P. ex rel. etc. v. Hebb

Filed 12/19/17

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

THE PEOPLE ex rel. MAHMOUD E066471
ALZAYAT,
(Super.Ct.No. INC1204627)
Plaintiff and Appellant,
OPINION
v.

GERALD HEBB et al.,

Defendants and Appellants.

APPEAL from the Superior Court of Riverside County. David M. Chapman,

Judge. Reversed.

English Lloyd & Armenta and Juan M. Armenta for Plaintiff and Appellant.

Rutan & Tucker, Duke F. Wahlquist and Proud Usahacharoenporn for Defendants

and Appellants.

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 I

INTRODUCTION

Plaintiff Mahmoud Alzayat, on behalf of the People of the State of California,

filed this qui tam action against his employer, Sunline Transit Agency, and his

supervisor, Gerald Hebb, alleging a violation of the Insurance Frauds Prevention Act

(IFPA or the Act). (Ins. Code, § 1871 et seq.) Alzayat alleged Hebb made false

statements in an incident report submitted in response to Alzayat’s claim for workers’

compensation, and Hebb repeated those false statements in a deposition taken during the

investigation into Alzayat’s claim for compensation. Hebb’s false statements resulted in

Alzayat’s claim being initially denied.

Defendants filed motions for judgment on the pleadings contending: (1) this

lawsuit is based on allegedly false and fraudulent statements Hebb made in connection

with a workers’ compensation proceeding and is, therefore, barred by the litigation

privilege under Civil Code1 section 47, subdivision (b) (hereafter § 47(b)); and

(2) Alzayat’s claim is barred by the workers’ compensation exclusivity rule. The

superior court concluded the workers’ compensation exclusivity rule is inapplicable, but

ruled the litigation privilege bars Alzayat’s claim. Therefore, the court granted the

motions without leave to amend and entered judgment dismissing the lawsuit.

1 All additional unspecified statutory references are to the Civil Code.

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 Alzayat appeals from the judgment, contending the litigation privilege only

applies to tort claims and not to statutory claims such as an action under the IFPA, and

the IFPA is a specific statute that prevails over the general litigation privilege.

Defendants cross-appeal, arguing that, even if Alzayat’s lawsuit is not barred by

the litigation privilege, the superior court erred by not granting judgment on the pleadings

on the ground that Alzayat’s claim is barred by the workers’ compensation exclusivity

rule.

We agree with Alzayat that his lawsuit is not barred by the litigation privilege.

The litigation privilege is broad, but it has its limits. Like any statute, Civil Code

section 47(b) is subject to the rule of statutory construction that a particular provision

prevails over a general one. (Civ. Code, § 3534; Code Civ. Proc., § 1859; Action

Apartment Assn., Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232, 1246 (Action

Apartment).) The courts have concluded the litigation privilege does not bar an action

filed under a more specific statute when application of the privilege would render the

specific provision “significantly or wholly inoperable.” (Action Apartment, at p. 1246.)

The IFPA is a more specific statute than the litigation privilege, and application of the

litigation privilege to claims under the IFPA—which in many cases will be based on

communications that are otherwise privileged under Civil Code section 47(b)—would in

large measure nullify the Act. Therefore, we conclude the litigation privilege does not

bar Alzayat’s claim.

We also conclude this lawsuit is not barred by the workers’ compensation

exclusivity rule. The Workers’ Compensation Act (WCA; Lab. Code, § 3200 et seq.)

3
provides exclusive remedies for injuries to a worker arising out of his or her employment.

Like any qui tam lawsuit, Alzayat’s claim under the IFPA is based on an injury suffered

by the People, not based on any injury he himself suffered. Therefore, the exclusivity

rule is inapplicable.

The trial court erred by granting judgment on the pleadings for defendants, so we

reverse the judgment.

II.

FACTS AND PROCEDURAL BACKGROUND

In conformity with the standard of review of an order granting a motion for

judgment on the pleadings, we accept as true the facts pleaded in the complaint. (Truong

v. Orange County Sheriff’s Dept. (2005) 129 Cal.App.4th 1423, 1427.)

Sunline Transit Agency (Sunline) is a public entity that provides regional

transportation services and oversight of other transportation entities such as taxi

companies. Alzayat was employed by Sunline as a stops and zones technician, and in

that capacity he maintained bus stop infrastructure. Hebb was Alzayat’s supervisor.

Sometime before his current injury, Alzayat suffered a work-related lumbar injury

and was later released back to work. On the day of the current injury, Alzayat was

working on a bus stop and needed concrete mix to anchor some posts. The only available

bags of concrete mix weighed 90 pounds. To avoid reinjuring his lumbar, Alzayat asked

Hebb for permission to either break down a 90-pound bag into lighter ones or to have

another employee help him lift the 90-pound bag. Hebb refused Alzayat’s requests, and

the two argued for about two minutes. Hebb ultimately ordered Alzayat to lift the 90-

4
pound bag by himself without breaking it down first. Alzayat complied and, immediately

upon lifting the bag, Alzayat felt intense pain in his lumbar spine, and he partially

collapsed. Alzayat dropped the bag and its contents spilled out. When Hebb asked

Alzayat why he had dropped the bag, Alzayat complained he had injured his back when

lifting the bag.

Alzayat was still in pain the next day, so he filled out a workers’ compensation

claim form about the incident. Some time thereafter, Hebb filled out a standard Sunline

report for work injuries that is used in determining whether to accept or deny liability for

workers’ compensation claims. In the report, Hebb wrote he did not witness Alzayat’s

injury. Alzayat alleged this statement was false, because Hebb was an active participant

in the incident.

Hebb was deposed during the investigation into Alzayat’s workers’ compensation

claim. Hebb testified under oath that he had no conversation with Alzayat about the

request to either break down the bag of concrete mix or to obtain help in lifting the bag.

Hebb also denied having witnessed Alzayat injure himself when he lifted and then

dropped the bag. Alzayat alleged Hebb knowingly provided false testimony because

Hebb was present and had witnessed Alzayat’s injury. In addition, Alzayat alleged

Sunline adopted and ratified Hebb’s misrepresentations, and Hebb and Sunline knew or

should have known that Hebb’s deposition testimony would be used in determining

whether Alzayat’s workers’ compensation claim would be granted or denied.

Sunline’s risk management authority denied Alzayat’s workers’ compensation

claim based on Hebb’s report and deposition testimony. Alzayat alleged Hebb’s

5
misrepresentations were material in that a reasonable insurance carrier would consider

them important when determining whether to accept or deny liability for Alzayat’s

injuries.2

Alzayat filed this lawsuit alleging Hebb’s false statements in relation to Alzayat’s

claim for workers’ compensation benefits constituted violations of Penal Code

section 550, and formed predicate offenses for liability under the IFPA.3 Alzayat alleged

he is an “interested person” under the IFPA, and that he had direct and independent

knowledge of the information on which the lawsuit was based within the meaning of

2 The parties agree that Alzayat eventually received workers’ compensation
benefits for his back injury.

3 In their brief, defendants contend Alzayat pleaded a predicate violation of Penal
Code section 550, subdivision (b)(3), which provides: “It is unlawful to do, or to
knowingly assist or conspire with any person to . . . [¶] . . . [¶] [c]onceal, or knowingly
fail to disclose the occurrence of, an event that affects any person’s initial or continued
right or entitlement to any insurance benefit or payment, or the amount of any benefit or
payment to which the person is entitled.” Not so. The complaint pleaded more generally
that Hebb’s misrepresentations in the Sunline report and in his deposition testimony were
“in violation of Penal Code § 550, which is a predicate offense for an action under the
Insurance Frauds Prevention Act.”
Alzayat relied on Penal Code section 550, subdivision (b)(3), in his opening brief
in an earlier appeal and in an answer to defendants’ petition for review in that proceeding.
Based on the parties’ briefs in that earlier appeal, this court addressed Penal Code
section 550, subdivision (b)(3), in the context of the specific issue presented to us, viz,
whether a self-insurance risk pool constitutes insurance for purposes of the IFPA.
(People ex rel. Alzayat v. Hebb et al. (Dec. 17, 2015, E060593) [nonpub. opn.].) This
court had no occasion whatsoever to decide whether Alzayat could state a claim based on
a predicate violation of Penal Code section 550, subdivision (b)(3), or whether Alzayat’s
IFPA lawsuit is limited to that specific predicate offense. Defendants have not argued
Alzayat is judicially estopped from asserting other predicate offenses under Penal Code
section 550, and we decline to find estoppel on our own motion. (Lee v. West Kern
Water Dist. (2016) 5 Cal.App.5th 606, 630 [equitable defense of judicial estoppel is
subject to the forfeiture doctrine].)

