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Mr. McKennon was featured in the August 2012 issues of Corporate Counsel magazine and The National Law Journal, both of which feature the 2012 Top Rated Lawyers in Insurance Law.
You have been probably wondering whether the filing of an insurance claim constitutes prelitigation activity that is protected under the anti-SLAPP statute, right? Well, if you were, you now have an answer: it is a resounding “maybe.”
In People ex rel. Fire Insurance Exchange v. Anapol, 211 Cal. App. 4th 809 (2012), the California Court of Appeals confirmed that, in certain circumstances, the filing of an insurance claim constitutes prelitigation activity that is protected under the anti-SLAPP statute. While such circumstances are described as the exception, not the rule, they are designed to protect insureds whose legitimate claims for insurance benefits are improperly denied by an insurance company.
The issue ended up before the Court of Appeals after Fire Insurance Exchange and Mid-Century Insurance Company (collectively, “Farmers”) filed a qui tam action after allegedly uncovering an insurance fraud ring engaged in filing false and inflated claims for smoke and ash damages following several Southern California wildfires. Two attorneys were accused of filing false insurance claims on behalf of Farmers’ insureds as part of their role in the fraud ring. The attorneys filed anti-SLAPP motions to strike, asserting that their pursuit of the insurance claims constitute prelitigation conduct protected by their First Amendment right to petition. The trial court denied those motions, and the attorneys sought review of the orders.
In denying the attorneys’ anti-SLAPP motions, the trial court specifically relied upon People ex rel. 20th Century Insurance Co. v. Building Permit Consultants, Inc., 86 Cal. App. 4th 280 (2000) (hereinafter “BPC”) which held that submission of an insurance claim does not constitute protected conduct under the anti-SLAPP law. On appeal, the Court of Appeals addressed “whether BPC completely bars all insurance claims from ever constituting prelitigation conduct.” While the Court held that BPC did not preclude the possibility that the filing of an insurance claim could be protected prelitigation conduct, the alleged acts of the two attorneys were not within the realm of protection.
The acts that the attorneys claimed as protected speech included the filing of allegedly false and fraudulent damage reports and repair estimates on behalf of clients. With their motions to strike, the attorneys filed declarations asserting that the majority of the damage reports were prepared in anticipation of litigation. The Court noted that while the filing of a claim is a necessary prerequisite to litigation, it is also a necessary prerequisite to obtaining performance under an insurance contact. The Court then explained that to grant the filing of a claim anti-SLAPP protection, would require granting anti-SLAPP protection to almost every communication that takes place in a commercial transaction “because human experience alerts us to the possibility that there may be [litigation from] otherwise routine business activity.”
However, while warning that such circumstances are the exception, rather than the rule, the Court explained that in certain circumstances, the filing of an insurance claim would constitute protected speech under anti-SLAPP law.
We can certainly envision circumstances in which an insurance claim is submitted in anticipation of litigation contemplated in good faith and under serious consideration. For example, a claim may be submitted after informal negotiations with the insurance company have proven unfruitful, and the insured has already decided to bring suit on the policy. In those circumstances, submission of the claim would be nothing more than the satisfaction of the statutory prerequisite for a suit. Similarly, an insured that has already been informed that its claim will be denied may submit the claim in the language of a demand letter, threatening suit if the claim is not paid in full. There, too, submission of the claim would qualify as a protected prelitigation statement in furtherance of the right of petition.
Unfortunately for the attorneys who filed the motions to strike under the anti-SLAPP statute, the Court of Appeals ruled that their alleged conduct did not fall within these exceptions, and their declarations were not sufficient to make a prima facie showing that the insurance claims were filed in anticipation of litigation contemplated by the insureds in good faith. Accordingly, while the orders of the trial court were upheld, the door for anti-SLAPP protection for insurance claims was left open by the Court of Appeals.
A recent California Court of Appeals decision served as a reminder of the long-standing rule in California that the mutual intent of the parties will always control the interpretation of potentially conflicting provisions in an insurance contract. In its recent decision in Gemini Ins. Co. v. Delos Ins. Co. (Dec. 5, 2012, B239533) __ Cal.App.4th __ [2012 WL 6050774] [Second Dist., Div. Five], the Court of Appeals was faced with the task of interpreting the inter-insured exclusion (i.e., an exclusion for claims between two insureds) in a liability policy as it applied to an additional insured named in the policy when the additional insured’s property has been damaged.
The Facts: A restaurant owner, and tenant to the property, negligently caused a fire which caused damage to property of the landlord. The landlord was an additional insured under the policy at issue, which insured him from liability for acts caused by the restaurant. The policy also contained an exclusion for claims asserted between two insureds. After the fire, the landlord sought relief from the restaurant for damage to his property. On a motion for summary judgment by the landlord’s insurer, the landlord argued that he was not an insured under the policy, and therefore the inter-insured exclusion did not apply. The trial court granted the motion.
Disposition: Affirmed. On appeal, the court addressed the issue as one of contract interpretation. Citing to the long-standing rules of contract interpretation, the court stated:
The rules are well established. In interpreting an insurance policy, we follow the general rules of contract interpretation. We give effect to the mutual intention of the parties, determined, if possible, from the written provisions of the contract. The clear and explicit meaning of those provisions, interpreted in their ordinary and popular sense, controls (Topanga and Victory Partners v. Toghia (2002) 103 Cal.App.4th 775, 779-780. ‘[E]xclusionary clauses are interpreted narrowly, whereas clauses identifying coverage are interpreted broadly.’ (Garvey v. State Farm Fire & Casualty Co. (1989) 48 Cal.3d 395, 406.
