30 Cal. App. 5th 1087
Cal. Ct. App. 5th2019Background
- Homeowners Diane and Dennis Strawn filed an insurance claim after a June 1, 2009 fire that destroyed their house and pickup; State Farm denied coverage in Aug. 2015, attributing the loss to arson and fraud.
- State criminal prosecution of Dennis for arson was filed but dismissed in Feb. 2013.
- Plaintiffs sued State Farm (breach of contract, bad faith, IIED, invasion of privacy, elder abuse) and also sued State Farm’s defense attorney Douglas Wood and his firm (MPP) for invasion of privacy and financial elder abuse.
- Plaintiffs allege Wood received privileged tax returns (mistakenly produced by plaintiffs’ accountant), knew plaintiffs had not waived privilege, yet forwarded the returns to State Farm and its forensic accountants who used them in the claim investigation.
- Trial court sustained respondents’ demurrer to the invasion-of-privacy and elder-abuse causes of action without leave to amend; plaintiffs appealed.
- Court of Appeal: affirmed dismissal as to financial elder abuse; reversed dismissal as to invasion of privacy and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether litigation privilege bars invasion-of-privacy claim for forwarding privileged tax returns | Wood’s transmission invaded privacy; privilege does not apply because conduct was wrongful and occurred prelitigation | Litigation privilege protects communications made in anticipation of litigation; Wood acted to protect client | Privilege may apply only if litigation was seriously and in good faith contemplated; facts alleged raise triable issue — demurrer improperly sustained |
| Whether plaintiffs stated a constitutional invasion-of-privacy claim | Tax returns are privileged; forwarding them without waiver was a serious privacy invasion | Financial relevance to arson inquiry makes disclosure justified or not sufficiently serious | Plaintiffs pled a protected privacy interest and sufficiently serious invasion to survive demurrer; issue is factual and remanded |
| Whether attorney defendants can be liable for financial elder abuse under Welf. & Inst. Code §15610.30 for assisting insurer’s wrongful retention of funds | Wood “assisted” State Farm by providing returns used to deny benefits; elder-abuse statute encourages private enforcement | Gruenberg bars imposing insurer-bad-faith liability on insurer’s agents acting solely for insurer; imposing liability on attorney would conflict with Gruenberg | Gruenberg controls; attorneys acting solely as insurer’s representatives cannot be held liable here; demurrer properly sustained and no viable amendment suggested |
| Whether amendment could cure elder-abuse pleading defect | Plaintiffs argued the Elder Abuse Act broad purpose supports liability and amendment | Respondents said no factual theory showed attorneys acted for themselves rather than on insurer’s behalf | Court: plaintiff failed to suggest amendment that would overcome Gruenberg; dismissal of elder-abuse claim affirmed |
Key Cases Cited
- Silberg v. Anderson, 50 Cal.3d 205 (privilege protects communications related to litigation)
- Rusheen v. Cohen, 37 Cal.4th 1048 (litigation privilege extends to pre- and post-proceeding steps when related to litigation)
- Action Apartment Assn., Inc. v. City of Santa Monica, 41 Cal.4th 1232 (litigation privilege test and prelitigation limits)
- Eisenberg v. Alameda Newspapers, Inc., 74 Cal.App.4th 1359 (prelitigation privilege requires serious, good-faith contemplation of imminent litigation)
- Hill v. National Collegiate Athletic Assn., 7 Cal.4th 1 (elements for constitutional invasion-of-privacy claim)
- Gruenberg v. Aetna Ins. Co., 9 Cal.3d 566 (insurer’s agents generally not liable for insurer’s breach of covenant of good faith and fair dealing)
- Webb v. Standard Oil Co., 49 Cal.2d 509 (tax returns are privileged)
- Abdelhamid v. Fire Ins. Exchange, 182 Cal.App.4th 990 (financial condition relevant when insurer suspects arson)