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Insurance Code section 1871.7, subdivision (h)(2)(B). On behalf of the People of the

State of California, Alzayat prayed for a civil penalty against Hebb and Sunline of no less

than $5,000 and no more than $10,000, an assessment of no more than three times the

amount of his workers’ compensation claim, attorney fees, and costs.

In their first motion for judgment on the pleadings, Hebb and Sunline argued self-

insured risk pools, like Sunline’s, are not considered insurance for purposes of the IFPA.

The superior court agreed, granted the motion without leave to amend, and entered

judgment for defendants. In an unpublished opinion, we concluded self-insured risk

pools are subject to the IFPA and reversed the judgment. (People ex rel. Alzayat v.

Hebb et al., supra, E060593.)

On remand, Hebb and Sunline again moved for judgment on the pleadings. In

their separate but identical motions, defendants argued Alzayat’s lawsuit was based on

communications Hebb made in the context of a workers’ compensation proceeding and,

therefore, the lawsuit is barred by the litigation privilege under section 47(b). Defendants

also argued Alzayat’s lawsuit seeks damages for injuries that he incurred in the

workplace and is, therefore, barred by the workers’ compensation exclusivity rule. In his

opposition to Sunline’s motion, Alzayat argued his lawsuit is not barred by the litigation

privilege. Relying on Action Apartment, supra, 41 Cal.4th 1232, Alzayat argued the

IFPA is a specific statute designed to combat workers’ compensation fraud, and

permitting the general litigation privilege to immunize communications the IFPA was

designed to penalize would frustrate the purposes of the Act. Alzayat also argued his

7
claim under the IFPA is not barred by the workers’ compensation exclusivity rule.

Alzayat did not file an opposition to Hebb’s motion.

In its tentative ruling, which became the final ruling, the superior court agreed

with defendants that Alzayat’s claim is barred by the litigation privilege. The court noted

the litigation privilege is absolute, applies to quasi-judicial proceedings such as workers’

compensation actions, and immunizes communications that have some logical relation to

the proceeding and are made to achieve the objects of the litigation. Although the court

acknowledged that the general litigation privilege must yield when immunity would

render a more specific statute to be significantly or wholly inoperable, the court

concluded application of the privilege in this case would not frustrate enforcement of the

IFPA. According to the court, Penal Code section 550, which lists the predicate offenses

for liability under the IFPA, “prohibits a wide array of conduct related to the false

submission of insurance claims, most of which could arise before litigation is ever

contemplated.” The court gave two examples: causing a vehicular accident for the

purpose of filing a false insurance claim, and misrepresenting an insured’s state of

domicile when obtaining motor vehicle insurance. Citing People ex rel. Monterrey

Mushrooms, Inc. v. Thompson (2006) 136 Cal.App.4th 24 (Thompson), the court

concluded the workers’ compensation exclusivity rule does not bar an action under the

IFPA, and rejected defendant’s alternative basis for judgment on the pleadings. The

court granted judgment on the pleadings for defendants without leave to amend and

entered a judgment dismissing the lawsuit.

8
 Alzayat timely appealed from the judgment. Defendants filed a protective cross-

appeal from the order denying judgment on the pleadings based on the workers’

compensation exclusivity rule.

III.

DISCUSSION

A. Standards of Review.

“A motion for judgment on the pleadings presents the question of whether ‘the

plaintiff’s complaint state[s] facts sufficient to constitute a cause of action against the

defendant.’ [Citation.] The trial court generally considers only the allegations of the

complaint, but may also consider matters that are subject to judicial notice. [Citation.]

‘“Moreover, the allegations must be liberally construed with a view to attaining

substantial justice among the parties.” [Citation.] “Our primary task is to determine

whether the facts alleged provide the basis for a cause of action against defendants under

any theory.”’ [Citation.] ‘An appellate court independently reviews a trial court’s order

on such a motion.’ [Citation.]” (Jacks v. City of Santa Barbara (2017) 3 Cal.5th 248,

272.)

Interpretation of Civil Code section 47, subdivision (b), and of the IFPA is a pure

question of law that we review de novo. (Goodman v. Lozano (2010) 47 Cal.4th 1327,

1332.) When the facts are not in dispute, the question of whether a cause of action is

barred by the workers’ compensation exclusivity rule is also a question of law we review

de novo. (Melendrez v. Ameron Internat. Corp. (2015) 240 Cal.App.4th 632, 639

(Melendrez).)

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 B. Alzayat’s Qui Tam Claim Under the IFPA Is Not Barred by the Litigation

Privilege.

Alzayat does not dispute that, in general, the litigation privilege bars tort liability

for communications that are made in judicial and quasi-judicial proceedings such as a

workers’ compensation proceeding. Rather, he argues the IFPA is an exception to the

litigation privilege. We agree.

1. The IFPA.

The IFPA was in large measure designed to prevent workers’ compensation

insurance fraud, and the Act includes a number of legislative findings and declarations

that are relevant here. “Workers’ compensation fraud harms employers by contributing

to the increasingly high cost of workers’ compensation insurance and self-insurance and

harms employees by undermining the perceived legitimacy of all workers’ compensation

claims.” (Ins. Code, § 1871, subd. (d).) Preventing workers’ compensation fraud “may

reduce the number of workers’ compensation claims and claim payments thereby

producing a commensurate reduction in workers’ compensation costs,” and “will assist in

restoring confidence and faith in the workers’ compensation system, and will facilitate

expedient and full compensation for employees injured at the workplace.” (Id.,

subd. (e).) In addition, “[t]he actions of employers who fraudulently underreport payroll

or fail to report payroll for all employees to their insurance company in order to pay a

lower workers’ compensation premium result in significant additional premium costs and

an unfair burden to honest employers and their employees.” (Id., subd. (f).) Finally,

“[t]he actions of employers who fraudulently fail to secure the payment of workers’

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compensation as required by Section 3700 of the Labor Code harm employees, cause

unfair competition for honest employers, and increase costs to taxpayers.” (Id.,

subd. (g).)

Any person who makes a false claim for workers’ compensation benefits, or who

presents a false or fraudulent statement in support of or in opposition to such a claim, is

guilty of a felony wobbler. (Ins. Code, § 1871.4, subd. (b).) In addition, the IFPA

provides for civil liability for various forms of workers’ compensation insurance fraud.

“Every person who violates any provision of this section or Section 549, 550, or 551 of

the Penal Code shall be subject, in addition to any other penalties that may be prescribed

by law, to a civil penalty of not less than five thousand dollars ($5,000) nor more than ten

thousand dollars ($10,000), plus an assessment of not more than three times the amount

of each claim for compensation, as defined in Section 3207 of the Labor Code[4] or

pursuant to a contract of insurance. The court shall have the power to grant other

equitable relief, including temporary injunctive relief, as is necessary to prevent the

transfer, concealment, or dissipation of illegal proceeds, or to protect the public. The

penalty prescribed in this paragraph shall be assessed for each fraudulent claim presented

to an insurance company by a defendant and not for each violation.” (Ins. Code,

§ 1871.7, subd. (b), hereafter Ins. Code, § 1871.7(b).)

Insurance Code section 1871.7, subdivision (a), makes it unlawful to use runners

and cappers to procure clients or patients for the purpose of filing claims for insurance

4 Labor Code section 3207 defines the term “compensation” for purposes of the
WCA.

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services or benefits. Penal Code section 549 makes it a crime to knowingly, or with

reckless disregard for the truth, solicit, accept, or refer a client who intends to file a

fraudulent claim for insurance benefits. Among other things, Penal Code section 550,

subdivisions (a) and (b), criminalize making false claims for compensation or benefits

and presenting or preparing false statements in support of or in opposition to a claim for

compensation or benefits. Relevant here, Penal Code section 550, subdivision (b)(1),

provides it is unlawful to “[p]resent or cause to be presented any written or oral statement

as part of, or in support of or opposition to, a claim for payment or other benefit pursuant

to an insurance policy, knowing that the statement contains any false or misleading

information concerning any material fact.” (Italics added.) Subdivision (b)(2) of the

same section makes it a crime to knowingly “[p]repare or make” a false or misleading

statement “to be presented to any insurer or any insurance claimant in connection with,

or in support of or opposition to, any claim or payment or other benefit pursuant to an

insurance policy.” (Italics added.) Assisting or conspiring with another person to present

or prepare such a false statement in support of or in opposition to a claim for

compensation or benefits is also a crime. (Pen. Code, § 550, subd. (b).) Finally, Penal

Code section 551 criminalizes paying consideration for the referral of clients to

automotive repair shops for repairs covered by automobile insurance.

