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Escobar v. Farmers Insurance Exchange

California Court of Appeals, Fourth District, Second Division
May 31, 2011
No. E051666 (Cal. Ct. App. May. 31, 2011)

Opinion

NOT TO BE PUBLISHED

APPEAL from the Superior Court of Riverside County No. RIC528112 John D. Molloy, Judge.

Hanson, Hales, Gorian & Bradford and Brent J. Hales for Plaintiffs and Appellants.

Stone & Hiles and David Schaffer for Defendant and Respondent.


OPINION

CODRINGTON J.

I

INTRODUCTION

Plaintiffs Jessica Escobar, Nestor Calderon, and Carmenza Tamayo (plaintiffs) appeal a judgment of dismissal of their malicious prosecution complaint, after the trial court granted defendant Farmers Insurance Exchange’s (Farmers) special motion to strike and dismiss plaintiffs’ complaint under Code of Civil Procedure section 425.16, Insurance Code section 1872.5, and Civil Code section 47, subdivision (b).

Unless otherwise noted, all statutory references are to the Code of Civil Procedure.

Plaintiffs contend the trial court erred in finding that plaintiffs failed to establish a probability of prevailing on their malicious prosecution complaint. Plaintiffs argue there was evidence Farmers opened a fraud investigation against plaintiffs and reported the suspected insurance fraud to the Department of Insurance (DOI), without probable cause and with malice.

We conclude the trial court did not err in granting Farmers’ special motion to strike and dismiss (anti-SLAPP motion). Plaintiffs did not provide sufficient evidence to establish a probability they would prevail on the merits. Farmers is immune from liability for malicious prosecution under Insurance Code section 1872.5. In addition, plaintiffs cannot demonstrate a probability of success as to plaintiffs’ other tort causes of action because Farmers’ fraud investigation report is privileged under Civil Code section 47, subdivision (b)(3). We affirm the trial court’s ruling granting Farmers’ anti-SLAPP motion as to the entire complaint.

The acronym, “SLAPP, ” refers to strategic lawsuit against public participation. Anti-SLAPP legislation is codified in section 425.16.

II

FACTUAL AND PROCEDURAL BACKGROUND

After Carmenza Tamayo (Tamayo) and Nestor Calderon (Calderon) got off work at the Pechanga Resort & Casino around 11:00 p.m., on December 15, 2005, they carpooled home together in the minivan driven by Tamayo. On the way home, shortly before midnight, Stella Rivera rear-ended Tamayo’s minivan. Both cars were traveling Northbound on the I-15, in the number four lane, on the far right of the highway, next to the shoulder.

We refer to the minivan as Tamayo’s minivan because she was driving it at the time of the accident. However, according to Farmers’s fraud investigator Jaclyn Hinel, Jesus Gonzales was the owner of the minivan. His relationship with the plaintiffs is unclear from the record.

California Highway Patrol (CHP) Officer Sandoval conducted a preliminary investigation at the accident scene. He interviewed witnesses and inspected the damage to Tamayo’s and Rivera’s vehicles. Both vehicles were towed from the accident site. Tamayo’s daughter, Jessica Escobar arrived at the scene and gave Tamayo and Calderon a ride home. Rivera had automobile insurance with Farmers under her mother’s policy.

The next day Farmers was notified of the accident and opened a claim file. The file was assigned to Farmers claims representative Michelle Samario (Samario) for handling.

Tamayo and Calderon brought third party claims against Rivera’s Farmers insurance policy for personal injuries arising from the accident. Farmers conducted a preliminary investigation and determined on December 28, 2005, that Rivera was 100 percent at fault. That same day, after making this finding, Samario notified Rivera of the liability determination. Rivera told Samario that Tamayo had caused the accident by coming to a sudden, abrupt stop for no apparent reason, even though traffic was flowing smoothly. Rivera identified two independent witnesses, Daniel Wright (Wright) and Gena Cabello (Cabello), to corroborate her account of the accident.

Wright’s Statement

On January 24, 2006, Samario took Wright’s statement. Wright stated that, around midnight on December 15, 2005, he pulled off the side of the northbound I-15 to assist a driver who had lost control of her car while traveling at least 100 miles per hour. Her car bounced off the center divider, hit a semi-truck, and slammed into a tree on the side of the freeway.

