People ex rel. Allstate Ins. Co. v. William Berg and Berg Injury Lawyers CA1/4 ( 2016 )

Filed 2/18/16 People ex rel. Allstate Ins. Co. v. William Berg and Berg Injury Lawyers CA1/4
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FOUR
PEOPLE OF THE STATE OF
CALIFORNIA EX REL. ALLSTATE
INSURANCE COMPANY, ET AL., A139054
Plaintiffs and Respondents,
(Alameda County
v. Super. Ct. No. RG10510153)
WILLIAM BERG AND BERG INJURY
LAWYERS, INC.,
Defendants and Appellants.
Plaintiff Allstate Insurance Company (Allstate) sued several members of an
alleged insurance fraud ring, claiming they caused Allstate and other insurance
companies to pay out more than they should under insurance policies for personal
injuries. Defendants Berg Injury Lawyers and its named partner, William Berg
(collectively referred to as “Berg”), were key players in this scheme. Berg allegedly
referred clients to certain medical providers who, in turn, would recommend unnecessary
surgical procedures, which allowed Berg to make inflated demands for payment under
the insurance policies.
Berg filed a special motion to strike pursuant to Code of Civil Procedure1
section 425.16, arguing that its demands to Allstate were protected petitioning activity,
and that Allstate had no probability of prevailing on its insurance fraud claim because
1
All further undesignated statutory references are to the Code of Civil Procedure.
1
Berg’s conduct was protected by the litigation privilege. The trial court denied the
motion, concluding that although Berg engaged in a protected activity, its conduct was
not privileged.
We will reverse. We agree with the trial court that Berg’s conduct is protected
petitioning activity. We also conclude that Berg’s conduct is protected by the litigation
privilege. As such, the trial could should have granted Berg’s motion.
I. BACKGOUND
A. The Complaint
Allstate commenced this lawsuit as a qui tam action, naming as defendants various
medical providers, medical centers, and diagnostic facilities. 2 Allstate alleges that the
defendants violated Insurance Code section 1871.7, subdivision (b). That subdivision
incorporates violations of Penal Code section 550, which makes criminal a broad array of
conduct relating to the false submission of insurance claims.3
As relevant to this appeal, Allstate alleges that certain defendants solicited
unnamed personal injury attorneys to refer their clients into a network of medical
providers. From there, providers within the network would form medical opinions that
the clients were candidates for surgical procedures when, in fact, they were not. “In
doing so, the network providers . . . ma[d]e material misrepresentation of facts with the
intent to falsely give the impression of serious injury where it does not otherwise exist,
and to falsely justify unnecessary, expensive and questionable medical procedures . . .
regardless of medical necessity or actual patient need.” The treatment recommended by
the network providers was “governed, at least in part, by available insurance proceeds
and not by medical necessity or reasonable patient care.” After the network providers
2
Four separate Allstate entities were named as plaintiffs. For ease of reference,
we will refer to them collectively as “Allstate.”
3
Allstate also alleged a cause of action for violation of Business and Professions
Code section 17200. The parties agree that the cause of action under Business and
Professions Code section 17200 rises and falls with the cause of action for violation of
Insurance Code section 1871.7, so we will limit our discussion to Insurance Code section
1871.7.
2
recommended such procedures, they would prepare “false and fraudulent reports” and
provide them to the attorneys, who would present the reports to Allstate as part of a
demand for payment of a loss or injury under an insurance policy.
Berg was not named as a defendant in the amended complaint. In April 2013,
Allstate amended its complaint by substituting Berg in place of unnamed Doe
defendants.4
B. The Special Motion to Strike
Berg filed a special motion to strike Allstate’s complaint under the anti-SLAPP
statute. Berg argued that Allstate’s complaint arose from Berg’s “lawful and protected
petitioning activity in personal injury settlement negotiations and litigation on behalf of
injured clients with claims against Allstate and its insureds.” Berg further argued that
Allstate could not establish a probability of prevailing on the merits because Berg’s
alleged conduct was protected by the litigation privilege.
