No Cause of Action for Libel, Slander or any Other Relevant Tort
Barry Zalma
Mar 25, 2024
Transcript
This is Barry Zalma speaking for Claim School Incorporated's blog, Zalma on Insurance.
Today we're going to explain why the California Supreme Court has concluded as early as the 1980s that an insurer by statute must report suspected fraud and when an insurer does so,
and reports fraud to the state without malice, it is immune from suits claiming defamation or other relevant torts, and there's no cause of action available for libel or slander just because they complied with the law and reported suspicion to the Department of Insurance.
Justice Broussard, writing for the California Supreme Court, dealt with a case where the plaintiff obtained a judgment for $15,271 in general damages, $250,000 for emotional distress, $1.25 million for punitive damages, and an action for misconduct of an insurer in dealing with a claim for stolen property.
The principal issue raised is whether the insurer's report to the Bureau of Fraudulent Claims was privileged so as to preclude recovery for insurance and injuries sustained as a result of a criminal proceeding.
In Clydehoe from a Thalido versus fire insurance exchange at all, the Supreme Court of California in Bank on July 24, 1986, resolved the dispute in favor of the insurer and the law.
The Supreme Court concluded that the report was privileged and that while it affirmed the judgment to the extent of the value of the stolen property, $8,871 less $100 deductible, the judgment should be reversed and was reversed as to any additional damages.
In August of 1978, plaintiff's home was burglarized and he submitted a claim for $17,185.
The insurer ultimately paid $10,784.
In late June of 1979, the house was burglarized again.
Plaintiff claimed a loss of $8,871, including $3,000 for a stereo and video equipment he claimed was bought from Matthews TV and Stereo.
Plaintiff attached a pink copy of a bill of sale to his sworn proof of loss.
The copy was one page of a five-page form.
The date 1-03-79 appeared in handwriting in the upper left-hand corner, but the cash register printout date on the right-hand side had been erased and obliterated.
The other four copies of the bill of sale had a cash register printout date of 7-19-79, which was after the second burglary.
The Bureau determined...
to investigate after receiving a report from the insurer and assigned one of its senior investigators who concluded that it appeared that insurance fraud had occurred in violation of what was then insurance code section five five six
Plaintiff was arrested at the fire station where he worked in March of 1980 by the investigator.
Plaintiff's attorney subsequently convinced the deputy district attorney that the latter could not prove beyond a reasonable doubt that the claim as opposed to the receipt was false.
The Deputy District Attorney dismissed the criminal charges on September 8, 1980, the morning of the trial, although there had been a pretrial hearing that determined that there was sufficient probable cause to take charge.
Mr. Frum with the light owed a trial.
Plaintiff's attorney subsequently convinced the deputy district attorney that the latter could not prove beyond reasonable doubt that the claim as opposed to the receipt was false.
The deputy district attorney dismissed the criminal charges on September 8, 1980, the morning of the trial.
The insurer was not advised of the existence of the witnesses that the prosecutor and the defense spoke about until after dismissal of the criminal charges.
The jury in the civil action found that plaintiff on the causes of action for breach of the duty of good faith and fair dealing, breach of fiduciary duty and violation of section 790.03.
a covenant of good faith and fair dealing is implied in every insurance contract in california insurance code section twelve nine nine two provides that an insurer which believes 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, send to the Bureau of Fraudulent Claims on a form prescribed by the Department the information requested by the form.
Section 12993 provides that an insurer shall not be subject to civil liability for libel, slander, or any other relevant tort cause of action.
by virtue of the filing of reports without malice or furnishing other information without malice required by this article or required by the commissioner under the authority granted in this article.
Close quote.
The Supreme Court of California noted that when the insurer reported to the Bureau, the facts known to the insurer provided a reasonable inference of insurance fraud.
Compliance with a statutory duty to report and furnish does not provide a basis for tort liability so long as the information is accurate and complete.
A true and complete report to the Bureau is not actionable.
The malice necessary to defeat a qualified privilege is actual malice.
which is established by 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.
This is from a case called Romer versus retail credit.
a 1975 decision of the California Court of Appeal.
In almost every case, if not in every case, where an insurer reports a claim believed to be fraudulent to the Bureau, the insurer stands to profit if the insured is successfully prosecuted.
However, if ability to profit warranted a finding of malice, the insurer would be required to guarantee the accuracy of information obtained and to act at its peril whenever reported information to the Bureau and the statutory privilege would then be meaningless.
The potential that the insurer may escape liability on the insured's claim is not sufficient to show malice.