As Wright was getting out of his car parked on the shoulder of the freeway, he heard “screeching brakes” and noticed a minivan had slowed almost to a complete stop in the number four lane, closest the shoulder of the freeway. A young woman driving a Corolla smashed into the back of the minivan. At the time of the collision, nothing was obstructing the flow of traffic in front of the minivan. Wright believed there was only one occupant in the minivan and in the Corolla. The driver of the minivan complained of neck injuries. The police officer talked to the drivers of both vehicles and to Wright.

By a letter dated January 24, 2006, Samario notified Tamayo’s attorney that Farmers would not accept liability until it determined who was at fault for the accident. Samario requested Tamayo provide a recorded statement.

Samario sent another letter dated February 1, 2006, to Tamayo’s attorney notifying him that Farmers concluded Tamayo was 50 percent at fault for the accident because she was driving very slowly or had stopped on the highway for no reason, in violation of the minimum speed law. Farmers thus declined 50 percent of Tamayo’s claim.

Tamayo’s Statement

On March 15, 2006, Samario took Tamayo’s recorded statement. Tamayo stated that on December 15, 2005, she was employed at Pechanga Casino. Tamayo was in a car accident on that day, at 11:30 p.m., on the northbound I-15, in the number four lane. Tamayo was heading home from work. She was travelling at approximately 70 miles per hour but slowed down when she noticed there had been an accident up ahead in her lane. There was traffic and many vehicles. She also saw a fire.

The driver behind her hit Tamayo’s van when Tamayo slowed to about 60 miles per hour. Nothing was in the lane in front of her. The vehicles and debris from the first accident were not in her lane. She had not stopped when her car was hit. She only slowed down when she saw the traffic from the accident up ahead. The cars in the first accident had pulled over to the freeway shoulder. Cars had stopped on the shoulder to help the drivers in the first accident.

Tamayo told Samario she had one passenger, Nesto Calderon, who was a coworker. He was seated in the front passenger seat of the minivan. Tamayo suffered neck, back, and shoulder injuries from the accident. Tamayo believed there were no witnesses to the accident. She also believed there were two people in the Corolla, a young woman and man, but Tamayo did not see them in the car. They had already left the car when she saw them.

Tamayo told the woman (Rivera) that she was sorry but that Rivera should have been more careful. Rivera said she was sorry. Rivera and the man did not appear to be injured. Tamayo “guessed” the man and Rivera were in the car together. Tamayo believed the man was actually driving and the car was travelling at a high speed because it hit Tamayo’s van very hard.

On March 30, 2006, Samario called Rivera, who confirmed she was driving at the time of the accident and denied she had a passenger. Rivera said Tamayo might have thought Rivera had a passenger because a witness, Wright, came up to Rivera right after the accident.

Samario identified the following three factors, referred to as “red flag” insurance fraud indicators: (1) There were conflicting statements regarding whether there were passengers in Tamayo and Rivera’s vehicles; (2) Calderon was recently identified as an injured passenger and was represented by Tamayo’s attorney; and (3) Tamayo denied there were any witnesses. These red flag indicators are factors which the National Insurance Crime Bureau (NICB) has determined are indicative of insurance fraud. Consequently, on March 30, 2006, Farmers reassigned the claim file to fraud investigator Jaclyn Hinel of Farmers’s special investigative unit (SIU).

On April 5, 2006, Hinel hired TinGoose Private Investigators (TinGoose) to obtain recorded statements from Gena Cabello (Cabello), Calderon, and Rivera, whose original statement had been inadvertently destroyed, according to Hinel. Hinel also told TinGoose to contact the CHP.

Rivera’s Statement

On April 7, 2006, private investigator Janet Tinch of TinGoose took Rivera’s recorded statement. Rivera stated that she was insured by Farmers under her mother’s policy. Rivera did not have any passengers in her car at the time of the accident. While travelling at the normal rate of speed (65 to 70 miles per hour), Rivera noticed a van up ahead and then suddenly slammed into the back of the van. Before the accident, she did not notice the van’s brake lights come on. Rivera was not sure if the van driver applied her brakes before the accident. Rivera did not apply her brakes before the impact. She applied her brakes too late and tried swerving into the number three lane. When asked if Rivera was distracted at the time of the accident, Rivera said she probably had quickly changed the radio station.