Berg’s special motion to strike included a declaration from William Berg, in
which he stated that him and his firm “have been litigation adversaries of [Allstate] for
decades in hundreds of cases[.]” He stated “[i]t is the policy of Berg Injury Lawyers to
make settlement demands in good faith and with the lawful intent of compromising either
potential future litigation or existing litigation fairly for its clients. If a pre-litigation
matter can be reasonably settled through good-faith negotiations, then Berg Injury
Lawyers will pursue a negotiated resolution in order to avoid filing a complaint for a
client. However, to the extent that the matter cannot be reasonably compromised, then
Berg Injury Lawyers will pursue litigation on behalf of its clients as appropriate.”
Mr. Berg also denied that he or anyone at his firm dictated medical treatment for clients.
Allstate opposed the motion. Allstate argued that the submission of insurance
claims was not protected activity because it was not related to litigation but was instead
done in the ordinary course of business. It also argued that Berg’s conduct of submitting
insurance claims to Allstate was not protected activity because it was criminal in nature.
4
Allstate advised the trial court that Berg is the only remaining defendant in this
case and that the other defendants have tentatively settled with Allstate.
3
Allstate argued that even if Berg demonstrated that its activity was protected under the
anti-SLAPP statute, it had demonstrated a probability of prevailing on the merits because
Bergs’ acts were not protected by the litigation privilege.
Allstate’s opposition included a “representative sampling” of three demand letters
submitted by Berg to Allstate. One letter related to a “first-party” claim in which Berg
made a demand for $70,000 on behalf of its client to Allstate pursuant to an underinsured
motorist provision in the client’s automobile insurance policy. The other two letters
related to “third-party” claims. In them, Berg claimed that Allstate’s insured was liable
for personal injuries sustained by Berg’s clients and detailed the medical treatment its
clients received. One of the letters made a $100,000 settlement demand. The other
requested that Allstate disclose the amount of its insured’s policy limits and stated that if
Allstate refused to disclose the policy limits, Berg and its client “will have no alternative
but to proceed with litigation.”
In a declaration filed with Berg’s reply brief, Mr. Berg stated that the three
representative letters selected by Allstate involved matters that were eventually litigated
after Berg sent its demand letters to Allstate.
C. The trial court’s ruling
The trial court denied Berg’s special motion to strike. Under the first step of the
analysis, it found that Berg’s demand letters “are fairly construed as pre-litigation
demand letters” and therefore constituted protected petitioning activity. However, under
the second step of the anti-SLAPP analysis, the trial court concluded that Allstate
demonstrated a probability of prevailing on the merits because Berg did not establish that
the demand letters were protected by the litigation privilege. The trial court reasoned that
“[a] ruling that the litigation privilege immunizes false claims in pre-litigation
communications would frustrate the important public polices underling the anti-fraud
statute by protecting the very conduct the statute makes actionable (and Penal Code
section 550 makes criminal).”
Berg timely filed this appeal.
4
II. DISCUSSION
A. Applicable Law and Standard of Review
“A SLAPP suit—a strategic lawsuit against public participation—seeks to chill or
punish a party’s exercise of constitutional rights to free speech and to petition the
government for redress of grievances. [Citation.] The Legislature enacted . . . section
425.16—known as the anti-SLAPP statute—to provide a procedural remedy to dispose of
lawsuits that are brought to chill the valid exercise of constitutional rights. [Citation.]”
(Rusheen v. Cohen (2006) 37 Cal. 4th 1048, 1055-1056.) The statute provides: “A cause
of action against a person arising from any act of that person in furtherance of the
person’s right of petition or free speech under the United States Constitution or the
California Constitution in connection with a public issue shall be subject to a special
motion to strike, unless the court determines that the plaintiff [or cross-complainant] has
established that there is a probability that the plaintiff [or cross-complainant] will prevail
on the claim.” (§ 425.16, subd. (b)(1).) The Legislature has directed that the language of
the statute be “construed broadly.” (§ 425.16, subd. (a).)