Rather, the requirement of malice in the statute must be viewed as legislative determination that the insurer's pecuniary interest without more does not make the report actionable.
Once an insurer 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 or is not incomplete
Application of the duty to investigate to actions based on a report by an insurer to the Bureau would be in conflict with the privilege established by Section 12993 for non-malicious reports.
The privilege applies unless the insurer acts out of hatred or ill will or in reckless disregard of the insured's right, the Supreme Court concluded.
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.
By awarding damages for economic loss, the jury obviously determined the plaintiff suffered the loss.
The judgment was affirmed by the Supreme Court, but only insofar as it awarded plaintiff $8,771.
In all other respects, it was reversed.
Each side was required to bear their own costs, in my opinion.
This insurer, in good faith, complied with its statutory requirement to report to the state its suspicion that a fraud had been attempted.
The Fraud Bureau, now the Fraud Division, found sufficient evidence to arrest the insured, and at a preliminary hearing, a judge found there was sufficient probable cause to take Mr. Formitholito to trial.
That the prosecutor got cold feet and dismissed the case on the date of trial is not evidence of any malice on the part of the insurer, and the civil suit brought by the plaintiff failed because the insurer was protected by the privilege.
Although this case may seem to be hoary with age, it is the law of California while the statute numbers have changed.
and should provide an absolute protection to any insurer that in good faith reports a potential fraud to the fraud division of the California Department of Insurance.
This video was adapted from my blog, Zelma on Insurance, which is available free to anyone.
who clicks on the URL zalma.com slash blog.
If you do so, you can subscribe to the blog and you'll be advised of every blog posting.
usually five, sometimes six a week, and access to the more than 4,750 blog postings.
You could also subscribe to the videos at rumble.com and at youtube.com.
And if you do, I'd appreciate it if you click on the thumbs up button at Rumble or the like button on YouTube.
And if you're interested in further detail about insurance, insurance claims, insurance fraud, and insurance law, please consider subscribing to my Substack publications.
Thank you for your attention.
Share
Leave a comment
Get a group subscription
Read the full article at https://lnkd.in/gkAGjcRS, see the full video at https://lnkd.in/gFrctbzF and at https://lnkd.in/ggMBY2jU and https://zalma.com/blog plus more than 4750 posts.
When an Insurer Reports Fraud to the State Without Malice It is Immune From Suits Claiming Defamation
No Cause of Action for Libel, Slander or any Other Relevant Tort
Post 4761
Read the full article at https://lnkd.in/gkAGjcRS, see the full video at https://lnkd.in/gFrctbzF and at https://lnkd.in/ggMBY2jU and https://zalma.com/blog plus more than 4750 posts.
This is not a new case but it is important to everyone in the insurance business in California and any other state that has similar statutes.
The principal issue raised is whether the insurer’s report to the Bureau of Fraudulent Claims (hereinafter Bureau) was privileged so as to preclude recovery for injuries sustained as a result of a criminal proceeding.
In Clydelho Frommoethelydo v. Fire Insurance Exchange et al., S.F. 24881, 228 Cal.Rptr. 160, 42 Cal.3d 208, 721 P.2d 41, Supreme Court of California, In Bank (July 24, 1986). The Supreme Court enforced the statutory privilege for reporting suspected fraud.
FACTS
In August 1978, plaintiff’s home was burglarized, and he submitted a claim for $17,185 based, in part on fraudulent documents.
DISCUSSION
The statute provides that an insurer shall not be subject to civil liability “for libel, slander or any other relevant tort cause of action by virtue of the filing of reports, without malice, or furnishing other information, without malice, required by this article or required by the commissioner under the authority granted in this article.”
The Supreme Court concluded that facts known to the insurer provided a reasonable inference of insurance fraud. A report to the Bureau is not actionable. The privilege applies unless the insurer acts out of hatred or ill will. The judgment was affirmed insofar as it awarded plaintiff $8,771. In all other respects it was reversed.
ZALMA OPINION
The insurer, in good faith, complied with its statutory requirement to report to the state its suspicion that a fraud had been attempted. The Fraud Bureau (now the Fraud Division) found sufficient evidence to arrest the insured and at a Preliminary hearing a judge found there was sufficient probable cause to take him to trial. That the prosecutor got cold feet and dismissed the case on the day of trial is not evidence of any malice on the part of the insurer and the civil suit brought by the plaintiff failed because the insurer was protected by the privilege. Although this case is hoary with age it is the law of California while the statute numbers have changed.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
Subscribe to my substack at https://lnkd.in/gcZKhG6g
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
Subscribe to my substack at https://lnkd.in/gcZKhG6g
Go to X @bzalma; Go to the Insurance Claims Library – https://lnkd.in/gwEYk
Convicted Criminal Seeks to Compel Receiver to Protect his Assets
Post number 5291
See the video at and at and at https://www.zalma.com/blog plus more than 5250 posts.