Rivera got out of her vehicle immediately after the accident. Wright approached her and asked if she was okay. Rivera said she was fine. Rivera did not know Wright before the accident.

Rivera did not approach Tamayo because Tamayo’s vehicle was quite a distance ahead of Rivera’s car. Tamayo came up to Rivera and started yelling at Rivera that the accident was Rivera’s fault. Rivera asked Tamayo why she slowed down and told Tamayo she should not have done so. Tamayo said drivers are supposed to slow down when passing an accident. Rivera and Wright disagreed. Rivera did not see anyone get out of Tamayo’s vehicle other than Tamayo. Tamayo never mentioned she had a passenger. Rivera did not hear Tamayo complain of any injuries at the accident scene.

A CHP officer talked to Tamayo, Rivera, Wright, and witness Cabello. Cabello came up to Rivera after Wright did to assist Rivera. Cabello had previously stopped to help the people in the other accident. Rivera called her boyfriend, Ryan Smith, to come get her. When Rivera and Smith left the accident scene, they drove by Tamayo’s van. Rivera did not see anyone in the van.

Two days after the accident, Tamayo called Rivera and asked for Rivera’s insurance information. Rivera refused to give it to her.

Cabello’s Statement

On April 15, 2006, Tinch took Cabello’s recorded statement. Cabello stated she pulled off the I-15, onto the shoulder, after seeing an accident involving a semi-truck and car. She was going to help the driver of the car, which was in some trees. Then another car stopped in the number four lane of the highway and was rear-ended by another vehicle when it stopped. The traffic had not stopped in front of the car. There did not appear to be anything in front of the vehicle. There was no obstruction. The traffic was travelling at 70 miles per hour. The car that stopped did not skid. The driver was slowing down to look at the cars on the side of the road. The second car that rear-ended the first car skidded. Cabello called 911 and said there had been a second accident.

Cabello did not see any passengers in the car that was rear-ended and no one accompanied the driver after she got out of her car, until someone later showed up. Both drivers in the second accident were by themselves and neither complained of injuries. Three CHP cars arrived at the accident scene. Cabello gave a statement to an officer. The officers also talked to Tamayo.

After the accident, an insurance company called and left a message but Cabello did not return the call. Cabello did not give a statement to anyone other than Tinch.

Cabello stated that, if Tamayo was claiming she had a passenger, she was lying. No one got out of Tamayo’s vehicle and accompanied her. Tamayo’s daughter showed up later, when the police were there.

In Tinch’s April 24, 2006, preliminary report to Farmers, she summarized TinGoose’s investigation. Tinch erroneously referred to Calderon as Jesus Gonzales. Tinch stated that TinGoose made several attempts to take Calderon’s statement by contacting his attorney but did not receive any response. Tinch was still trying to contact the CHP officers at the accident scene.

Tinch sent Farmers a final report on May 9, 2006, detailing all of the investigation TinGoose had conducted and summarizing Rivera and Cabello’s recorded statements. Tinch reported that investigation, as requested by Farmers, was complete for the most part. Due to a lack of cooperation by Tamayo’s attorney, TinGoose was unable to obtain a statement from Tamayo’s alleged passenger, “Jesus Gonzales.” Tinch noted that neither Rivera nor the two independent witnesses saw a passenger in Tamayo’s vehicle. Tinch stated that TinGoose had concluded its preliminary investigation and would suspend efforts to interview Tamayo’s passenger and law enforcement officers unless otherwise instructed by Farmers.

Hinel concluded Calderon was not a passenger in Tamayo’s van. She also suspected the accident was staged and Tamayo and Calderon were lying. Consequently, on June 5, 2006, Hinel reported the suspected fraudulent claims to the DOI and NICB because Hinel believed she was required to do so under Insurance Code section 1872.4.