A court’s consideration of an anti-SLAPP motion involves a two-step process.
“First, the court decides whether the defendant has made a threshold showing that the
challenged cause of action is one arising from protected activity. The moving
defendant’s burden is to demonstrate that the act or acts of which the plaintiff complains
were taken ‘in furtherance of the [defendant]’s right of petition or free speech under the
United States or California Constitution in connection with a public issue,’ as defined in
the statute. (§ 425.16, subd. (b)(1).) If the court finds such a showing has been made, it
then determines whether the plaintiff has demonstrated a probability of prevailing on the
claim.” (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal. 4th 53, 67.)
We review the trial court’s decision to grant or deny an anti-SLAPP motion de
novo. (Flatley v. Mauro (2006) 39 Cal. 4th 299, 325.) In doing so, we consider “the
pleadings, and supporting and opposing affidavits stating the facts upon which the
liability or defense is based.” (§ 425.16, subd. (b)(2).) “ ‘However, we neither “weigh
credibility [nor] compare the weight of the evidence. Rather, [we] accept as true the
5
evidence favorable to the plaintiff [citation] and evaluate the defendant’s evidence only to
determine if it has defeated that submitted by the plaintiff as a matter of law.”
[Citation.]’ [Citation.]” (Flatley v. Mauro, supra, 39 Cal.4th at p. 326.)
B. Protected Activity
Berg argues that the demand letters it sent to Allstate were “classic petitioning
activity” that the anti-SLAPP statute protects. Allstate disagrees, and argues that Berg
was not engaging in protected petitioning activity because it merely sought performance
under insurance policies but did not have reason to believe that its demands would be
rejected and litigation would follow. It further argues that Berg was not engaging in
protected activity because its alleged conduct was criminal. Allstate contends that the
trial court erred in ruling that Berg was engaging in protected petitioning activity, and
asks us to affirm the trial court’s denial of Berg’s motion on this ground.
1. Berg engaged in protected pre-litigation activity.
Subdivision (e) of section 425.16 identifies four general categories of activities
that constitute protected “ ‘act[s] in furtherance of a person’s right of petition or free
speech under the United States or California Constitution in connection with a public
issue.’ ” At issue here are subdivisions (e)(1) and (e)(2), which describe as an act in
furtherance of the right of petition any written or oral statement or writing made “before”
a judicial proceeding or “in connection with” an issue under consideration or review by a
judicial body.
Communications preparatory to or in anticipation of litigation are protected
petitioning activity under subdivisions (e)(1) and (e)(2) if they relate to litigation that is
“ ‘ “ ‘contemplated in good faith and under serious consideration.’ ” [Citation].’ ”
(Digerati Holdings, LLC v. Young Money Entertainment, LLC (2011) 194 Cal. App. 4th
873, 887; see also Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The
Rutter Group 2015) ¶ 7:625 [“Lawsuits predicated on prelitigation statements or writings
may be subject to an anti-SLAPP motion”).) “[T]he good faith and serious consideration
of litigation test . . . is addressed to the requirement the statements ‘have some connection
or logical relation to the action. [Citations.]’ [Citation.]” (Aronson v. Kinsella (1997) 58
6
Cal. App. 4th 254, 266.) “In other words, if the statement is made with a good faith belief
in a legally viable claim and in serious contemplation of litigation, then the statement is
sufficiently connected to litigation . . . .” (Ibid.) 5
Here, Berg’s demand letters were made in good faith and under serious
consideration of litigation, and therefore constitute protected petitioning activity. Berg’s
practice was to pursue a settlement of its clients’ cases whenever feasible, but also pursue
litigation on behalf of its clients in the event a matter could not be settled. This practice
is reflected in the three representative demand letters submitted to the trial court. In the
first-party demand letter, Berg stated it wanted to “explore the possibility of settlement”
and “avoid the delays and expenses inherent in litigation.” Berg then detailed the
medical treatment its client purportedly received and made a settlement offer, but also
stated that its client “hereby demands arbitration” in the event a settlement is not reached.
