Insurer’s Reports to Insurance Support Organization is Privileged
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Post 4912
Allstate Northbrook Indemnity Company (“Allstate”) moved for Judgment on the Pleadings. Plaintiff Zhiwei Chen (“Plaintiff”) opposed and Allstate filed a Reply. After considering the moving, opposing, and reply papers, and the arguments therein, in Zhiwei Chen v. Allstate Northbrook Indemnity Company, No. CV 24-5239-JFW(Ex), United States District Court, C.D. California (October 2, 2024) and the court resolved the motion.
FACTUAL BACKGROUND
On January 16, 2023, Plaintiff was delivering food for Uber when he was involved in an automobile accident. At the time of the accident, Allstate insured Plaintiff’s car under an automobile insurance policy. The Policy provided that Allstate “may settle any claim or suit if [Allstate] believe[s] it is proper.”
After the accident, a claim was made to Allstate against Plaintiff, and Allstate settled that claim. Plaintiff alleged that Allstate reported the claim/accident to LexisNexis, and that Allstate’s reporting of the claim/accident caused an increase in his premiums.
Plaintiff sued Allstate in Los Angeles Superior Court “LASC”), alleging claims for: (1) breach of contract; (2) breach of the implied duty of good faith and fair dealing; (3) insurance fraud; (4) defamation; and (5) intentional infliction of emotional distress. Allstate removed this action to the USDC.
MOTION FOR JUDGMENT ON THE PLEADINGS
Allstate argued that because the Policy gives Allstate the discretion to settle any claim that it believes is proper, Plaintiff cannot succeed on any of his claims
Federal Rule of Civil Procedure 12(c) governs motions for judgment on the pleadings. As with motions brought pursuant to Rule 12(b)(6), in addition to assuming the truth of the facts plead, the court must construe all reasonable inferences drawn from those facts in the nonmoving party’s favor.
THE POLICY GIVES ALLSTATE THE ABSOLUTE DISCRETION TO SETTLE ANY CLAIM
In this case, it is undisputed that the Policy provides that Allstate can “settle any claim or suit if we believe it is proper.” As a result, because Allstate has the contractual right to settle any claim, it cannot be liable under any cause of action alleged by Plaintiff for settling a claim.
The insured’s policy gave the insurer the right to settlement as it deemed expedient and since this type of clause is not unusual in liability insurance policies and is appropriate to the benefit of the insurer and the insured. As a result, an insurer normally cannot be liable to the insured if the insurer does no more than settle a claim or suit within the policy’s limits.
Because Allstate has the right to settle any claim it believes is proper, Plaintiff cannot maintain any cause of action based on Allstate’s exercise of its contractual right to settle the claim made against him.
ALLSTATE REPORTING OF PLAINTIFF’S CLAIM/ACCIDENT IS PRIVILEGED
In addition, Plaintiff cannot maintain a cause of action against Allstate based on Allstate’s reporting that Plaintiff was involved in an accident and that it settled the claim against him because Allstate’s reporting of Plaintiff’s claim/accident is privileged. Specifically, California Insurance Code §791.13 allows an insurer to report personal and privileged information to an “insurance-support organization” when necessary “to perform its function in connection with an insurance transaction involving an individual.” See Cal. Ins. Code §791.13(c)(1)(2).
Plaintiff bases his claim on the fact that Allstate reported information about Plaintiff’s claim/accident to LexisNexis. Plaintiff also alleges that LexisNexis disseminated that information to other insurers who “use[d] the information released by [Allstate] to judge [P]laintiff unfavorably” which led to Plaintiff paying “more for insurance than before.”
The USDC concluded that Allstate’s alleged reporting of Plaintiff’s claim/accident is privileged, and, as a result, cannot support a cause of action against Allstate.
All of Plaintiff’s claims alleged in the Complaint, including claims for breach of contract, breach of the implied duty of good faith and fair dealing, insurance fraud, defamation, and intentional infliction of emotional distress, were dismissed without leave to amend.