On June 19, 2006, the DOI notified Samario that the DOI had opened a file for Tamayo and Calderon’s claims. The following day, Hinel received two letters from CHP investigator Roland Burgess, who was assigned to the DOI’s Urban Organized Crime Fraud Unit. Burgess was assigned to investigate Tamayo and Calderon’s claims. Burgess requested that Farmers provide copies of its claim file, along with all recorded statements and police reports. Burgess also informed Hinel that Farmers was immune from liability for reporting suspected insurance fraud under Insurance Code section 1872.5.AA 40-41, 154-155}

By email on August 16, 2006, Hinel provided Burgess with a copy of Farmers’s final internal SIU report dated August 16, 2006, describing Farmers’s investigation and conclusions. In the report, Farmers referred to Calderon by his correct name but also intermittently referred to him by the erroneous name of Jesus Gonzales. Hinel stated in the report that an investigator attempted to meet with the CHP officer who took the accident report but he was on military leave and the investigator was unable to speak to anyone else regarding the accident.

On September 26, 2006, Burgess advised Hinel that Burgess believed Calderon was not a passenger in Tamayo’s vehicle. Burgess requested copies of Farmers’ claim file, which was provided.

On March 21, 2007, Burgess sent Hinel an email stating that, as a result of DOI’s investigation, it had referred the case to the Riverside County District Attorney (DA) for filing three counts of felony insurance fraud and criminal conspiracy against Tamayo; two felony counts of insurance fraud and conspiracy against Calderon; and one felony count of insurance fraud and conspiracy against Escobar for corroborating Tamayo’s story during Burgess’s interview of Escobar.

On May 22, 2008, the DA filed a second amended information against plaintiffs, charging each with the felony of presenting a fraudulent insurance claim (Pen. Code, § 550, subd. (a)(1)). Escobar was also charged with making a false statement in connection with an insurance claim (Pen. Code, § 550, subd. (b)(1)). After a criminal trial on the charges in June 2008, the jury found plaintiffs not guilty of all charges.

Malicious Prosecution Action

On June 4, 2009, plaintiffs filed a complaint against Farmers for malicious prosecution, negligence, and intentional and negligent infliction of emotional distress. Plaintiffs alleged that Farmers failed properly to initiate, handle, and resolve Tamayo and Calderon’s insurance claims and Farmers was instrumental in instituting insurance fraud allegations against them without probable cause and with malice.

On April 22, 2010, Farmers filed a special motion to strike plaintiffs’ complaint under section 425.16 (an anti-SLAPP motion). Farmers argued that plaintiffs could not prevail on their malicious prosecution claim because Farmers was immune from liability under Insurance Code section 1872.5 and the other tort claims were barred by the litigation privilege under Civil Code section 47, subdivision (b)(3). Plaintiffs opposed the motion, arguing they demonstrated a probability of success as to the malicious prosecution cause of action.

On June 14, 2010, the trial court granted Farmers’s anti-SLAPP motion as to the malicious prosecution cause of action on the ground there was no evidence Farmers’s fraud report to the DOI lacked probable cause or that Farmers made the report with actual malice. The court found that Farmers was immune from liability for malicious prosecution under Insurance Code section 1872.5 and plaintiffs’ other tort claims were barred by the litigation privilege (Civ. Code, § 47, subd. (b)(3)). The trial court ordered plaintiffs’ complaint stricken and dismissed with prejudice. The court entered a judgment in favor of Farmers and against plaintiffs.

III

PROBABILITY OF PREVAILING ON MALICIOUS PROSECUTION CLAIM

Plaintiffs contend they established a probability of prevailing on their malicious prosecution cause of action. We disagree. Farmers is immune from liability under Insurance Code section 1872.5.

A. Anti-SLAPP Law

The anti-SLAPP statute, section 425.16, authorizes the trial court to strike a cause of action against a person arising from that person’s exercise of constitutional rights to free speech and petition for redress of grievances. (§ 425.16; see Flatley v. Mauro (2006) 39 Cal.4th 299, 311-312.) The Legislature enacted the statute to discourage lawsuits brought primarily to chill the valid exercise of these constitutional rights. (Id. at p. 312.) The anti-SLAPP motion provides an expeditious procedure to screen out meritless claims. (Ibid.)