The Work of a Court Appointed Receiver is Constitutionally Protected
In Simon Semaan et al. v. Robert P. Mosier et al., G064385, California Court of Appeals, Fourth District, Third Division (February 6, 2026) the Court of Appeals applied the California anti-SLAPP statute which protects defendants from meritless lawsuits arising from constitutionally protected activities, including those performed in official capacities. The court also considered the doctrine of quasi-judicial immunity, which shields court-appointed receivers from liability for discretionary acts performed within their official duties.
Facts
In September 2021, the State of California filed felony charges against Simon Semaan, alleging violations of Insurance Code section 11760(a) for making...
When There are Two Different Other Insurance Clauses They Eliminate Each Other and Both Insurers Owe Indemnity Equally
Post number 5289
In Great West Casualty Co. v. Nationwide Agribusiness Insurance Co., and Conserv FS, Inc., and Timothy A. Brennan, as Administrator of the Estate of Pat- rick J. Brennan, deceased, Nos. 24-1258, 24-1259, United States Court of Appeals, Seventh Circuit (February 11, 2026) the USCA was required to resolve a dispute that arose when a tractor-trailer operated by Robert D. Fisher (agent of Deerpass Farms Trucking, LLC-II) was involved in a side-impact collision with an SUV driven by Patrick J. Brennan, resulting in Brennan’s death.
Facts
Deerpass Trucking, an interstate motor carrier, leased the tractor from Deerpass Farms Services, LLC, and hauled cargo for Conserv FS, Inc. under a trailer interchange agreement. The tractor was insured by Great West Casualty Company with a $1 million policy limit, while the trailer was insured by Nationwide Agribusiness Insurance Company with a $2 million ...
Opiod Producer Seeks Indemnity from CGL Insurers
Post number 5288
Read the full article at https://lnkd.in/guNhStN2, see the full video at https://lnkd.in/gYqkk-n3 and at https://lnkd.in/g8U3ehuc, and at https://zalma.com/blog plus more than 5250 posts.
Insurers Exclude Damages Due to Insured’s Products
In Matthew Dundon, As The Trustee Of The Endo General Unsecured Creditors’ Trust v. ACE Property And Casualty Insurance Company, et al., Civil Action No. 24-4221, United States District Court, E.D. Pennsylvania (February 10, 2026) Matthew Dundon, trustee of the Endo General Unsecured Creditors’ Trust, sued multiple commercial general liability (CGL) insurers for coverage of opioid-related litigation involving Endo International PLC a pharmaceutical manufacturer.
KEY FACTS
Beginning as early as 2014, thousands of opioid suits were filed by governments, third parties, and individuals alleging harms tied to opioid manufacturing and marketing.
Bankruptcy & Settlements
Endo filed Chapter 11 in August 2022; before bankruptcy it ...
Passover for Americans
Posted on February 19, 2026 by Barry Zalma
“The Passover Seder For Americans”
For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lost the ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah. Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and wonder how did all these wonderful things come into being. Jews believe the force we call G_d created the entire universe and everything in it. Jews feel G_d is all seeing and knowing and although we can’t see Him, He is everywhere and in everyone.We understand...
Passover for Americans
Posted on February 19, 2026 by Barry Zalma
Read the full article at https://www.linkedin.com/pulse/passover-americans-barry-zalma-esq-cfe-5vgkc.
“The Passover Seder For Americans”
For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lostthe ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah.
Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and ...
You Get What You Pay For – Less Coverage Means Lower Premium
Post number 5275
Posted on January 30, 2026 by Barry Zalma
See the video at and at
When Experts for Both Sides Agree That Two Causes Concur to Cause a Wall to Collapse Exclusion Applies
In Lido Hospitality, Inc. v. AIX Specialty Insurance Company, No. 1-24-1465, 2026 IL App (1st) 241465-U, Court of Appeals of Illinois (January 27, 2026) resolved the effect of an anti-concurrent cause exclusion to a loss with more than one cause.
Facts and Background
Lido Hospitality, Inc. operates the Lido Motel in Franklin Park, Illinois. In November 2020, a windstorm caused one of the motel’s brick veneer walls to collapse. At the time, Lido was insured under a policy issued by AIX Specialty Insurance Company which provided coverage for windstorm damage. However, the policy contained an exclusion for any loss or damage directly or indirectly resulting from ...