The IFPA’s civil penalties are intended to be remedial and not punitive (Ins. Code,

§ 1871.7, subd. (c)), and they are not the exclusive remedies available for insurance fraud

(id., subd. (k)). An action to recover civil penalties under the IFPA may be initiated by the

district attorney or the insurance commissioner. (Ins. Code, § 1871.7, subd. (d).) In

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addition, any “interested person,” including an insurance company, may file such an action

in the name of the People of the State of California. (Id., subd. (e)(1).) A lawsuit filed on

behalf of the state is called a qui tam action, and the interested person is called a relator.

(People ex rel. Strathmann v. Acacia Research Corp. (2012) 210 Cal.App.4th 487, 500

(Strathmann); People ex rel. Allstate Ins. Co. v. Weitzman (2003) 107 Cal.App.4th 534,

538 (Weitzman).) The relator’s complaint must be served on the district attorney and the

insurance commissioner, who have 60 days to decide whether to intervene and proceed

with the lawsuit. (Ins. Code, § 1871.7, subd. (e)(2).) If the district attorney and the

insurance commissioner both decline to take over the action (id., subd. (e)(4)(A)), the

relator may proceed with the action and recover a bounty of 40 to 50 percent of the

recovered proceeds, plus reasonable expenses and attorney fees (id., subds. (e)(4)(B),

(g)(2)(A); Strathmann, at p. 500).

Relying on State of California ex rel. Metz v. Farmers Group, Inc. (2007)

156 Cal.App.4th 1063 (Metz) and State of California ex rel. Nee v. Unumprovident Corp.

(2006) 140 Cal.App.4th 442 (Nee), defendants contend the IFPA is concerned primarily

with workers’ compensation fraud by employees, and that its limited application to

fraudulent statements made by employers or other persons in opposition to employee

claims has no bearing here. Although those decisions concluded the IFPA was drafted

primarily to address fraudulent claims for workers’ compensation benefits filed by

employees (Metz, at pp. 1068-1069; Nee, at pp. 448-449; accord, State ex rel. Metz v.

CCC Information Services, Inc. (2007) 149 Cal.App.4th 402, 413), they did not hold the

IFPA is only concerned with fraudulent claims. To the contrary, Insurance Code

13
section 1871, subdivisions (f) and (g), specifically address the Legislature’s concern

about employers who fraudulently fail to comply with their obligations under the WCA.

The Metz and Nee courts held that the defendants in those cases—insurance

companies and insurance company agents, affiliates, and exchanges—were not subject to

criminal liability under Penal Code section 550 and, therefore, were not proper defendants

under Insurance Code section 1871.7, subdivision (b). (Metz, supra, 156 Cal.App.4th at

pp. 1070-1071; Nee, supra, 140 Cal.App.4th at pp. 450-452.) Nee concluded “the class of

persons who violate [Penal Code sections 549, 550, or 551] are those who submit false or

fraudulent claims to insurers.” (Nee, at p. 450, fn. omitted.) By way of example, the court

said Penal Code section 550, subdivisions (a)(1) through (a)(9) and (b)(3) and (b)(4)

“specifically refer to the presentation of false or fraudulent claims for compensation or

benefits,” conduct the defendant insurer in that case was not alleged to have engaged in.

(Nee, at p. 450; see Metz, at p. 1069.) At least one appellate court has concluded Nee’s

limitation of Penal Code section 550 to the class of persons who file insurance claims is

unpersuasive dictum.5 (People v. Butler (2011) 195 Cal.App.4th 535, 540.) We need not

decide whether Nee correctly interpreted the scope of Penal Code section 550. As stated,

5 A number of courts have made statements regarding the elements for a violation
of Penal Code section 550 that, if taken out of context, might support the suggestion in
Nee that only persons who file claims for benefits are liable under that statute. (See, e.g.,
People ex rel. Government Employees Ins. Co. v. Cruz (2016) 244 Cal.App.4th 1184,
1193 [“The elements generally necessary to find a violation of Penal Code section 550
are (1) the defendant’s knowing presentation of a false claim, (2) with the intent to
defraud.”].) Those courts had no occasion to determine whether Penal Code section 550,
subdivision (b)(3), can be violated by anyone other than a person who submits a claim for
benefits under an insurance policy and, therefore, do not support the dictum in Nee.

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ante, in footnote 2, we do not read Alzayat’s complaint as being limited to the predicate

offense of concealment in violation of Penal Code section 550, subdivision (b)(3). When

reviewing a judgment on the pleadings, it is our duty to determine whether the complaint

states a cause of action under any theory. (Jacks v. City of Santa Barbara, supra,

3 Cal.5th at p. 272.)

As defendants must concede, Nee concluded, albeit in dicta, that Penal Code

section 550, subdivision (b)(1) and (b)(2), “extend liability to persons other than those

who actually file the suspect claim” for workers’ compensation benefits. (Nee, supra,

140 Cal.App.4th at p. 450; see Metz, supra, 156 Cal.App.4th at p. 1070.) “These

provisions might apply, for example, to a doctor who submits false documentation in

support of an employee’s claim for benefits under a workers’ compensation policy, or an

employer who makes a false statement in opposition to such a claim, or to a person who

files a false statement in support of an insured’s claim under a disability policy, and

extends as well to anyone who knowingly assists or conspires to do any of these things.”

(Nee, at p. 450, italics added; see Metz, at p. 1070.)

We conclude the latter bit of dicta from Nee is well considered and persuasive.

(Cf. PGA West Residential Assn., Inc. v. Hulven Internat., Inc. (2017) 14 Cal.App.5th

156, 171.) A false report submitted by or prepared to be submitted by an employer in

response to a claim for workers’ compensation insurance benefits, fraudulently disputing

liability for the claimed injury, is a false oral or written statement “in support of or

opposition to” a claim for benefits within the meaning of Penal Code section 550,

subdivision (b)(1) and (b)(2). That is exactly what Alzayat alleged in his complaint.

15
Therefore, we conclude Alzayat pleaded predicate offenses under Penal Code

section 550, subdivision (b)(1) and/or (b)(2).

Finally, relying on State ex rel. Wilson v. Superior Court (2014) 227 Cal.App.4th

579 (Wilson), defendants argued for the first time at oral argument that civil penalties

under Insurance Code section 1871.7(b) are only available to remedy the filing of

fraudulent claims for compensation. Arguments made for the first time at oral argument

are generally waived. (Bonfigli v. Strachan (2011) 192 Cal.App.4th 1302, 1311, fn. 4.)

In any event, we do not agree with such a cabined reading of the statute.

Insurance Code section 1871.7(b) has three sentences. The first sentence provides

that a “civil penalty” of no less than $5,000 and no more than $10,000, plus an assessment

of no more than three times the amount of the underlying claim for compensation, “shall”

be imposed on “[e]very person who violates any provision of this section or Section 549,

550, or 551 of the Penal Code.” As noted, ante, sections 549 through 551 of the Penal

Code criminalize various forms of insurance fraud, including but not limited to the filing

of a fraudulent claim. The second sentence of Insurance Code section 1871.7(b) provides

that the superior court also has the power to grant equitable or injunctive relief as

necessary to protect the public from insurance fraud. Finally, the third sentence provides

that the “civil penalty” mentioned in the first sentence “shall be assessed for each

fraudulent claim presented to an insurance company by a defendant and not for each

violation.”

Defendants argue that, notwithstanding the incorporation of all predicate

violations of Penal Code sections 549 through 551 into the first sentence of Insurance

16
Code section 1871.7(b), the third sentence limits penalties to the sole predicate violation

of filing a fraudulent claim, and that the only available remedies for other predicate

violations is the equitable and injunctive relief mentioned in the second sentence. But

“[t]he meaning of a statute may not be determined from a single word or sentence; the

words must be construed in context, and provisions relating to the same subject matter

must be harmonized to the extent possible. [Citation.]” (Lungren v. Deukmejian (1988)

45 Cal.3d 727, 735; accord, Weitzman, supra, 107 Cal.App.4th at p. 544.) The most

reasonable reading of Insurance Code section 1871.7(b), which harmonizes all three

sentences, is that the “civil penalty” mentioned in the first sentence may only be assessed

once per underlying claim for compensation regardless of how many predicate violations

occurred, and the equitable and injunctive remedies mentioned in the second sentence are

supplementary to the civil penalty. In other words, rather than limiting the IFPA’s

statutory penalties to one type of predicate violation, the most reasonable reading of

Insurance Code section 1871.7(b) is that it limits the number of penalties that can be

imposed for insurance fraud violations related to a single claim.