Under section 425.16, the moving party, usually the defendant, bears the initial burden of showing that the cause of action arose from the defendant’s acts in furtherance of rights to petition and free speech. (§ 425.16, subd. (b)(1); see Zamos v. Stroud (2004) 32 Cal.4th 958, 965.) If the defendant makes this showing that the challenged cause of action arises from protected activity, the burden shifts to the plaintiff to establish that there is a probability of prevailing on the merits of his or her claim. (§ 425.16, subd. (b)(1); see Zamos, at p. 965.) To satisfy this burden, the plaintiff must demonstrate that the complaint is legally sufficient and the elements of each claim are supported by a sufficient prima facie showing of facts such that, if the evidence submitted in support of these facts is credited, the plaintiff would be entitled to a favorable judgment. (Ibid.)

A trial court’s ruling on an anti-SLAPP motion is reviewed de novo. (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3 (Soukup).) The issues in an anti-SLAPP motion are framed by the pleadings. (Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 672-673.) We independently review the pleadings and the affidavits submitted by the parties and determine whether the plaintiff has made a prima facie showing of facts necessary to establish a claim at trial. (Soukup, at p. 269, fn. 3; Paulus, at p. 673.) The plaintiff may not rely on the complaint alone, but must produce admissible evidence to support the elements of his claim. (Paulus, at p. 673.) The role of the trial court is not to weigh the credibility or comparative strength of the parties’ evidence. (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 821.) The court simply determines whether the defendant’s evidence defeats the plaintiff’s prima facie showing as a matter of law. (Ibid.; Colt v. Freedom Communications, Inc. (2003) 109 Cal.App.4th 1551, 1557.)

Plaintiffs do not challenge on appeal the trial court’s ruling granting Farmers’s anti-SLAPP motion as to plaintiffs’ tort claims for negligence, and intentional and negligent infliction of emotional distress. Perhaps plaintiffs recognize they are unable to prevail on these claims since they are founded on Farmers’s fraud report, which is absolutely privileged under Civil Code section 47, subdivision (b)(3), commonly referred to as the litigation privilege. (Fremont Comp. Ins. Co. v. Superior Court (1996) 44 Cal.App.4th 867, 876-877 (Fremont).) With the exception of the malicious prosecution claim, the litigation privilege precludes tort liability for reporting suspected criminal activity to the police or local prosecutor, even if a report is made maliciously. (Id. at p. 875; Kimmel v. Goland (1990) 51 Cal.3d 202, 209.)

The litigation privilege (Civ. Code, § 47, subd. (b)(3)) extends to reports made to quasi-judicial government agencies, such as the DOI. (Fremont, supra, 44 Cal.App.4th at p. 875; Kimmel v. Goland, supra, 51 Cal.3d at p. 209.) As a consequence, plaintiffs cannot prevail on their negligence and emotional distress claims.

B. Malicious Prosecution

Plaintiffs’ malicious prosecution cause of action is the only claim plaintiffs argue on appeal that the trial court erred in striking under the anti-SLAPP statute. A malicious prosecution claim falls within the purview of the anti-SLAPP statute because, by definition, it is based on an underlying lawsuit, i.e., a petition to the courts for redress of grievances. (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 734-735; Robinzine v. Vicory (2006) 143 Cal.App.4th 1416, 1421.) “To prevail on a malicious prosecution claim, the plaintiff must show that the prior action (1) was commenced by or at the direction of the defendant and was pursued to a legal termination favorable to the plaintiff; (2) was brought without probable cause; and (3) was initiated with malice. [Citation.]” (Soukup, supra, 39 Cal.4th at p. 292.)

C. Immunity Under Insurance Code Section 1872.5

Plaintiffs are unable to establish a probability of prevailing on the merits of their malicious prosecution claim because Farmers is immune from liability under Insurance Code section 1872.5 of the Insurance Frauds Prevention Act (Ins. Code, § 1871 et seq.). The purpose of the act is to deter insurance fraud. (Fremont, supra, 44 Cal.App.4th at p. 875.) In furtherance of this purpose, insurers are required to maintain an insurance fraud investigation unit. (Ins. Code, § 1875.20.) In addition, under the act, an insurer “that reasonably believes or knows that a fraudulent claim is being made shall, within 60 days after determination by the insurer that the claim appears to be a fraudulent claim, ” report the suspected fraudulent claim to the DOI. (§ 1872.4, subd. (a).) “Whenever the [California insurance] commissioner is satisfied that fraud, deceit, or intentional misrepresentation of any kind has been committed in the submission of the claim, he or she shall report the violations of law... to the district attorney....” (§ 1872.4, subd. (a).)