In the two third-party demand letters, Berg also stated that it wanted to explore a
settlement in order to avoid litigation. 6 Berg went on to claim that Allstate’s insured was
“responsible for all damages and losses” caused by the accidents at issue, and detailed the
medical treatment received by its clients. In one of the letters, Berg informed Allstate
that “if you refuse to disclose your insured’s policy limits at this time, we will have no
alternative but to proceed with litigation.” The other letter did not include an express
threat to commence litigation, but did state that if Allstate rejected Berg’s demand, Berg
5
Aronson addressed whether a prelitigation demand letter was protected by the
litigation privilege. (Aronson v. Kinsella, supra, 58 Cal.App.4th at p. 272.) Cases
addressing the litigation privilege are useful in determining if a defendant’s conduct is
protected petitioning activity under the anti-SLAPP statute since statements protected by
the litigation privilege “ ‘are equally entitled to the benefits of section 425.16.’
[Citations.]” (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal. 4th 1106,
1115.)
6
Allstate argues that Berg could not have contemplated litigation seriously and in
good faith because Berg’s goal in making demand letters was to settle claims without
litigation. This argument is wholly without merit given that Berg actually litigated
several cases against Allstate. Moreover, an attorney can have the noble goal of settling a
matter while also seriously contemplating that litigation will occur.
7
would “view this as a case where [Allstate] had an opportunity to settle within its
insured’s policy limits and that it failed to do so.”
Even more telling than the content of the three demand letters is the fact that Berg
initiated litigation against Allstate in those three matters after Allstate rejected Berg’s
demands. This strongly indicates that Berg was contemplating litigation in good faith
when it made settlement demands to Allstate, and was not merely making empty threats.
(See Digerati Holdings, LLC v. Young Money Entertainment, LLC, supra, 194
Cal.App.4th at p. 888 [actually commencing litigation was evidence that prior demand
letter was made in good faith contemplation of litigation].) Indeed, it is undisputed that
Berg litigated hundreds of cases involving Allstate. Taken together, these circumstances
indicate that Berg’s demand letters to Allstate were sent “with a good faith belief in a
legally viable claim and in serious contemplation of litigation.” (Aronson v. Kinsella,
supra, 58 Cal.App.4th at p. 266.)
In arguing that Berg’s conduct is not protected activity, Allstate places heavy
reliance on People ex rel. Fire Ins. Exchange v. Anapol (2012) 211 Cal. App. 4th 809
(Anapol). In that case, an insurance company sued several participants of an alleged
insurance fraud ring, including two attorneys, alleging they submitted false or inflated
insurance claims for damage caused by wildfires. (Id. at p. 814.) The two attorneys
brought anti-SLAPP motions, arguing that their submission of insurance claims was
protected petitioning activity. The trial court found the activity was not protected under
the anti-SLAPP statute, and the appellate court affirmed. (Id. at p. 821.) It held that one
of the attorney’s failed to establish that he engaged in protected activity because he
submitted claims that “simply sought settlement,” and “[f]ar from declaring that each
claim was submitted with the expectation of litigation, [the attorney] declared that most
of the claims were, in fact, settled without litigation.” (Id. at p. 828.) As to the second
attorney, the court held that he failed to show his submission of insurance claims was
protected because he “relie[d] solely on his self-serving declaration that, in his own mind,
at the time he submitted the claims, his mindset was that the claims would likely be
denied and litigation would be necessary.” (Id. at p. 830.)
