We agree with other courts’ interpretation of those legislative findings: “The clear
import of the legislation is to reduce fraud against insurers in order to benefit
policyholders.” (Nee, supra, 140 Cal.App.4th at p. 448; see also State ex rel. Aetna
Health of California, Inc. v. Pain Management Specialist Medical Group (2020) 58
Cal.App.5th 1064, 1069 (Aetna) [“The Legislature enacted the IFPA to combat insurance
fraud committed against insurers by individuals, organizations, and companies”].)
Notably, the IFPA’s legislative findings make “no mention of a problem with insurance
claims handling practices.” (Nee, at p. 448; § 1871.)
Section 1871.7 of the IFPA provides that any interested person may bring a qui
tam action to recover penalties, damages, and other relief for certain deceptive acts
directed at insurers. (§ 1871.7, subd. (e)(1); Aetna, supra, 58 Cal.App.5th at p. 1069.)
The penalties are “assessed for each fraudulent claim presented to an insurance company
by a defendant and not for each violation.” (§ 1871.7, subd. (b).)
5
Prohibited conduct in support of or in opposition to an insurance claim is
actionable. (People ex rel. Alzayat v. Hebb (2017) 18 Cal.App.5th 801, 816; see also
Nee, supra, 140 Cal.App.4th at pp. 450-451.) Some kinds of actionable conduct are
described in section 1871.7 itself (§ 1871.7, subd. (a)), while other kinds are identified by
incorporation of separate statutes (id., subd. (b)).
One such statute is Penal Code section 550, which criminalizes a broad range of
deceptive acts in connection with making, supporting, or opposing claims for payment,
including but not limited to insurance claims. (Pen. Code, § 550, subds. (a), (b).) Thus,
some but not all violations of Penal Code section 550 can serve as the basis for a section
1871.7 action, because section 1871.7 concerns only claims presented to insurance
companies and Penal Code section 550 is not so limited.
Nee, supra,140 Cal.App.4th 442 and Metz, supra, 156 Cal.App.4th 1063 held that
liability under section 1871.7 does not extend to insurers and their agents based on claims
handling practices. (Nee, at p. 451; Metz, at pp. 1068-1070.) Nee explained that this
conclusion is consistent with the IFPA’s purpose of “preventing and punishing the
making of fraudulent claims to insurance companies”; the statute does not target the
conduct of insurance companies themselves. (Nee, at p. 449.)
II. Ellinger’s Arguments
Ellinger argues that the trial court erred by concluding that defendants could not
be held liable under section 1871.7 for Magill’s alleged mishandling of his claim.
Ellinger contends that the trial court erred by relying on Nee, supra,140 Cal.App.4th 442
and Metz, supra, 156 Cal.App.4th 1063 in concluding that the IFPA does not impose
6
liability on insurers based on such practices. He contends that Nee and Metz involved
only general claims handling practices and not allegations related to the mishandling of a
specific claim. The argument lacks merit. Contrary to Ellinger’s characterization, Metz
involved a specific automobile insurance claim in which the relator alleged that several
named insurance companies and their agents had made false or misleading statements
about the settlement of the relator’s claim. (Metz, at pp. 1065, fn. 1, & 1067.) Metz
followed Nee and concluded that the insurers’ alleged misconduct in handling a specific
claim was not subject to liability under the IFPA because insurers and their agents are not
proper defendants under section 1871.7. (Metz, at pp. 1068-1070.)
Ellinger next argues that People v. Butler (2011) 195 Cal.App.4th 535 (Butler),
supports his position because it explains that Nee and Metz did not hold that “only those
who make claims can be liable under the IFPA.” The argument fails because Ellinger’s
description of Butler is incorrect.
In Butler, the defendant was convicted of making false claims to manufacturers,
not to insurers. (Butler, supra, 195 Cal.App.4th at pp. 537-538.) Butler held that
violations of Penal Code section 550 are not limited to claims made to insurers. (Butler,
at p. 538.)
Butler thus provides no support for Ellinger’s contention that insurers and their
agents can be sued under the IFPA. Butler does not say anything about that issue.
Rather, Butler merely confirms that a violation of Penal Code section 550 need not
involve an insurance claim at all. (Butler, supra, 195 Cal.App.4th at p. 538.)