Plaintiffs’ malicious prosecution claim is premised on Farmers reporting Tamayo’s and Calderon’s insurance claims as suspected fraudulent claims. Plaintiffs claim Farmers’s fraud report was based on an inept and incomplete investigation and insufficient evidence of fraud. Section 1872.5, however, provides insurers with immunity for reporting fraud, unless there is actual malice. Under Insurance Code section 1872.5, “No insurer, or the employees or agents of any insurer, shall be subject to civil liability for libel, slander, or any other relevant tort cause of action by virtue of providing any of the following without malice: [¶] (a) Any information or reports relating to suspected fraudulent insurance transaction furnished to law enforcement officials, or licensing officials governed by the Business and Professions Code. [¶] (b) Any reports or information relating to suspected fraudulent insurance transaction furnished to other persons subject to this chapter. [¶] (c) Any information or reports required by this article or required by the commissioner under the authority granted in this chapter.” (Italics added.)

D. Malice

Plaintiffs argue they demonstrated Farmers is not immune from liability under Insurance Code section 1872.5 because Farmers acted with malice by initiating a fraud investigation and reporting insurance fraud to the DOI without probable cause and without conducting a thorough investigation, knowing the fraud report would likely result in criminal prosecution of plaintiffs for insurance fraud. Plaintiffs claim Farmers failed to consider significant exculpatory evidence and interview key witnesses. For instance, Farmers failed to review the 911 tape, in which Tamayo mentioned she had a passenger. Farmers also did not interview Officer Sandoval or take into account Rivera’s initial statement that, when she rear-ended Tamayo, Rivera’s attention was diverted to a previous collision. In addition, Farmers did not review the CHP traffic collision report or consider the 911 tape in which Cabello said there was debris in the roadway causing flat tires. Farmers also did not interview Tamayo’s coworkers or Calderon, who confirmed that Calderon routinely commuted with Tamayo from work. Farmers’s report also incorrectly named Tamayo’s passenger as Jesus Gonzalez, rather than Nestor Calderon.

The California Supreme Court in Frommoethelydo v. Fire Ins. Exchange (1986) 42 Cal.3d 208, 217 (Frommoethelydo), explained that, in order to defeat the conditional privilege under Insurance Code section 1872.5 [formerly Ins. Code, § 12993], the plaintiff must establish actual malice on the insurer’s part in reporting suspected fraud. Such malice is defined in Civil Code section 48a, subdivision 4(d) as: “that state of mind arising from hatred or ill will toward the plaintiff; provided, however, that such a state of mind occasioned by a good faith belief on the part of the defendant in the truth of the libelous publication or broadcast at the time it is published or broadcast shall not constitute actual malice.” (Civ. Code, § 48a, subd. 4(d); italics added; see also Frommoethelydo, at p. 217.)

According to Frommoethelydo, “‘“The malice necessary to defeat a qualified privilege is ‘actual malice’ which is established by a showing that the publication was motivated by hatred or ill will towards the plaintiff or by a showing that the defendant lacked reasonable grounds for belief in the truth of the publication and therefore acted in reckless disregard of the plaintiff’s rights (citations).”’” (Frommoethelydo, supra, 42 Cal.3d at p. 217.)

In Frommoethelydo, during an investigation of an insured’s claim for a burglary loss, the insurer suspected insurance fraud and reported the matter to the State Bureau of Fraudulent Claims as is required by Insurance Code section 12992. The insured was arrested but criminal charges were eventually dismissed. The insured then brought an insurance bad faith action against his insurer, alleging violations of section 790.03, subdivisions (h)(3) and (h)(5), among other causes of action. He argued that a more thorough investigation would have established that he had not committed fraud. (Frommoethelydo, supra, 42 Cal.3d at pp. 213-215.) The Supreme Court held that because the insurer’s report was privileged, the insured could not recover for injuries attributable to the report. Nevertheless, the court stated that an insured may recover damages for failure to investigate in violation of the statutory duty to engage in fair practices where recovery is not predicated upon injuries due to a privileged report. (Id. at pp. 219-220.) Here, as in Frommoethelydo, plaintiffs cannot prevail on their malicious prosecution claim because the claim is based on Farmers reporting insurance fraud.