8
Anapol is distinguishable on its facts, and actually supports a finding in this case
that Berg engaged in protected petitioning activity. Berg did more than submit insurance
claims that “simply sought settlement.” (Anapol, supra, 211 Cal.App.4th at p. 828.) It
submitted detailed demand letters claiming that Allstate was required to pay Berg’s
clients under insurance policies, and it threatened Allstate with litigation in the event a
settlement could not be reached. The Anapol court believed that while mere insurance
claims would ordinarily not be considered protected petitioning activity, prelitigation
demand letters like the ones at issue here “likely constitute[] protected prelitigation
conduct” under the anti-SLAPP statute. (Ibid.)
Anapol is also distinguishable because it involved only first-party insurance
claims, the submission of which was a “necessary prerequisite to obtaining performance
under the insurance contract.” (Anapol, supra, 211 Cal.App.4th at p. 827.) As such, the
Anapol court could not determine by the mere submission of a claim whether it was a
“simple claim for payment submitted in the usual course of business” or was made in
contemplation of litigation. (Id. at p. 829.) (Ibid.) The same concern is not present in
this case. Berg’s demand letters, which related to both first- and third-party claims, do
not appear to have been a necessary prerequisite to receiving payment under the
insurance policies. The content of the letters makes clear that they were not a simple
claim for payment, but were instead settlement demands that were a precursor to
litigation.7
The other cases Allstate relies on to support its argument that Berg was not
engaging in a protected activity are also distinguishable on their facts. In People ex rel.
20th Century Ins. Co. v. Building Permit Consultants, Inc. (2000) 86 Cal. App. 4th 280,
7
Kajima Engineering and Const., Inc. v. City of Los Angeles (2002) 95
Cal. App. 4th 921 is distinguishable for similar reasons. There, a contractor claimed that
he engaged in protected activity when he submitted allegedly inflated construction claims
in connection with a public project. (Id. at p. 932.) The court rejected his argument
because “[t]he submission of contractual claims for payment in the regular course of
business before the commencement of litigation simply is not an act in furtherance of the
right of petition or free speech within the meaning of the anti-SLAPP statute.” (Ibid.)
Berg’s letters were more than claims made in the ordinary course of business.
9
the court held that a construction company’s preparation of allegedly fraudulent damage
reports that were eventually submitted with insurance claims was not a protected activity,
even though some of the reports were later used in bad faith cases brought against the
insurance company. (Id. at p. 285.) Here, Berg did more than prepare reports that were
submitted at a later time with an insurance claim. It sent demand letters directly to
Allstate in which it detailed the basis for its settlement demand and threatened litigation
in the event a settlement could not be reached. In Beach v. Harco National Ins. Co.
(2003) 110 Cal. App. 4th 82, the court held that an insurance company’s alleged bad faith
conduct was not protected petitioning activity because it centered on the insurance
company’s “delay in responding to and resolving plaintiff’s claim,” as opposed to any
litigation related activity. (Id. at p. 94.) The allegations against Berg are not based on its
inaction, but instead based upon its demands for payment under insurance policies.
2. Berg’s conduct was not criminal as a matter of law.
Separately, Allstate argues that because Berg’s conduct allegedly violated a
criminal statue––Penal Code section 550––it is not protected by the anti-SLAPP statute.
We disagree. Although petitioning activity that is illegal “as a matter of law” is not
protected by the anti-SLAPP statute, this exception only applies in “narrow
circumstance[s]” in which the “ ‘the defendant concedes, or the evidence conclusively
establishes, that the assertedly protected speech or petition activity was illegal, as a
matter of law[.]’ ” (Flatley v. Mauro, supra, 39 Cal.4th at p. 316.) Here, Mr. Berg’s
declaration states that Berg “unequivocally” denies engaging in the fraudulent conduct
alleged by Berg. As such, Berg has not conceded it acted illegally. Mr. Berg’s
declaration also precludes a finding that Berg’s conduct violated Penal Code section 550
as a matter of law, since such a violation cannot be established as a matter of law without
conclusive evidence that Berg acted with the specific intent to defraud. (People v. Blick
(2007) 153 Cal. App. 4th 759, 773.)
