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March 2014

Common Interest Privilege Protects Claims Representative’s Statements to Lawyer

In Hui v. Sturbaum, the California Court of Appeal affirmed a trial court’s order granting the insurance company claims representative’s anti-SLAPP motion to strike the operative complaint pursuant to Code of Civil Procedure section 425.16) on the grounds the investigator’s statements to a personal injury lawyer were protected by the qualified common interest privilege set forth in Civil Code section 47(c).

According to the court’s opinion, Dr. Anthony K. Hui is a chiropractor who received patient referrals from a personal injury law firm run by attorney Frank Kim.  In 2003, Hui settled a civil case with a former patient who claimed he “mishandled” her, received a 30-day suspension of his license and was placed on probation for five years.

In 2008, Beth Sturbaum was a claims representative for Federated Mutual Insurance Co.  Sturbaum handled a liability claim involving chiropractic services performed by Hui for two women (the claimants) who had been in a car accident.  During her review of Hui’s invoices, Sturbaum noted services described on the invoices that she believed violated the Business and Professions Code and California regulations governing chiropractors.

In 2010, the Department of Insurance (DOI) informed Sturbaum it was investigating Hui’s chiropractic business for potential fraudulent activity and asked her to provide information.  Sturbaum cooperated and provided the requested information.  In June 2010, Kim’s assistant called Sturbaum to settle the liability claim.  According to Kim’s assistant, Sturbaum stated that the case was not worth money because it was a small impact matter and Sturbaum questioned the medical treatment.  Sturbaum also stated that the billings were excessive because of the type of impact in the car accident and that the billings could be fraudulent.  Sturbaum added that Hui had past misconduct and should have stopped seeing female patients.  Finally, Sturbaum may have suggested that Kim should not have any business dealings with Hui.

In November 2010, Hui filed a first amended complaint alleging trade libel, libel per se and slander. He alleged he became the target of a DOI investigation pursuant to “false reports” submitted by Sturbaum and others who claimed he was “running a fraudulent chiropractic business, conducted intentional overcharges for services, and engaged in fraudulent and improper billing.”  Hui also alleged Sturbaum and others told personal injury attorneys in the area not to send clients to him.

Sturbaum filed an anti-SLAPP motion to strike the operative complaint, arguing that her communications with the DOI were privileged under Civil Code section 47; her statements to any third parties were protected by the qualified common interest privilege under section 47(c); and Hui could not establish a probability of prevailing on his claims against her.  The trial court agreed with Sturbaum and granted her anti-SLAPP motion. Hui appealed only as to the trial court’s ruling that Sturbaum’s statements to the personal injury lawyer were protected by the common interest privilege.

The Court of Appeal stated that in ruling on an anti-SLAPP motion, the moving defendant carries the initial burden of demonstrating that the cause of action arises from protected free speech or petitioning activity.  If the defendant makes such a showing, the burden shifts to the plaintiff to produce evidence establishing a probability of prevailing on the cause of action.

The Court of Appeal held that Sturbaum’s statements to the personal injury attorney were protected by the qualified common interest privilege.  In particular, section 47(c) extends a conditional privilege against defamation to statements made without malice on subjects of mutual interest.  The privilege applies where the communicator and recipient share a common interest and the communication is of a kind reasonably calculated to protect that interest. The defendant has the burden of showing that the allegedly defamatory statement was made on a privileged occasion, whereupon the burden shifts to the plaintiff to show the defendant made the statement with malice.

The Court of Appeal held that Sturbaum’s employer, Federated, and the claimants’ attorney, Kim, shared a business relationship that was sufficient to establish the requisite “common interest,” noting that Kim’s office had contacted Sturbaum to settle a claim and that they shared a common interest in resolving that claim. The Court of Appeal also held that Sturbaum’s statements were reasonably calculated to protect or further the common interest of resolving the claim. 

Specifically, the Court of Appeal stated that if Hui was engaging in fraudulent or unethical activity, it was important for Sturbaum to notify those with whom Hui did business and could be affected by such conduct, including Kim.  Similarly, the Court of Appeal held that Sturbaum’s suggestion that the personal injury lawyer stop doing business with Hui also was relevant to protecting Federated’s interests and its business relationship with Kim.

Finally, the Court of Appeal held that Hui had failed to meet his burden of showing the statements were made with malice, and that bare assertions that the statements were false did not make them malicious.  Accordingly, the Court of Appeal affirmed the trial court’s order granting the anti-SLAPP motion.  

Click here for the opinion in Hui v. Sturbaum (2014) 222 Cal.App.4th 1109.

This and other case bulletins, as well as other publications of Gordon & Rees, may be found at www.gordonrees.com.

Insurance

Jordan S. Altura
Aaron P. Rudin



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