Insurance Code section 12992 was repealed in 1989, and recodified in Insurance Code section 1872.4.

The Frommoethelydo court rejected the plaintiff’s argument that plaintiff established malice by showing (1) the insurer stood to profit if the plaintiff was successfully prosecuted for fraud, (2) the insurer’s employee intentionally prepared his report in a manner likely to result in prosecution, (3) the insurer did not interview two key witnesses, (4) the insurer did not interview the plaintiff before reporting the suspected fraud to the bureau or advise the plaintiff of the insurer’s intent to do so, and (5) the insurer did not consult an expert document examiner. (Frommoethelydo, supra, 42 Cal.3d at p. 218.)

The court in Frommoethelydo concluded these factors were not sufficient to establish malice. (Frommoethelydo, supra, 42 Cal.3d at p. 218.) When the qualified privilege under Insurance Code section 1872.5 is involved, a true and complete report is not actionable regardless of any showing of malice. (Frommoethelydo, at p. 216.) As stated in Frommoethelydo, “Once an insurer has evidence providing probable cause to believe an insurance fraud has occurred and determines to make a report to the Bureau, it may properly make its report, and the fact that the report is designed to secure prosecution does not show malice so long as the report does not contain known inaccuracies and is not incomplete.” (Id. at p. 218.) When there is evidence that the communication was false or inaccurate, the privilege is not lost if the defendant had reasonable grounds for believing the communication to be accurate. (Id. at p. 217.)

The insured in Frommoethelydo argued, as do plaintiffs in the instant case, that the insured demonstrated malice by submitting an incomplete report and not adequately investigating the insurance claim before reporting suspected insurance fraud. (Frommoethelydo, supra, 42 Cal.3d at p. 218.) The court in Frommoethelydo, rejected these arguments, stating: “Application of the duty to investigate [] actions based on a report by an insurer to the Bureau would be in conflict with the privilege established by section 12993 [now Insurance Code section 1872.5] for nonmalicious reports. As we have seen, the privilege applies unless the insurer acts out of hatred or ill will or in reckless disregard of the insured’s rights. There is no evidence that the insurer acted out of hatred or ill will or in reckless disregard of the insured’s rights. Permitting recovery for an inaccurate report on the basis of a lesser standard – a duty to further investigate based on the implied covenant, fiduciary duty, or the duty to engage in fair practices – would mean that the privilege is illusory. We conclude that when an insured seeks damages on the basis of an insurer’s report to the Bureau, the privilege of section 12993 must take precedence over the ordinary duty to investigate. In the instant case, plaintiff has failed to present evidence that the insurer acted maliciously in making its report to the Bureau.” (Id. at p. 219.)

Here, there is no evidence that the insurer acted out of hatred or ill will or in reckless disregard of the insured’s rights. (Frommoethelydo, supra, 42 Cal.3dat p. 219.) Farmers investigated Tamayo’s and Calderon’s claims. A claims representative conducted a preliminary investigation and found three factors consistent with factors determined by the NICB to suggest possible fraud: (1) plaintiffs claimed Calderon was a passenger in Tamayo’s van at the time of the accident, whereas Rivera and two independent witnesses claimed there was no passenger in Tamayo’s van; (2) Calderon was later identified as an injured passenger and was represented by the same attorney representing Tamayo; and (3) Tamayo denied there were any witnesses, whereas Rivera produced two independent witnesses.

Based on these fraud indicators, Farmers reasonably suspected insurance fraud and assigned the case to its SIU for further investigation. Farmers’s SIU fraud investigator retained a private investigation company, TinGoose, to investigate the claims further. TinGoose completed the majority of the requested investigation, noting that it had attempted but had not succeeded in obtaining Calderon’s statement and was in the process of contacting law enforcement. At this point, Farmers concluded it was required to report the suspected fraud claims to the DOI.