Allstate’s reliance on Gerbosi v. Gaims, Weil, West & Epstein, LLP (2011) 193
Cal. App. 4th 435 to support its argument that Berg engaged in criminal conduct is
misplaced. In Gerbosi, the plaintiff’s cause of action against a law firm for invasion of
10
privacy was based on the firm’s activity of “wiretapping in the course of representing a
client,” which was indisputably unlawful. (Id. at p. 446.) The court concluded that such
activity was not protected by the anti-SLAPP statute, stating that “[u]nder no factual
scenario . . . is such wiretapping activity protected by the constitutional guarantees of free
speech and petition.” (Ibid.) Berg’s alleged conduct in this case relates to sending
prelitigation demand letters which, unlike wiretapping, is not inherently unlawful
conduct. Allstate’s reliance on Malin v. Singer (2013) 217 Cal. App. 4th 1283 is
misplaced for similar reasons. The alleged unlawful conduct in Malin was computer
hacking and wiretapping. (Id. at p. 1303.) Following Gerbosi, the court held that those
activities “do not fit one of the categories of protected conduct defined by the Legislature
in section 425.16, subdivision (e).” (Ibid.) Berg’s conduct was far different from
computer hacking and wiretapping.
To summarize, Berg’s alleged wrongful conduct arose from protected petitioning
activity that was not illegal as a matter of law. Accordingly, Berg has made a prima facie
showing that Allstate’s complaint is subject to an anti-SLAPP motion.
C. Probability of Prevailing on the Merits
Having determined that Berg’s alleged conduct is protected by the anti-SLAPP
statute, we turn to the issue of whether Allstate has demonstrated a probability of
prevailing on the merits of its complaint.
Berg argues that Allstate cannot demonstrate a probability of prevailing on the
merits because Berg allegedly fraudulent conduct is absolutely privileged under the
litigation privilege. Allstate counters that the litigation privilege does not apply for two
separate reasons. First, relying on Shafer v. Berger, Kahn, Shafton, Moss, Figler, Simon
& Gladstone (2003) 107 Cal. App. 4th 54 (Shafer), Allstate argues that the litigation
privilege should not apply because “application of the litigation privilege in this case
would be inconsistent with the purpose of [Insurance Code] section 1871.7.” Second,
Allstate argues that Berg’s alleged fraudulent conduct was not “communicative” in
nature, which it must be in order for the litigation privilege to apply.
11
The litigation privilege, as codified by Civil Code section 47, subdivision (b),
“precludes civil liability, except for malicious prosecution, for ‘any communication (1)
made in judicial or quasi-judicial proceedings; (2) by litigants or other participants
authorized by law; (3) to achieve the objects of the litigation; and (4) that have some
connection or logical relation to the action. [Citations.]’ ” (Cabral v. Martins (2009) 177
Cal. App. 4th 471, 485.) “[T]hese requirements for invoking the privilege are based upon
section 47(b)’s perceived purpose of affording litigants and witnesses ‘the utmost
freedom of access to the courts without fear of being harassed subsequently by derivative
tort actions.’ In other words, the litigation privilege is intended to encourage parties to
feel free to exercise their fundamental right of resort to the courts for assistance in the
resolution of their disputes, without being chilled from exercising this right by the fear
that they may subsequently be sued in a derivative tort action arising out of something
said or done in the context of the litigation.” (Edwards v. Centex Real Estate Corp.
(1997) 53 Cal. App. 4th 15, 29.) The litigation privilege has been given “expansive
application” by California courts. (Id. at p. 29.) “ ‘Any doubt as to whether the privilege
applies is resolved in favor of applying it. [Citations.]’ ” (Tom Jones Enterprises, Ltd. v.
County of Los Angeles (2013) 212 Cal. App. 4th 1283, 1294.)
