute protected activity.
Because the court found that Berg’s alleged misconduct constituted protected activity, the burden shifted to Allstate to show a “minimum level of legal sufficiency and triability” for the case to proceed. Berg did not argue that Allstate failed to satisfy this standard. Instead, Berg argued that he was immune from liability because his pre-litigation demand letters were protected by California’s litigation privilege. The court disagreed. It held that the litigation privilege cannot immunize false claims in pre-litigation communications because that would frustrate the important public policies underlying the anti-fraud statute by protecting the very conduct the statute makes actionable. The court then found that Allstate had established that its claims had sufficient merit to defeat the motion to strike.