Under the Insurance Frauds Prevention Act, Farmers was required to report suspected insurance fraud claims to the DOI within 60 days “after determination by the insurer that the claim appears to be a fraudulent claim.” (Ins. Code, § 1872.4, subd. (a).) Farmers assigned the claim to Hinel of its special investigations unit on March 30, 2006, because Farmers suspected fraud and, upon receiving TinGoose’s final report in May, Farmers had not received compelling evidence refuting Farmers’s suspicion of fraud. Farmers based its suspicion of fraud on the following four NICB fraud factors: (1) There were conflicting statements regarding whether Tamayo and Rivera had any passengers; (2) Tamayo and her alleged passenger, Calderon, were represented by the same attorney, perhaps indicating collusion; (3) Tamayo placed all blame on the insured, Rivera, and denied contributing to the collision by stopping suddenly, indicating the accident was staged; (4) Tamayo reported there were no witnesses, whereas two witnesses came forward and both support the insured’s version that Tamayo stopped for no viable reason. In addition, Calderon’s attorney would not allow Farmers’s investigator to take Calderon’s statement in person.

As in Frommoethelydo, any deficiency in Farmers’s investigation, resulting in not obtaining exculpatory evidence before reporting the suspected fraud, is not a sufficient basis for finding actual malice. There is no evidence that Farmers knowingly or recklessly overlooked or ignored exculpatory evidence. There is also no evidence Farmers’s fraud report was incomplete or that Farmers willfully and knowingly concealed exculpatory evidence within its possession. Even assuming Farmers did not complete all possible investigation, this does not constitute malice under Frommoethelydo. The privilege of section 1872.5 takes precedence over the ordinary duty to investigate. (Frommoethelydo, supra, 42 Cal.3d at p. 219.) In addition, plaintiffs cannot recover damages for an incomplete or deficient investigation because plaintiffs are not asserting a claim for breaching a duty to investigate, in violation of the statutory duty to engage in fair insurance practices, since plaintiffs are third party insureds.

Any claim of actual malice is further dispelled by the fact both the DOI and DA recommended prosecution of plaintiffs for presenting fraudulent claims, after reviewing the evidence obtained from Farmers’s investigation, along with additional evidence the DOI and DA obtained investigating the claims, including Escobar’s statement taken by Burgess. Farmers’s claims representative, Samario, Farmers’s SIU investigator, Hinel, DOI investigator, Burgess, and the DA all believed Tamayo’s and Calderon’s insurance claims were fraudulent. This strongly suggests that Farmers acted reasonably and without malice in reporting the suspected insurance fraud to the DOI.

Plaintiffs argue that Farmers provided the DOI with an investigative report containing known inaccuracies, consisting of referring to Calderon erroneously as Jesus Gonzales. This error does not support a finding of malice that would defeat immunity under section 1872.5. Although Farmers forwarded to the DOI a copy of Farmers’s final investigation report, which intermittently erroneously refers to Calderon as Jesus Gonzales, it is apparent this was an inadvertent error originating from TinGoose’s investigation reports. There is no evidence that the error was material or prejudicial to plaintiffs in any way.

Plaintiffs have not demonstrated a probability of prevailing on their malicious prosecution claim because they cannot overcome Farmers’s immunity defense under Insurance Code section 1872.5. Plaintiffs have not established Farmers’s fraud report to the DOI was incomplete or that any inaccuracies were malicious. Farmers was required by law to report suspected fraud within 60 days and the record shows that Farmers reasonably suspected fraud, investigated the claims, and reported the suspected fraud based on established NICB factors substantiated by evidence provided through investigation of the claims. While additional investigation likely would have provided convincing evidence refuting Farmers’s suspicion of fraud, Farmers is nevertheless immune from liability for reporting suspected fraud under section 1872.5.

IV

DISPOSITION

The judgment is affirmed. The parties are ordered to bear their own costs on appeal.

We concur: RICHLI Acting P.J., KING J.


Summaries of

Escobar v. Farmers Insurance Exchange

California Court of Appeals, Fourth District, Second Division
May 31, 2011
No. E051666 (Cal. Ct. App. May. 31, 2011)
Case details for

Escobar v. Farmers Insurance Exchange

Case Details

Full title:JESSICA ESCOBAR et al., Plaintiffs and Appellants, v. FARMERS INSURANCE…

Court:California Court of Appeals, Fourth District, Second Division

Date published: May 31, 2011

Citations

No. E051666 (Cal. Ct. App. May. 31, 2011)