If the Legislature had intended the IFPA’s civil penalties to be limited to

defendants who present false claims to insurance companies, as defendants contend, it

could have made the point more clearly by amending the first sentence of Insurance Code

section 1871.7(b) to only incorporate the predicate offense of filing a fraudulent claim in

violation of Penal Code section 550, subdivision (a). Other changes to the statute that

would more clearly express an intent to limit penalties to fraudulent claims would

include: (1) amending the second sentence of Insurance Code section 1871.7(b) to

17
expressly provide that equitable and injunctive relief is the sole remedy for insurance

fraud in violation of Penal Code sections 549, 550, subdivision (b), and 551, but is a

supplementary remedy for filing a fraudulent insurance claim in violation of Penal Code

section 550, subdivision (a); and (2) amending the third sentence to clearly state that the

civil penalties mentioned in the first sentence are only available to remedy the filing of a

fraudulent claim in violation of Penal Code section 550, subdivision (a). The Legislature

did neither of those things, and the structure of the paragraph as a whole simply does not

support the interpretation given to it by defendants.

Even if we were to agree with defendants that the third sentence of Insurance Code

section 1871.7(b) could be read to limit the civil penalties mentioned in the first sentence

to the filing of fraudulent claims, such a reading would render the statute ambiguous

because, as already noted, ante, on its face the first sentence more broadly provides for

civil penalties to remedy all forms of insurance fraud proscribed by Penal Code

sections 549 through 551. Normally, we only look no further than the plain language of a

statute when determining the Legislature’s intent. (Nolan v. City of Anaheim (2004)

33 Cal.4th 335, 340.) However, “[i]f we find the statutory language ambiguous or

subject to more than one interpretation, we may look to extrinsic aids, including

legislative history or purpose to inform our views. [Citation.]” (John v. Superior Court

(2016) 63 Cal.4th 91, 96.)

The available legislative history supports our reading of the statute. Since 1995,

the first sentence of Insurance Code section 1871.7(b) has incorporated Penal Code

sections 549 through 551 in toto. (Stats. 1995, ch. 574, § 2, p. 4427.) The third sentence

18
was added to section 1871.7(b) in 1999, when the Legislature adopted a number of

amendments to the IFPA. (Stats. 1999, ch. 885, § 2, p. 6345.) One of the main purposes

of those amendments was to change the distribution of penalties recovered in civil actions

filed by insurance companies, but taken over by the Attorney General, the district

attorney, or the Insurance Commissioner. (Assem. Com. on Insurance, Analysis of

Assem. Bill No. 1050 (1999-2000 Reg. Sess.) as amended Apr. 19, 1999, p. 1.)6

An early version of the bill to amend the IFPA would have added a new

subdivision (g)(1)(B) to Insurance Code section 1871.7, to provide that insurance company

relators would be entitled to “receive at least 75 percent but not more than 85 percent of the

proceeds of the action or settlement of the claim depending upon the extent to which the

insurer substantially contributed to the prosecution of the action.” (Assem. Bill No. 1050

(1999-2000 Reg. Sess.) § 2, p. 9, as amended Apr. 19, 1999, italics omitted.)7 Along the

same lines, the same version of the bill would have amended the first sentence of section

1871.7(b) to read: “Every person who violates any provision of this section or Section 549,

550, or 551 of the Penal Code shall be subject, in addition to any other penalties that may

be prescribed by law, to a civil penalty for each violation of not less than five thousand

dollars ($5,000) nor more than ten thousand dollars ($10,000), plus an assessment of not

6 Available at (as of Dec. 19, 2017). On our
own motion, we take judicial notice of the legislative history materials mentioned in this
opinion related to Assembly Bill No. 1050 (1999-2000 Reg. Sess.), which amended
Insurance Code section 1871.7. (Evid. Code, §§ 452, 459.)

7Available at (as of Dec. 19, 2017).

19
more than three times the amount of each claim for compensation, as defined in Section

3207 of the Labor Code or pursuant to a contract of insurance.” (Assem. Bill No. 1050

(1999-2000 Reg. Sess.), supra, § 2, pp. 4-5, as amended Apr. 19, 1999.) Note that the

proposed amendment to the first sentence spoke of civil penalties for “each violation,” and

not for “each fraudulent claim.”

Clearly such a proposed distribution of the civil penalty to insurance companies

was seen as too generous, because as Assembly Bill No. 1050 proceeded through further

amendments, the provision specifically addressing distribution of penalties to insurance

companies was eliminated entirely. In its place, the amended bill more modestly

increased the distribution of penalties to any person who initiated a civil lawsuit under

the IFPA that was taken over by the government. (Assem. Bill No. 1050 (1999-2000

Reg. Sess.) § 2, as amended May 19, 1999.)8 At the same time, the bill was amended to

eliminate a windfall to relators by limiting the civil penalty to one per claim, rather than

one per predicate violation. It was at this point that the third sentence of Insurance Code

section 1871.7(b), with its reference to “each fraudulent claim,” was introduced. (Assem.

Bill No. 1050 (1999-2000 Reg. Sess.), supra, § 2, p. 5, as amended May 19, 1999.) That

language remained unchanged in the final bill signed by the Governor (Stats. 1999, ch.

885, § 2, p. 6345), and it has not been amended since. (See Stats. 2010, ch. 400, § 26.)

Nothing in the legislative history to the 1999 amendments to Insurance Code

section 1871.7 suggests that the Legislature intended to limit the assessment of penalties

8Available at (as of Dec. 19, 2017).

20
to persons who fraudulently file insurance claims. To repeat, if that was its intent the

Legislature could have easily amended the first sentence of section 1871.7(b) to limit the

incorporation of predicate offenses. Because the addition of the third sentence to the

statute related specifically to the Legislature’s intent to adopt a proper distribution of the

penalties recovered, and not to any intent to limit the type of predicate violation that

would give rise to penalties in the first place, we decline to read section 1871.7(b) as

narrowly as defendants suggest. Therefore, we respectfully disagree with the court in

Wilson, which held the addition of the third sentence to section 1871.7(b), did limit

penalties to persons who file fraudulent claims with insurance companies. (Wilson,

supra, 227 Cal.App.4th at pp. 595-597.)

2. The litigation privilege.

Defendants contend that, even if Alzayat pleaded predicate offenses under Penal

Code section 550 for purposes of civil liability under the IFPA, those offenses were based

on communications that are absolutely privileged under Civil Code section 47(b).

“The litigation privilege, codified at Civil Code section 47, subdivision (b),

provides that a ‘publication or broadcast’ made as part of a ‘judicial proceeding’ is

privileged. This privilege is absolute in nature, applying ‘to all publications, irrespective

of their maliciousness.’ (Silberg v. Anderson (1990) 50 Cal.3d 205, 216 . . . .) ‘The usual

formulation is that the privilege applies to any communication (1) made in judicial or

quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to

achieve the objects of the litigation; and (4) that [has] some connection or logical relation

to the action.’ (Id. at p. 212.) The privilege ‘is not limited to statements made during a

21
trial or other proceedings, but may extend to steps taken prior thereto, or afterwards.’

(Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1057 . . . .)” (Action Apartment, supra,

41 Cal.4th at p. 1241.)

“‘The principal purpose of [Civil Code] section [47, subdivision (b)] is to afford

litigants and witnesses [citation] the utmost freedom of access to the courts without fear

of being harassed subsequently by derivative tort actions.’ (Silberg v. Anderson (1990)

50 Cal.3d 205, 213 . . . .) Additionally, the privilege promotes effective judicial

proceedings by encouraging ‘“open channels of communication and the presentation of

evidence”’ without the external threat of liability (ibid.), and ‘by encouraging attorneys to

zealously protect their clients’ interests.’ (Id. at p. 214.) ‘Finally, in immunizing

participants from liability for torts arising from communications made during judicial

proceedings, the law places upon litigants the burden of exposing during trial the bias of

witnesses and the falsity of evidence, thereby enhancing the finality of judgments and

avoiding an unending roundelay of litigation, an evil far worse than an occasional unfair

result.’ (Ibid.)” (Flatley v. Mauro (2006) 39 Cal.4th 299, 321-322.)