1. The reasoning of Shafer is inapplicable.
In Shafer, the plaintiff sued an insurance company’s attorney for fraud. (Shafer,
supra, 107 Cal.App.4th at pp. 66-67.) The plaintiff claimed that when he attempted to
enforce a judgment against the insurance company pursuant to Insurance Code section
11580,8 the insurance company’s attorney falsely represented that the insurance company
had not agreed to indemnify its insured for willful acts when, it fact, it had. (Shafer,
supra, 107 Cal.App.4th at p. 66.) The attorney argued that the plaintiff’s fraud claim was
barred because the litigation privilege protected his statements about insurance coverage.
8
Insurance Code section 11580 states, in pertinent par, that “whenever judgment
is secured against the insured . . . , then an action may be brought against the insurer on
the policy and subject to its terms and limitations, by such judgment creditor to recover
on the judgment.” (Ins. Code, § 11580, subd. (b)(2).)
12
(Id. at p. 67.) The appellate court disagreed and held that “[t]he litigation privilege does
not protect fraudulent statements intended to prevent an injured party from exercising his
or her rights under [Ins. Code] section 11580.” (Id. at p. 80.) It provided several reasons
supporting its holding.
First, the court found that an injured party seeking to enforce a judgment against
an insurance company pursuant to Insurance Code section 11580 is a third-party
beneficiary of the insurance policy. (Shafer, supra, 107 Cal.App.4th at p. 80.) As such,
an insurance company owes a duty to act “ ‘ as if such injured person had been
specifically named in the policy.” (Ibid.) From there, the court continued: “Counsel
retained by an insurer has an obligation to be truthful in describing insurance coverage to
a third party beneficiary. The litigation privilege is not a license to deceive an injured
party who steps into the shoes of the insured. [Citation.] Section 11580 grants an injured
party the right to file suit in order to recover under the insurance policy. Coverage
counsel may not commit fraud in an attempt to defeat that right.” (Id. at p. 81.)
Next, the court stated that “to the extent there is a conflict between an injured
party’s rights under section 11580 and coverage counsel’s reliance on the litigation
privilege (Civ. Code, § 47, subd. (b)), the rights of the injured party prevail as they arise
under the more specific of the two statutes.” (Id. at p. 81.)
Finally, the court looked to the policies underlying the litigation privilege and
concluded that they would not be frustrated even if the privilege was inapplicable to fraud
claims under Insurance Code section 11580. It reasoned that “a primary purpose of the
litigation privilege is to safeguard litigants and witnesses from subsequent tort suits. The
privilege also encourages open channels of communication, promotes the zealous
protection of clients’ interests, and obligates litigants to expose the bias of witnesses and
the falsity of evidence during trial. [Citations.] Those purposes are not frustrated where,
consistent with section 11580, an injured party pursues a fraud claim against an insurer’s
coverage counsel.” (Shafer, supra, 107 Cal.App.4th at p. 81.) The court also believed
that the privilege’s purpose to enhance the finality of judgments and avoid endless
litigation would not be frustrated because “an action under section 11580 is not a second
13
bite at the apple. The statute does not offer an opportunity to retry issues, reweigh
evidence, or make a collateral attack.” (Ibid.)
The reasons articulated by the court in Shafer for refusing to apply the litigation
privilege are not present in this case. First, the third party beneficiary relationship that
existed in Shafer is much different than the relationship between Berg and Allstate.
Allstate, far from being a third party beneficiary of Berg, was a potential adversary of
Berg that would engage in negotiations with Berg regarding personal injury claims.
Because the relationship between Allstate and Berg differs from the parties’ relationship
in Shafer, it is much less likely that application of the litigation privilege in this case
would allow the privilege to be used as a “license to deceive an injured party.” (Shafer,
supra, 107 Cal.App.4th at p. 81.)
Next, unlike Insurance Code section 11580, the rights of an injured party under the
Insurance Code provision at issue here––section 1871.7––do not prevail over the
litigation privilege as rights that “arise under the more specific of the two statutes.”