The appellate court found that the inter-insured exclusion did not bar recovery by the landlord for damage to his property, but not because the landlord wasn’t an insured under the policy. The court found that the inter-insured exclusion only barred recovery when the landlord (an additional insured) was being charged with liability as a result of the tenant’s (the named insured) negligence in causing the fire at the restaurant, and the landlord sought recovery directly from the tenant. That was not the case. The landlord only sought to recover for the damage to his property; no one sought to hold the landlord liable for the fire. Since the intent of the additional insured provision was to protect the landlord from liability (not limit recovery for damage to property), he would not be considered an additional insured for purposes of his recovering for damage to his own property. The court therefore looked past the literal interpretation of the policy to give effect to the parties’ intent based on a broad reading of the provision identifying coverage.
The court of appeals further found that instances such as this, where a landlord insists on being added as an additional insured under a tenant’s liability policy, are common practice. Thus, clearly, the landlord intended to be added to limit its liability for acts of the tenant, not to limit its recovery for damage to property.
On November 27, 2012, following a trial before Judge Cormac J. Carney of the United States Federal District Court for the Central District of California, Robert J. McKennon and Scott E. Calvert of the McKennon Law Group secured a victory for their client in a lawsuit against Sun Life and Health Insurance Company. Representing the claimant, Mr. Evans, the McKennon Law Group convinced the District Court that Sun Life abused its discretion in denying Mr. Evans’ claim for long-term disability benefits and that Mr. Evans is entitled to receive his disability benefits that Sun Life denied him.
Mr. Evans was an attorney who unfortunately suffered a mental breakdown that left him unable to return to work. While his claim for short-term disability benefits was approved and paid by Sun Life, the company improperly denied his claim for long-term disability (“LTD”) benefits. When Sun Life refused to overturn its claim decision on appeal, Mr. Evans hired the McKennon Law Group to file a lawsuit against Sun Life, alleging that the decision to deny his claim for LTD benefits violated the Employee Retirement Income Security Act of 1974, also known as ERISA. Mr. Evans filed a Complaint in September 2011.
During the litigation, the parties could not agree as to the proper scope of discovery in an ERISA matter. After the parties presented the dispute the Court, Mr. Evans was permitted to conduct discovery regarding Sun Life’s conflict of interest through written discovery and deposition testimony.
Following the trial, Judge Carney issued a Memorandum of Decision in Mr. Evans’ favor. While explaining that the Plan’s language mandated that Sun Life’s decision should be reviewed under the more lenient “abuse of discretion” standard of review, the Court found that Mr. Evans presented:
evidence that Sun Life failed to credit Mr. Evans’ reliable evidence, failed to adequately investigate the claim, and failed to ask Mr. Evans for necessary evidence. As a result, the Court will give considerable weight to Sun Life’s conflict of interest in determining whether it abused its discretion in denying Mr. Evans’ claim.
The Court then explained that despite being presented with medical evidence supporting Mr. Evans’ claim for disability benefits, Sun Life abused its discretion in denying his claim:
In addition to the conflict of interest, the other factors, “the quality and quantity of the medical evidence, whether the plan administrator subjected the claimant to an in-person medical evaluation or relied instead on a paper review of the claimant’s existing medical records, whether the administrator provided its independent experts with all of the relevant evidence, and whether the administrator considered a contrary SSA disability determination, if any,” Montour, 588 F.3d at 630, weigh in favor of a finding that Sun Life abused its discretion. Specifically, its decisions that Mr. Evans was not disabled until December 13, 2007 and that Mr. Evans was not disabled throughout the elimination period were illogical, implausible, and without support in inferences that could reasonably be drawn from facts in the record because: (1) every doctor who personally examined Mr. Evans concluded that he was disabled and unable to return to his regular work; (2) Sun Life did not subject Mr. Evans to an in-person medical evaluation; (3) Sun Life relied almost exclusively on the deeply flawed assessment by Dr. Himber; (4) and Sun Life failed to engage in a “meaningful dialogue” with Mr. Evans.
In conclusion, the Court ruled that the “evidence in the record overwhelming shows that Mr. Evans was totally disabled prior the date of his termination and throughout the elimination period” and ordered Sun Life “to pay long-term disability benefits to Mr. Evans in accordance with the Policy.”
Robert J. McKennon and Scott E. Calvert litigated the case on behalf of Mr. Evans.
On November 29, 2012, following a trial, Robert J. McKennon and Scott E. Calvert won a judgment against Sun Life and Health Insurance Company in a case involving long-term disability insurance benefits. The McKennon Law Group attorneys convinced the Court that Sun Life “abused its discretion,” and Sun Life was ordered to pay their client all benefits due to him under the Policy.
In November 2012, McKennon Law Group achieved a 7 figure settlement in an insurance bad faith and insurance fraud case against several defendants, including Hartford Life Insurance Company, on behalf of a business owner who was sold a 412(i) retirement plan.