In the trial court and in their briefs on appeal, defendants argue this court’s

decision in Harris v. King (1998) 60 Cal.App.4th 1185 (Harris) is dispositive and

mandates dismissal of Alzayat’s suit. The plaintiff in Harris sued a physician alleging he

submitted false and defamatory medical reports to the State Compensation Insurance

Fund, which resulted in the temporary termination of the plaintiff’s disability and

rehabilitation benefits. (Id. at pp. 1186-1187.) The plaintiff alleged causes of action for

22
general negligence, fraud, and libel, and prayed for general and punitive damages. (Id. at

p. 1187.)

On appeal, this court concluded the trial court properly sustained a demurrer to the

complaint without leave to amend because the plaintiff’s claims were barred by the

litigation privilege. “[Section 47(b)] creates a privilege for the report prepared by King.

That section provides that ‘A privileged publication . . . is one made: [¶] . . . [¶] (b) In

any . . . (2) judicial proceeding . . . .’ That privilege is absolute [citation], and applies to

communications involving quasi-judicial proceedings, including workers’ compensation

proceedings. [Citation.] [¶] Harris alleged he was receiving workers’ compensation

benefits as the result of a work-related injury. In connection with that proceeding, King

communicated his report to the workers’ compensation insurance carrier. King’s

communication satisfies the requirements for application of the litigation privilege

because it was made in a quasi-judicial proceeding, by participants authorized by law to

achieve the objects of the litigation, and the communication had a logical relation to that

proceeding. [Citation.] The King report is therefore absolutely privileged and is not

actionable even if prepared and communicated maliciously and with knowledge of its

falsity. [Citation.]” (Harris, supra, 60 Cal.App.4th at pp. 1187-1188.)

At first blush, Harris would appear to support defendants’ contention that, because

Hebb’s alleged misrepresentations were made in the context of a workers’ compensation

insurance proceeding, Alzayat’s lawsuit is barred by the litigation privilege. Alzayat

argues, however, our decision in Harris does not compel dismissal of his IFPA claim

because: (1) the litigation privilege applies to common law tort causes of action and not

23
to claims under remedial statutory schemes, and (2) application of the general litigation

privilege is inappropriate when it will render a more specific statute to be wholly or

significantly inoperable. Alzayat’s first argument is dubious at best,9 but we need not

address it further because we conclude the IFPA is an exception to the privilege.

3. Exceptions to the litigation privilege.

As defendants point out, Alzayat cited no authority in his briefs for the proposition

that the litigation privilege does not apply when it is inconsistent with, and would render

ineffective, a more specific statute.10 In their brief, defendants contend they are unaware

of any controlling authority that supports Alzayat’s argument and raise the stakes by

boldly asserting “[t]here is not a single potential cause of action that could conceivably”

be exempt from the litigation privilege. Quite to the contrary, there is ample published

authority for the proposition that the general litigation privilege must yield when its

application will render a more specific law to be wholly or significantly inoperable.

In Begier v. Strom (1996) 46 Cal.App.4th 877 (Begier), while a couple were in the

midst of a marital dissolution action, the wife filed a police report falsely accusing her

9 The litigation privilege “has . . . been interpreted to preclude constitutional and
statutory causes of action. [Citation.]” (People v. Persolve, LLC (2013) 218 Cal.App.4th
1267, 1274 (Persolve).)

10 “Each brief must: [¶] . . . [¶] State each point under a separate heading or
subheading summarizing the point, and support each point by argument and, if possible, by
citation of authority.” (Cal. Rules of Court, rule 8.204(a)(1)(B).) Issues not supported by
citation to legal authority are subject to forfeiture. (Needelman v. DeWolf Realty Co., Inc.
(2015) 239 Cal.App.4th 750, 762.) Because the issue of whether the litigation privilege
preempts the IFPA is a pure question of law, and because Alzayat cited Action Apartment
(discussed post) in his opposition to Sunline’s motion in the trial court, we exercise our
discretion to address it despite Alzayat’s noncomplying brief.

24
husband of sexually abusing their young daughter and repeated the false accusation within

the dissolution proceeding. (Id. at p. 881.) The husband thereupon sued his former wife

for malicious prosecution and intentional infliction of emotional distress, and the wife

successfully demurred to the emotional distress claim contending it was based on

privileged communications and was, therefore, barred by section 47(b). (Begier, at

p. 881.) On appeal, the husband conceded the wife’s false accusations made in the context

of the dissolution proceeding were privileged, but he argued the false police report was

not privileged. (Id. at p. 882.) Without deciding whether false police reports are

absolutely privileged, the court held the litigation privilege was preempted in that case by

the Child Abuse and Neglect Reporting Act (CANRA; Pen. Code, § 11164 et seq.).

(Begier, at pp. 882-883.)

The purpose of CANRA is to protect children from abuse or neglect, and to that

end it requires certain classes of individuals (mandatory reporters) to report known or

suspected child abuse or neglect to a child protective agency. (Pen. Code, § 11166.)

Failure to report known or suspected child abuse or neglect by a mandatory reporter is a

misdemeanor. (Id., subd. (c).) Mandatory reporters are absolutely immune from criminal

or civil liability for making a false report of child abuse or neglect. (Pen. Code, § 11172,

subd. (a).) Nonmandatory reporters are entitled to qualified immunity for making a false

report unless it is proven the reporter knew the report was false or made the report with

reckless disregard for the truth or falsity of the report, in which case they are liable for

damages caused by the false report. (Ibid.)

25
 Begier agreed with the husband that “the Legislature’s direction in Penal Code

section 11172 that a person who knowingly makes a false report of child abuse ‘is liable

for any damages caused’ creates a limited exception to the privilege.” (Begier, supra,

46 Cal.App.4th at p. 884.) The court “discern[ed] within [CANRA] a legislative effort to

balance, on the one hand, the public interest in ferreting out cases of child abuse so that

the child victims can be protected from harm and, on the other hand, the policy of

protecting the reputations of those who might be falsely accused. [Citation.] The

Legislature has struck that balance by withholding immunity from those who knowingly

make false reports of child abuse.” (Begier, at p. 885, fn. omitted.) Application of the

litigation privilege to knowingly made false reports of child sexual abuse, the court noted,

“would essentially nullify the Legislature’s determination that liability should attach.”

(Ibid.) Mindful of its duty “to read statutes with reference to the whole system of law and

to avoid rendering a statute meaningless and ineffective,” the Begier court held “that the

statutory privilege of Civil Code section 47, subdivision (b), does not immunize a party

who would otherwise be liable under Penal Code section 11172, subdivision (a).”

(Begier, at p. 885; see Siam v. Kizilbash (2005) 130 Cal.App.4th 1563, 1577 [reaffirming

the Begier holding that liability under CANRA for false reports of child sexual abuse

preempts litigation privilege].)

26
 In Action Apartment, the plaintiff argued a tenant harassment ordinance enacted by

the City of Santa Monica, which established criminal and civil liability for maliciously

serving an eviction notice or filing an unlawful detainer action without a reasonable

factual or legal basis, was preempted by the litigation privilege. (Action Apartment,

supra, 41 Cal.4th at pp. 1239-1240.) Although our Supreme Court stated the litigation

privilege is broad, the court acknowledged the privilege “is not without limit[s]” and

cited claims for malicious prosecution, certain criminal prosecutions and regulatory

enforcement proceedings, as examples of actions that are exempt from the litigation

privilege. (Id. at pp. 1242, 1245-1246.) Those exceptions “involved suits brought under

state laws, each of which makes clear that the Legislature did not intend its enforcement

to be barred by the litigation privilege.” (Id. at p. 1245; see id. at p. 1247 [“the

Legislature remains free to create exceptions to the litigation privilege”].) “[R]ecognition

of these exceptions to the litigation privilege,” the court continued, “has been guided by

the ‘rule of statutory construction that particular provisions will prevail over general

provisions.’ [Citations.] [¶] Each of the above mentioned statutes is more specific than

the litigation privilege and would be significantly or wholly inoperable if its enforcement

were barred when in conflict with the privilege.” (Id. at p. 1246.) Because local

governments lack the authority to create their own exceptions to general state laws, the

court declined to find an exception to the litigation privilege for the city’s ordinance.