7
Moreover, contrary to Ellinger’s argument, Butler supra, 195 Cal.App.4th 535 did
not undermine the holdings in Nee, supra,140 Cal.App.4th 442 and Metz, supra, 156
Cal.App.4th 1063 that insurers and their agents are not proper defendants under the IFPA.
Butler involved criminal violations of Penal Code section 550 and not liability under the
IFPA. Butler correctly explained that Nee did not stand for the proposition that “the only
class of persons who can violate Penal Code section 550 are those who submit fraudulent
claims to insurers.” (Butler, at pp. 540-541.) That does not cast any doubt on Nee’s
holding that insurers and their agents are not proper defendants under the IFPA. (Nee, at
p. 451.)
Ellinger next argues that he properly pleaded violations of Penal Code section 550,
subdivision (b)(1) to (3), based on Magill’s alleged conduct in handling his claim, so he
therefore properly seeks relief under section 1871.7. The argument fails for two reasons.
First, as we have explained, not every violation of Penal Code section 550 is actionable
under section 1871.7. Second, Ellinger’s contention that he has properly pleaded a
violation of Penal Code section 550 is based on a mischaracterization of the record. In
his opening brief, he asserts that “[t]he denial [of his workers’ compensation claim] was
reversed after Magill’s deposition,” in which Magill claimed not to have known about the
time line memorandum before the human resources’ manager’s deposition. Ellinger in
fact alleged that ESIS reversed the denial of his claim in July 2017—more than one year
before Magill’s deposition. Ellinger does not explain how Magill’s alleged lie at her
deposition in September 2018 could have affected the handling of his claim, given that
the denial of his claim had already been reversed in July 2017.
8
Finally, Ellinger argues that affirming the trial court order sustaining the
demurrers is against public policy, as it “would tacitly approve of insurance company
fraud.” We disagree. First, Ellinger has not sufficiently alleged a violation of Penal
Code section 550 and thus has not properly alleged that defendants committed any kind
of fraud. Second, excluding insurers and their agents from liability under section 1871.7
does not “tacitly approve of insurance company fraud” or otherwise entail that insurers
and their agents can commit fraud with impunity. It means only that insurers and their
agents cannot be sued under the IFPA. That holding is not surprising, because the IFPA
expressly targets only deceptive conduct directed at insurers, not improper conduct by
insurers. (See § 1871.)
For all of these reasons, we conclude that the trial court did not err by sustaining
defendants’ demurrers without leave to amend.
DISPOSITION
The judgment is affirmed. Defendants shall recover their costs of appeal.
MENETREZ J.
We concur:
McKINSTER Acting P. J. RAPHAEL J.
9
Filed 4/11/22 CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
THE PEOPLE ex rel. GILBERT ELLINGER, E076378 Plaintiff and Appellant, (Super.Ct.No. PSC1908114) v. ORDER CERTIFYING OPINION STEPHANIE ANN MAGILL et al., FOR PUBLICATION
Defendants and Respondents.
THE COURT:
We have received two requests pursuant to California Rules of Court, rule 8.1120(a), to publish the nonpublished opinion in this matter that was filed on March 18, 2022. Having reviewed those requests, we conclude that the opinion meets the standards for publication set forth in California Rules of Court, rule 8.1105(c).
We therefore grant the requests and order that this opinion be certified for publication pursuant to California Rules of Court, rule 8.1105(b). We consequently certify for publication the opinion filed in this matter on March 18, 2022.
CERTIFIED FOR PUBLICATION MENETREZ J.
We concur:
McKINSTER Acting P. J. RAPHAEL J.
10
AI Brief
AI-generated · verify before citing
Holding. Insurance carriers and their agents cannot be held liable in a qui tam action under the Insurance Frauds Prevention Act (IFPA) for claims handling practices.
Issues
Whether insurers and their agents are subject to liability under the IFPA for claims handling practices.
Whether the alleged concealment of a memorandum by a claims adjuster constitutes an actionable violation under Insurance Code section 1871.7.
Disposition. Affirmed
Quotations verified verbatim against the opinion
“liability under section 1871.7 does not extend to insurers and their agents based on claims handling practices.”
“the IFPA expressly targets only deceptive conduct directed at insurers, not improper conduct by insurers.”