ZALMA OPINION
The USDC did away with this odd lawsuit without a need for oral argument because, if the Plaintiff tried to renew his Allstate policy it knew about the claim and if it applied to a different insurer he would be invariably asked to advise the new insurer about his accident history and would be required to disclose it himself. Settling claims against the Plaintiff was why he bought insurance from Allstate, he got what he paid for when they settled the claim, and they reported the claim to an insurance-support organization. The Plaintiff hoped by alleging bad faith he could bludgeon Allstate into paying him off. His attempt failed. In fact, the Plaintiffs actions were designed to deprive the insurer of the benefits of the contract fitting the definition of the tort of bad faith.
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Post 5119
Death by Drug Overdose is Excluded
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Southern Insurance Company Of Virginia v. Justin D. Mitchell, et al., No. 3:24-cv-00198, United States District Court, M.D. Tennessee, Nashville Division (October 10, 2024) Southern Insurance Company of Virginia sought a declaratory judgment regarding its duty to defend William Mitchell in a wrongful death case pending in California state court.
KEY POINTS
1. Motion for Judgment on the Pleadings: The Plaintiff moved for judgment on the pleadings, which was granted in part and denied in part.
2. Duty to Defend: The court found that the Plaintiff has no duty to defend William Mitchell in the California case due to a specific exclusion in the insurance policy.
3. Duty to Indemnify: The court could not determine at this stage whether the Plaintiff had a duty to ...
GEICO Sued Fraudulent Health Care Providers Under RICO and Settled with the Defendants Who Failed to Pay Settlement
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Post 5119
Default of Settlement Agreement Reduced to Judgment
In Government Employees Insurance Company, Geico Indemnity Company, Geico General Insurance Company, and Geico Casualty Company v. Dominic Emeka Onyema, M.D., DEO Medical Services, P.C., and Healthwise Medical Associates, P.C., No. 24-CV-5287 (PKC) (JAM), United States District Court, E.D. New York (July 9, 2025)
Plaintiffs Government Employees Insurance Company and other GEICO companies (“GEICO”) sued Defendants Dominic Emeka Onyema, M.D. (“Onyema”), et al (collectively, “Defendants”) alleging breach of a settlement agreement entered into by the parties to resolve a previous, fraud-related lawsuit (the “Settlement Agreement”). GEICO moved the court for default judgment against ...
ZIFL – Volume 29, Issue 14
Post 5118
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You can read the full 20 page issue of the July 15, 2025 issue at https://lnkd.in/giaSdH29
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
This issue contains the following articles about insurance fraud:
The Historical Basis of Punitive Damages
It is axiomatic that when a claim is denied for fraud that the fraudster will sue for breach of contract and the tort of bad faith and seek punitive damages.
The award of punitive-type damages was common in early legal systems and was mentioned in religious law as early as the Book of Exodus. Punitive-type damages were provided for in Babylonian law nearly 4000 years ago in the Code of Hammurabi.
You can read this article and the full 20 page issue of the July 15, 2025 issue at https://zalma.com/blog/wp-content/uploads/2025/07/ZIFL-07-15-2025.pdf
Insurer Refuses to Submit to No Fault Insurance Fraud
...
Rulings on Motions Reduced the Issues to be Presented at Trial
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CASE OVERVIEW
In Richard Bernier v. State Farm Mutual Automobile Insurance Company, No. 4:24-cv-00002-GMS, USDC, D. Alaska (May 28, 2025) Richard Bernier made claim under the underinsured motorist (UIM) coverage provided in his State Farm policy, was not satisfied with State Farm's offer and sued. Both parties tried to win by filing motions for summary judgment.
FACTS
Bernier was involved in an auto accident on November 18, 2020, and sought the maximum available UIM coverage under his policy, which was $50,000. State Farm initially offered him $31,342.36, which did not include prejudgment interest or attorney fees.
Prior to trial Bernier had three remaining claims against State Farm:
1. negligent and reckless claims handling;
2. violation of covenant of good faith and fair dealing; and
3. award of punitive damages.
Both Bernier and State Farm dispositive motions before ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