(Id. at p. 1247.)

27
 The plaintiff in Komarova v. National Credit Acceptance, Inc. (2009)

175 Cal.App.4th 324 (Komarova) sued alleging the defendant engaged in harassing and

illegal debt collection practices in violation of the Rosenthal Fair Debt Collection

Practices Act (Rosenthal Act; § 1788 et seq.), when it tried to collect a debt the plaintiff

never incurred. (Komarova, at pp. 330-335.) On appeal, the defendant argued its

conduct in attempting to collect the debt was privileged under section 47(b). (Komarova,

at p. 337.) The Court of Appeal held “the privilege cannot be used to shield violations of

the [Rosenthal] Act.” (Ibid.)

Citing Action Apartment, supra, 41 Cal.4th 1232, Komarova stated our Supreme

Court had already recognized exceptions to the litigation privilege for “statutes that

(1) are ‘more specific’ than the privilege, and (2) would be ‘significantly or wholly

inoperable’ if the privilege applied.” (Komarova, supra, 175 Cal.App.4th at p. 339,

citing Action Apartment, at p. 1246.) The defendant argued, however, that the litigation

privilege was more specific than the Rosenthal Act “because the privilege ‘only applies

to communications related to litigation,’ while the [Rosenthal] Act ‘prohibits a broad

range of practices in the context of debt collection,’ ‘whether in litigation or not.’”

(Komarova, at p. 339.) The court was not persuaded. “[T]he privilege is implicated in all

judicial and quasi-judicial proceedings and the [Rosenthal] Act is implicated in only the

small subset of those proceedings that involve collection of consumer debts. We note

that the Legislature specifically prohibited certain litigation related activity when it

passed the Rosenthal Act in 1977, presumably aware of the extant broad litigation

privilege in section 47.” (Komarova, at pp. 339-340.)

28
 The court recognized, however, that whether application of the litigation privilege

would render the Rosenthal Act significantly inoperable was “a closer question.”

(Komarova, supra, 175 Cal.App.4th at p. 340.) The defendant argued there was no need

to find an exception to the litigation privilege for Rosenthal Act claims because “‘[t]he

majority of debt collection attempts have nothing to do with litigation,’” “‘[o]nly a small

percentage of debts are ever litigated,’ [and] the [Rosenthal] Act ‘will still provide broad

protection to consumers from improper attempts to collect debts even if all litigation

related communications are excluded from [its] reach . . . .’” (Komarova, at p. 340.)

Assuming for purposes of its decision that a significant percentage of debts are not

litigated, the court nonetheless concluded application of the litigation privilege would

render the Rosenthal Act significantly inoperable. “We must . . . be mindful of the ease

with which the [Rosenthal] Act could be circumvented if the litigation privilege applied.

In that event, unfair debt collection practices could be immunized merely by filing suit on

the debt.” (Komarova, at p. 340.) After acknowledging its duty to interpret remedial

statutes broadly to effectuate their purpose, the court concluded the privilege would

render the Rosenthal Act significantly inoperable and held the plaintiff’s claims were not

barred.11 (Komarova, at p. 340.)

11 The lower federal courts have uniformly followed Komarova, supra,
175 Cal.App.4th 324 and rejected application of the litigation privilege to claims under
the Rosenthal Act. (E.g., Holmes v. Electronic Document Processing, Inc. (N.D. Cal.
2013) 966 F.Supp.2d 925, 935-937 [adopting Komarova holding that Rosenthal Act
claims are not barred by litigation privilege, and noting that since issuance of Komarova
“not ‘a single federal court has found Rosenthal Act claims to be barred by the litigation
privilege’”].)

29
 Relying on the analysis in Komarova, 175 Cal.App.4th 324, the Court of Appeal

in Persolve held an action filed by the People under the unfair competition law (Bus. &

Prof. Code, § 17200), based on communications that allegedly violated specific

provisions of the Rosenthal Act and the Fair Debt Collection Practices Act (FDCPA;

15 U.S.C. § 1692 et seq.), was not barred by the litigation privilege. (Persolve, supra,

218 Cal.App.4th at pp. 1275-1277.) “Applying the privilege to unlawful practices based

on specific violations of the [Rosenthal Act] and the [FDCPA] would effectively render

the protections afforded by those acts meaningless. . . . Civil statutes for the protection of

the public should be interpreted broadly in favor of their protective purpose.

Accordingly, the People’s unfair competition law claims that are based on [the Rosenthal

Act] and/or the [FDCPA] are not barred by the litigation privilege.” (Persolve, at pp.

1276-1277, citing Komarova, at pp. 339-340.)

The question before the court in Banuelos v. LA Investment, LLC (2013)

219 Cal.App.4th 323 (Banuelos) was whether a claim for retaliatory eviction was barred

by the litigation privilege. A landlord who files an unlawful detainer action in retaliation

for the tenant lawfully organizing or participating in a tenant’s association, or in

retaliation for the tenant’s lawful and peaceable exercise of her rights under law, is liable

for damages. (§ 1942.5, subds. (c), (f); Banuelos, at p. 328.) The defendant argued “that

insofar as section 1942.5 purports to allow a tenant to sue a landlord for ‘bring[ing] an

action to recover possession[,]’ it is trumped by the ‘litigation privilege’ provision of

section 47, subdivision (b).” (Banuelos, at p. 330.)

30
 The court concluded section 1942.5, subdivisions (c) and (f), satisfied “both

prongs” of the test under Action Apartment, supra, 41 Cal.4th 1232 for an exception to

the litigation privilege. (Banuelos, supra, 219 Cal.App.4th at p. 332.) “The statute’s

reference to a landlord’s liability ‘in a civil action’ for bringing ‘an action to recover

possession’ in retaliation for a tenant’s exercise of rights coupled with the provision

recognizing a good faith defense ‘at the trial or other hearing’ demonstrates that the

Legislature intended to create a cause of action for retaliatory eviction that is not barred

by the litigation privilege. If the litigation privilege trumped a suit for retaliatory

eviction under section 1942.5 the privilege would ‘“effectively immunize conduct that

the [statute] prohibits”’ (Komarova v. National Credit Acceptance, Inc., supra,

175 Cal.App.4th at p. 338) thereby encouraging, rather than suppressing, ‘“the mischief

at which it was directed. [Citation.]”’ (Barela v. Superior Court [(1981)] 30 Cal.3d

[244,] 251.)” (Banuelos, at p. 332.) In addition, the court noted “the right of tenants to

be free from eviction actions brought by their landlords because the tenants ‘lawfully

and peaceably exercised [their] rights under the law’ (§ 1942.5, subd. (c)) would be

‘significantly or wholly inoperable if its enforcement were barred [by the litigation

privilege].’” (Banuelos, at p. 332, quoting Action Apartment, at p. 1246.)

31
Therefore, the court held the Legislature intended that section 1942.5 not be nullified by

the litigation privilege.12 (Banuelos, at p. 335.)

More recently, a court found no exception for the litigation privilege where applying

the privilege would advance rather than frustrate the purpose of a more specific statute.

The plaintiff in McNair v. City and County of San Francisco (2016) 5 Cal.App.5th 1154

(McNair) had a commercial driver’s license and was employed as a bus driver. A

physician employed by the San Francisco Department of Public Health sent a letter to the

12 The Banuelos court declined to follow two decisions of the Court of Appeal
that concluded the litigation privilege barred retaliatory eviction claims under
section 1942.5. (Banuelos, supra, 219 Cal.App.4th at p. 333.) The plaintiff in Feldman
v. 1100 Park Lane Associates (2008) 160 Cal.App.4th 1467 (Feldman) alleged his
landlord filed an unlawful detainer action in violation of a city ordinance. Relying on
Action Apartment, the appellate court concluded the retaliatory eviction claim was barred
by the litigation privilege. (Feldman, at p. 1486.) As Banuelos noted, “the [Feldman]
court did not discuss the distinction between a tenant suing under a city ordinance, as in
Action Apartment, and a tenant suing under the authority of coequal state statute, nor did
it analyze section 1942.5 to determine whether it ‘makes clear’ that it is not barred by the
litigation privilege.” (Banuelos, at p. 333, citing Action Apartment, supra, 41 Cal.4th at
p. 1246.)
The court in Wallace v. McCubbin (2011) 196 Cal.App.4th 1169 (Wallace)
similarly held claims for retaliatory eviction under section 1942.5 were barred by the
litigation privilege. (Wallace, at p. 1213, disapproved on another ground in Baral v.
Schnitt (2016) 1 Cal.5th 376, 396, fn. 11.) “Like Feldman, the court [in Wallace] cited
but did not discuss or analyze Action Apartment and the litigation privilege[,] nor did it
distinguish between a city ordinance and a state statute when resolving the conflict
issue.” (Banuelos, supra, 219 Cal.App.4th at p. 333.)
Banuelos also rejected the defendant’s suggestion that the California Supreme
Court’s decisions in Ribas v. Clark (1985) 38 Cal.3d 355 and Rubin v. Green (1993)
4 Cal.4th 1187 mandated application of the litigation privilege. “[B]oth addressed
statutes that cover a broad spectrum of conduct, none of which specifically relates to
litigation. It was only because the facts that gave rise to the causes of action in those
cases happened to involve litigation activities that the privilege was implicated. Neither
statute ‘would be significantly or wholly inoperable if its enforcement were barred when
in conflict with the privilege.’” (Banuelos, supra, 219 Cal.App.4th at p. 335, quoting
Action Apartment, supra, 41 Cal.4th at p. 1246.)

