P. ex rel. Ellinger v. Magill
E076378
| Cal. Ct. App. | Apr 11, 2022Background
- In Jan 2016 Ellinger injured his back at work and filed a workers’ compensation claim; Zurich was the employer’s insurer and ESIS was the claims administrator; Stephanie Magill was the ESIS claims examiner assigned to the claim.
- The employer’s HR manager prepared a contemporaneous “time line memorandum” corroborating Ellinger’s report and placed it in his personnel file.
- ESIS initially denied the claim; the HR memo was produced in a November 2016 deposition (counsel for Ellinger in the WC action did not know of it until then); ESIS reversed its denial and stipulated the injury was work-related in July 2017.
- Magill later testified (Sept. 2018) that she had not known about the HR memo and that it would have helped her investigation; contemporaneous emails, however, showed the HR manager had sent the memo to Magill in March–April 2016 and Magill thanked her.
- Ellinger filed a qui tam action under Insurance Code §1871.7 (IFPA), alleging Penal Code §550 subdivisions (b)(1)–(3) violations (concealment/misrepresentation) and seeking civil penalties and treble recovery; defendants demurred.
- The trial court sustained demurrers without leave to amend, concluding insurers and their agents cannot be held liable under §1871.7 for claims-handling practices (relying on Nee and Metz); this appeal followed and the Court of Appeal affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether insurers or their agents can be defendants under the IFPA for improper claims-handling of a specific claim | Ellinger: IFPA and Penal Code §550 violations (as pleaded) can reach insurers/agents who deceive or conceal evidence in handling a claim | Defendants: IFPA targets fraudulent claims presented to insurers, not insurers’ own claims-handling; precedent bars such defendants | Held: Insurers and agents are not proper §1871.7 defendants for claims-handling misconduct; demurrer properly sustained |
| Whether pleaded violations of Penal Code §550 support a §1871.7 action against insurers/agents | Ellinger: Magill’s alleged concealment/false testimony violated §550 and thus is actionable under §1871.7 | Defendants: Not every §550 violation is actionable under §1871.7; pleaded facts do not connect Magill’s alleged later testimony to the claim’s handling reversal | Held: Even if §550 could apply, Ellinger failed to plead a cognizable §1871.7 claim tied to actionable conduct directed at an insurer for the claim in question |
| Whether People v. Butler undermines Nee/Metz and allows suits against insurers/agents under IFPA | Ellinger: Butler shows §550 is not limited to claims to insurers, implying IFPA could reach others | Defendants: Butler addressed criminal §550 liability outside IFPA; it does not address whether insurers can be sued under §1871.7 | Held: Butler does not disturb Nee/Metz; it is irrelevant to whether insurers are proper §1871.7 defendants |
| Whether dismissing a §1871.7 claim against insurers/agents is contrary to public policy (permits insurer fraud) | Ellinger: barring recovery would tacitly permit insurance company fraud | Defendants: Excluding insurers from §1871.7 liability does not immunize fraud; other remedies/regulators exist; IFPA’s text and purpose focus on fraud against insurers | Held: Public policy argument unpersuasive; the IFPA by text and precedent does not create §1871.7 liability for insurers/agents |
Key Cases Cited
- State of California ex rel. Nee v. Unumprovident Corp., 140 Cal.App.4th 442 (2006) (IFPA targets fraudulent claims presented to insurers; insurers/agents not proper §1871.7 defendants for claims-handling)
- State of California ex rel. Metz v. Farmers Group, Inc., 156 Cal.App.4th 1063 (2007) (followed Nee; rejected §1871.7 liability for insurers/agents over specific claim-handling allegations)
- People v. Butler, 195 Cal.App.4th 535 (2011) (Penal Code §550 is not limited to claims made to insurers; concerns criminal liability under §550, not IFPA scope)
- Aetna Health of California, Inc. v. Pain Management Specialist Medical Group, 58 Cal.App.5th 1064 (2020) (IFPA enacted to combat insurance fraud committed against insurers)
- Fremont Indemnity Co. v. Fremont General Corp., 148 Cal.App.4th 97 (2007) (standard of review for demurrer: de novo; assume truth of properly pleaded allegations)
- People ex rel. Alzayat v. Hebb, 18 Cal.App.5th 801 (2017) (discusses actionable deceptive conduct in support of or opposition to insurance claims)