An unfair competition suit charging the State Farm insurance companies with mishandling claims for property damage resulting from the Northridge earthquake should not have been stricken under the anti-SLAPP law, the Court of Appeal for this district ruled yesterday.
Los Angeles Superior Court Judge Ray L. Hart “confused allegations of wrongdoing with the evidence required to prove them,” Justice Walter Croskey wrote for Div. Three.
The court reinstated Ronald Gallimore’s private attorney general suit against State Farm Mutual Automobile Insurance Company and State Farm Fire and Casualty Insurance Company. Gallimore’s complaint alleged, among other things, that the state insurance commissioner had failed to obtain redress for policyholders after an investigation showed that the company had violated Department of Insurance regulations in its handling of a substantial number of earthquake claims cases.
State Farm argued that the suit infringed upon its First Amendment rights to communicate freely with insurance regulators. Hart agreed, saying the plaintiff was attempting to pierce the absolute privilege given to communications between the insurer and the department regarding “market conduct examinations.”
The judge struck the complaint under Code of Civil Procedure Sec. 425.16 and awarded State Farm $ 61,000 in attorney fees.
Croskey, however, said the case involved insurer conduct, not speech, so the statute designed to deter strategic lawsuits against public participation had no application.
To prevail under the statute, the justice pointed out, the defendant has the burden of proving that the suit is one “arising from” its exercise of the constitutional rights of free speech and to petition for redress of grievances. Only once that is established does the burden shift to the plaintiff to establish a probability of success on the merits, the jurist explained.
State Farm, Croskey concluded, did not meet its burden. Even if the insurer’s communications to the regulators led to the suit-Gallimore acknowledged that the suit was based in part on information derived from the market conduct examinations, obtained by lawmakers, and posted on the state Senate’s website-that does not establish that the suit “arose from” those communications.
“The mere fact that a plaintiff has filed an action after a defendant has engaged in some protected activity does not mean that the plaintiff’s action arose from that activity,” the justice wrote.
He cited State Farm General Ins. Co. v. Majorino (2002) 99 Cal.App.4th 974, in which the court ruled that an insurer’s filing of a declaratory action in a coverage dispute did not, for purposes of Sec. 425.16, arise from the filing of a suit against the insured. The claimants alleged that the filing of their suit was an exercise of their rights of petition and that the declaratory action was an attempt to chill those rights, but the court held that the declaratory action arose from the coverage dispute, not the filing of the personal injury suit.
Similarly, Croskey said, Gallimore was suing not to prevent State Farm from communicating with the Department of Insurance, but to obtain redress for its alleged violations of statutes and regulations in the claims handling process. “The allegations that State Farm engaged in claims handling misconduct do not charge an act that State Farm could or would argue was done by it ‘in furtherance of’ its petition or free speech rights,” the justice wrote.
State Farm may be correct as to its claims of privilege and confidentiality, Croskey acknowledged. But if it is, he said, it may seek a remedy by moving for summary judgment, or to limit admission of evidence at trial, or for a protective order, but not to strike under the anti-SLAPP law.
On remand, he added, the plaintiff may seek attorney fees for a frivolous or dilatory anti-SLAPP motion. “We express no opinion on the merits of such a potential claim,” he wrote.
Attorneys on appeal were Harvey Rosenfield and Pam Pressley of the Foundation For Taxpayer and Consumer Rights and Mark P. Robinson Jr. and Sharon J. Arkin of Robinson, Calcagnie & Robinson for the plaintiff and William L. Stern of Severson & Werson and Pamela E. Dunn and Daniel J. Koes of Robie & Matthai for State Farm.
The case is Gallimore v. State Farm Fire & Casualty Insurance Company, B147937.