32
Department of Motor Vehicles (DMV) expressing her concern that, due to the plaintiff’s

medical history and cognitive deficits, he posed a risk to public safety. In response, the

DMV revoked the plaintiff’s commercial driver’s license. (Id. at pp. 1157-1160.) In his

lawsuit, the plaintiff alleged a cause of action for breach of contract and tort claims based

on violation of the Confidentiality of Medical Information Act (CMIA; § 52 et seq.). The

defendants successfully argued in the trial court that the tort claims were barred by the

litigation privilege. (McNair, at pp. 1160-1161.)

The Court of Appeal easily concluded the plaintiff’s tort claims, based on the

physician’s letter to the DMV, were barred by the litigation privilege. (McNair, supra,

5 Cal.App.5th at pp. 1163-1164.) The plaintiff, however, relied on a number of the cases

discussed, ante, for the proposition that the general litigation privilege does not apply

when it conflicts with a more specific statute. “Under [that] line of cases, application of

the litigation privilege has been deemed inappropriate where the specific statute ‘would

be significantly or wholly inoperable if its enforcement were barred when in conflict with

the privilege.’” (Id. at p. 1164, citing Action Apartment, Komarova, Begier, & Siam v.

Kizilbash.) The McNair court rejected the assertion that application of the litigation

privilege “would eliminate safeguards governing disclosures of medical information that

the Legislature sought to protect in the CMIA and would therefore render the CMIA

‘significantly or wholly inoperable.’” (McNair, at p. 1165.)

“The CMIA ‘was originally enacted . . . “to provide for the confidentiality of

individually identifiable medical information, while permitting certain reasonable and

limited uses of that information.” [Citation.]’” (McNair, supra, 5 Cal.App.5th at p. 1165,

33
quoting Heller v. Norcal Mutual Ins. Co. (1994) 8 Cal.4th 30, 38.) Section 56.10,

subdivision (c)(14), part of the CMIA, is a “catchall provision,” which permits disclosure

of confidential medical information when specifically authorized by law. (McNair, at

p. 1165, quoting Shaddox v. Bertani (2003) 110 Cal.App.4th 1406, 1414 (Shaddox).)

“‘It legitimizes a myriad of situations the Legislature may not have cared to spell out, by

establishing the principle of permissive disclosure when specifically authorized by law.’”

(McNair, at p. 1165, quoting Shaddox, at p. 1414.) “[B]ecause California has a policy of

encouraging reports regarding suspected unsafe drivers,” the McNair court concluded the

catchall provision of section 56.10, subdivision (c)(14), “must be construed in a way that

will not impede voluntary reports of the type generated by [a doctor], ‘reports whose

importance is already recognized and immunized by [the official proceeding privilege

under] section 47, subdivision (b)(3).’” (McNair, at p. 1166, quoting Shaddox, at

p. 1418.)

“[A] voluntary disclosure of confidential medical information falls within the reach

of [section 56.10,] subdivision (c)(14) if a public policy exists encouraging such disclosure;

the disclosure involves issues of public safety; and it is a communication which would

otherwise be immunized by the litigation privilege. In this case, California clearly has a

policy of encouraging, and sometimes even mandating, reports regarding suspected unsafe

drivers. . . . The [DMV’s] proposed decision to revoke or suspend a person’s driver’s

license is subject to an evidentiary hearing and decision by an administrative officer or

body, as well as review by the courts. (Veh. Code, § 14100 et seq.)’ [Citation.] In

addition, [the doctor’s] letter clearly implicated issues of public safety, as she was

34
disclosing a problem that could impair [plaintiff’s] ability to perform the public safety

duties entrusted to him as a bus driver. Finally, this is a situation where the importance of

the report has already been recognized and immunized by the litigation privilege.”

(McNair, supra, 5 Cal.App.5th at pp. 1167-1168.) The court concluded the physician’s

disclosure was authorized by, and not in violation of, the CMIA and held that application

of the litigation privilege would not render the CMIA significantly or wholly inoperable.

(McNair, at p. 1168.)

4. Claims under the IFPA for insurance fraud are an exception

to the litigation privilege.

We conclude the litigation privilege does not bar Alzayat’s claim under the IFPA.

First, we have no difficulty concluding Insurance Code section 1871.7 is a more specific

statute than the litigation privilege.13 The litigation privilege “is implicated in all judicial

and quasi-judicial proceedings” (Komarova, supra, 175 Cal.App.4th at p. 339, italics

added), but the IFPA is limited to a “small subset of those proceedings” (Komarova, at

p. 339), viz, actions to recover civil penalties for fraud related to claims for insurance

benefits. (Ins. Code, § 1871.7, subd. (b).)

Nor do we have any doubt that application of the litigation privilege would thwart

rather than promote the legislative purpose behind the IFPA. Whereas in McNair

13 Defendants do not address whether the IFPA is a more specific statute than the
general litigation privilege, and instead focus their argument on whether application of
the privilege will render the IFPA “wholly inoperable.” We need not decide whether
applying the litigation privilege would completely render the IFPA inoperable because
we conclude, post, that the privilege would render it significantly inoperable. (Action
Apartment, supra, 41 Cal.4th at p. 1246.)

35
application of the litigation privilege supported the public policy of encouraging

unfettered disclosures of confidential medical information in the interest of public safety

(McNair, supra, 5 Cal.App.5th at pp. 1167-1168), applying the privilege to fraudulent

communications made in support of or in opposition to a claim for insurance benefits

would frustrate the remedial purpose of the IFPA. Civil statues enacted for the protection

of the public are to be construed broadly in favor of their protective purpose. (Pineda v.

Williams-Sonoma Stores, Inc. (2011) 51 Cal.4th 524, 530; People ex rel. Lungren v.

Superior Court (1996) 14 Cal.4th 294, 313.) The Legislature was “presumably aware of

the extant broad litigation privilege in section 47” (Komarova, supra, 175 Cal.App.4th at

p. 340) when it enacted the IFPA to provide civil liability for fraudulent communications

related to claims for insurance benefits, including liability for communications that are

otherwise at the core of the privilege. This strongly suggests the Legislature balanced the

public interest in preventing insurance fraud with the interest in encouraging free and

unfettered communications in litigation, and “struck that balance” in favor of preventing

insurance fraud. (Begier, supra, 46 Cal.App.4th at p. 885.) Applying the privilege here

would “encour[age] rather than suppress[]” (Banuelos, supra, 219 Cal.App.4th at p. 332)

the type of fraud the IFPA was designed to combat and would upset the legislative

balance enshrined in the Act.

Last, we conclude application of the litigation privilege would render the IFPA

significantly inoperable. In its ruling, the trial court cited two examples of automobile

insurance fraud that would not necessarily involve contemplated litigation and, therefore,

would not trigger the litigation privilege. We agree there may be various ways of violating

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Penal Code section 550, and incurring liability under the IFPA, that do not involve actual

or contemplated litigation. But we need not conclude that the litigation privilege would

render the IFPA wholly inoperable before finding an exception to the privilege. A

significant amount of fraud governed by the IFPA will occur during or in contemplation of

litigation. Relevant here, false statements made by an employer, witness, or physician,

casting doubt on the validity of a legitimate claim for workers’ compensation benefits, are

made in the context of a quasi-judicial proceeding and absent an exception would be

subject to the litigation privilege. (Harris, supra, 60 Cal.App.4th at pp. 1187-1188.) It is

not difficult to imagine other types of insurance fraud that would potentially trigger the

protections of the litigation privilege. Applying the privilege to such acts of fraud, in a

remedial action under the IFPA, “would effectively render the protections afforded by [the

Act] meaningless.” (Persolve, supra, 218 Cal.App.4th at p. 1277.) Therefore, we conclude

Alzayat’s claims under the IFPA are not barred by the litigation privilege, and the trial

court erred by granting judgment for defendants based on the privilege.