(Shafer, supra, 107 Cal.App.4th at p. 81.) The principle that a specific statute prevails
over the litigation privilege applies only when a more specific statute “would be
‘significantly or wholly inoperable’ if the privilege applied.” (Komarova v. National
Credit Acceptance, Inc. (2009) 175 Cal. App. 4th 324, 339.) Here, even if we assume that
Insurance Code section 1871.7 is more specific than the litigation privilege, it would not
be rendered “significantly or wholly inoperable” by the litigation privilege. As pertinent
here, Insurance Code section 1871.7 is predicated on a violation of Penal Code section
550. That penal code provision prohibits a wide array of conduct related to the false
submission of insurance claims, most of which could arise before litigation is ever
contemplated. As just two examples, the statute proscribes knowingly causing a
vehicular accident for the purpose of presenting a fraudulent insurance claim, (Pen. Code,
§ 550, subd. (a)(3)), and misrepresenting an insured’s state of domicile when obtaining
motor vehicle insurance. (Pen. Code, § 550, subd. (b)(4).) It is difficult to foresee a
party successfully asserting the litigation privilege in these circumstances, or many of the
other circumstances the statute addresses.
14
Finally, unlike in Shafer, the failure to apply the litigation privilege in this case
would frustrate the purpose of the privilege. The litigation privilege “places the
obligation on parties to ferret out the truth while they have the opportunity to do so
during litigation.” (Edwards v. Centex Real Estate Corp., supra, 53 Cal.App.4th at
p. 30.) As far as we can tell, Allstate had ample opportunity to discover Berg’s alleged
fraud after it received Berg’s demand letters, which included a detailed listing of the
medical treatment received by Berg’s clients. Berg has instead raised the alleged fraud in
this collateral case, thus undermining the litigation privilege’s purpose of avoiding “an
unending roundelay of litigation.” (Silberg v. Anderson (1990) 50 Cal. 3d 205, 214.) “To
allow a litigant to attack the integrity of evidence after the proceedings have concluded,
except in the most narrowly circumscribed situations, such as extrinsic fraud, would
impermissibly burden, if not inundate, our justice system.” (Ibid.)
Accordingly, we find Shafer distinguishable from this case, and conclude that
application of the litigation privilege does not conflict with Insurance Code section
1871.7.
2. The demand letters were communicative.
Allstate also argues that the litigation privilege is inapplicable because the conduct
alleged against Berg is not communicative in nature. We find no merit in this argument.
“[T]he key in determining whether the privilege applies is whether the injury allegedly
resulted from an act that was communicative in its essential nature.” (Rusheen v. Cohen,
supra, 37 Cal. 4th 1048, 1058.) Here, the gravamen of Allstate’s case against Berg is that
Berg committed insurance fraud through the sending of prelitigation demand letters.
Attorney demand letters such as these are a “classic example” of communicative conduct
to which the litigation privilege applies. (Edwards v. Centex Real Estate Corp., supra, 53
Cal.App.4th at p. 35, fn. 10 [“The classic example of an instance in which the privilege
would attach to prelitigation communications is the attorney demand letter threatening to
file a lawsuit if a claim is not settled”].)
Having concluded that Berg’s conduct was communicative, we also conclude that
Berg has satisfied the other elements of the litigation privilege, which Allstate does not
15
dispute have been met. Since the litigation privilege applies, Allstate cannot show a
probability of prevailing on the merits in this case.9 Berg’s anti-SLAPP motion should
have been granted.
DISPOSITION
The order denying Berg’s special motion to strike the complaint is reversed, and
the trial court is directed to enter a new order granting the motion. Berg is entitled to its
costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1).)
9
Having determined that the litigation privilege applies, we need not address
Berg’s alternative argument that Allstate did not show a probability of prevailing on the
merits because it did not put forth competent evidence to support its insurance fraud
claim. We also need not address Berg’s contention that the trial court erred in overruling
several evidentiary objections raised by Berg.
16
_________________________
REARDON, ACTING P. J.
We concur:
_________________________
RIVERA, J.
_________________________
STREETER, J.
People v. Berg A139054
17