C. The Workers’ Compensation Exclusivity Rule Does Not Apply to Alzayat’s

Claims Under the IFPA.

In their cross-appeal, defendants argue the trial court should have granted

judgment on the pleadings on the alternative theory that Alzayat’s IFPA lawsuit is barred

by the workers’ compensation exclusivity rule. According to defendants, Thompson,

supra, 136 Cal.App.4th 24, on which the trial court relied when rejecting defendant’s

alterative theory, does not apply to an IFPA claim filed by an employee. We conclude

the trial court correctly rejected defendant’s alternative argument.

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 The WCA “‘provides an employee’s exclusive remedy against his or her employer

for injuries arising out of and in the course of employment.’ [Citation.] The exclusive

remedy provision of the act provides, in part, that ‘“[w]here the conditions of

compensation set forth in Section 3600 concur, the right to recover compensation is . . .

the sole and exclusive remedy of the employee or his or her dependents against the

employer” (Lab. Code, § 3602, subd. (a)), and that “[i]n all cases where the conditions of

compensation set forth in Section 3600 do not concur, the liability of the employer shall

be the same as if this division had not been enacted” (Lab. Code, § 3602, subd. (c)). The

legal theory supporting this exclusive remedy provision “is a presumed ‘compensation

bargain,’ pursuant to which the employer assumes liability for industrial personal injury or

death without regard to fault in exchange for limitations on the amount of that liability.

The employee is afforded relatively swift and certain payment of benefits to cure or

relieve the effects of industrial injury without having to prove fault but, in exchange, gives

up the wider range of damages potentially available in tort.” [Citations.]’” (Melendrez,

supra, 240 Cal.App.4th at pp. 638-639.)

In Thompson, supra, 136 Cal.App.4th 24, a self-insured employer filed a relator

action alleging various physicians participated in a scheme to file false claims for

workers’ compensation benefits on behalf of the relator’s employees, in violation of the

IFPA. (Thompson, at p. 27.) On appeal from a judgment finding them liable, the

defendants argued the relator’s claims were barred by the workers’ compensation

exclusivity rule. (Thompson, at pp. 27-28.) The defendants argued the relator’s claim

was basically a complaint of overbilling, and that Labor Code section 3820 already

38
provided civil penalties for fraudulent practices. (Thompson, at p. 29.) The court was not

persuaded. “[I]n [Labor Code section 3820] the Legislature expressly acknowledged that

other penalties may exist, and it stated that the penalty set forth in subdivision (d) may be

imposed ‘in addition to any other penalties that may be prescribed by law.’ And in

subdivision (a) of Labor Code section 3820 the Legislature expressly recognized ‘that the

conduct prohibited by this section is, for the most part, already subject to criminal

penalties pursuant to other provisions of law.’” (Thompson, at pp. 28-29, fn. omitted.)

With respect to the IFPA, the court noted the Act “was intended to encompass

fraudulent claims for workers’ compensation benefits” and “specifically provides for civil

penalties for claims for compensation under Labor Code section 3207, which is part of

the WCA.” (Thompson, supra, 136 Cal.App.4th at p. 30.) “Lest there be any residual

confusion over the authority to proceed,” the court noted, “Insurance Code section

1871.7, subdivision (k), makes it clear that the remedies it provides are ‘in addition to any

other remedies provided by existing law.’” (Ibid.) “The express inclusion of workers’

compensation claims thus demonstrates the Legislature’s intention to allow civil actions

under Insurance Code section 1871.7 arising from fraudulent acts made unlawful by

Penal Code section 550, notwithstanding applicability of the WCA.” (Id. at p. 31.)

Defendants contend Thompson is limited to the facts in that case, and the holding

there has no application to an IFPA claim filed by an employee. We need not decide

whether Thompson is so limited. The workers’ compensation exclusivity rule only limits

liability “against an employer for any injury sustained by his or her employees arising out

of and in the course of the employment . . . .” (Lab. Code, § 3600, subd. (a), italics

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added.) Because this lawsuit is based on an injury allegedly suffered by the People of the

State of California, and was not filed for the purpose of remedying an injury suffered by

Alzayat, the exclusivity rule simply does not apply.

By definition, a qui tam lawsuit vindicates an injury to the government, not an

injury to the relator. “A qui tam statute effectively assigns part of the government’s

interest to a relator so that the relator has standing to assert an injury suffered by the

government. [Citation.]” (Stalley ex rel. U.S. v. Catholic Health Initiatives (8th Cir.

2007) 509 F.3d 517, 521, second italics added.) “‘A qui tam relator is essentially a self-

appointed private attorney general, and his recovery is analogous to a lawyer’s contingent

fee. The relator has no personal stake in the damages sought—all of which, by definition,

were suffered by the government.’ [Citation.] A qui tam action ‘is a type of private

attorney general lawsuit’ [citation], in which ‘the qui tam plaintiff stands in the shoes of

the state or political subdivision’ [citation]. ‘[A]lthough qui tam actions allow individual

citizens to initiate enforcement against wrongdoers who cause injury to the public at

large, the Government remains the real party in interest in any such action.’ [Citation.]”

(Strathmann, supra, 210 Cal.App.4th at pp. 500-501.)

As a true qui tam provision, Insurance Code section 1871.7 does not mandate that

the relator has suffered his or her own injury. In addition to a lawsuit by the district

attorney or insurance commissioner, “[a]ny interested persons” may bring a lawsuit “for

40
the person[14] and for the State of California,” alleging insurance fraud. (Ins. Code,

§ 1871.7, subd. (e)(1).) “The action shall be brought in the name of the state.” (Ibid.) The

superior court has jurisdiction over a relator action as long as the allegations or transactions

underlying the claim are not already the subject of a proceeding in which the People are a

party (Ins. Code, § 1871.7, subd. (h)(1)) and, if the lawsuit is based on allegations or

transactions that were previously disclosed in another proceeding or by the media, the

interested person is an “original source” of the information (id., subd. (h)(2)(A), (h)(2)(B)).

In his complaint, Alzayat did not allege that he was personally harmed by the

misrepresentations made by Hebb and adopted by Sunline.15 Instead, he alleged he is an

“interested person” and an “original source” acting on behalf of the People of the State of

California, and he prays for civil penalties to be paid to the People.

Taken to its logical conclusion, defendants’ position would mean that whenever

the district attorney or insurance commissioner takes over an IFPA lawsuit filed by an

employee who alleges workers’ compensation insurance fraud, those officials would also

be forced to pursue civil penalties before the Workers’ Compensation Appeals Board. In

addition, defendants’ argument would mean that a third party whistleblower who files a

14 The fact that an IFPA qui tam lawsuit is brought on behalf of the relator and
the People does not change our analysis. The successful relator is entitled to a percentage
of the penalties ultimately recovered on behalf of the People, as a bounty for bringing the
action, so by definition the lawsuit is brought on his or her behalf as well. It does not
follow that the lawsuit seeks to remedy a direct harm to the relator, such that the workers’
compensation exclusivity rule would require the relator to pursue penalties before the
Workers’ Compensation Appeals Board.

15
As noted, ante, in footnote 2, Alzayat concedes he was already fully
compensated for his back injury.

41
qui tam lawsuit on behalf of the People, based on fraud in the grant or denial of workers’

compensation benefits, would similarly be required to pursue civil penalties before the

board. We are not convinced that the Legislature intended the workers’ compensation

exclusivity rule to work such mischief.

Because a qui tam relator does not sue based on his or her own injuries, we

conclude an IFPA claim filed by an employee against an employer is not barred by the

workers’ compensation exclusivity rule.

IV.

DISPOSITION

The judgment is reversed. Mahmoud Alzayat shall recover his costs on appeal.

CERTIFIED FOR PUBLICATION

McKINSTER
Acting P. J.
We concur:

CODRINGTON
J.

SLOUGH
J.

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