Metropolitan News-Enterprise


Monday, January 13, 2014


Page 1


Claims Investigator’s Statements to Regulators Held Privileged




An insurance company claims investigator’s statements to insurance regulators and to a plaintiffs’ lawyer’s assistant, questioning the honesty of a chiropractor’s billings, were privileged, the First District Court of Appeal has ruled.

Div. Five Thursday affirmed the dismissal of Anthony K. Hui’s suit against claims adjuster Beth Sturbaum of Federated Mutual Insurance Company. The panel agreed with San Francisco Superior Court Judge Harold Kahn, who ruled that Hui could not show a likelihood of winning and granted Sturbach’s motion to strike under the anti-SLAPP statute.

Hui opened a practice in 1998, fed largely by lawyer referrals through an organization called National Legal Associates. In 2008, when reviewing a claim for payment, Sturbaum raised the question of whether Hui had over-billed for treatment of injuries sustained in a “relatively minor” accident, according to the papers filed in connection with the anti-SLAPP motion.

After she spoke to him, Hui said the patients had preexisting conditions aggravated by the accident and offered to “use apportionment in billing.”

Lawyer Under Investigation

Sturbaum noted that the lawyer who referred the patients to Hui, Frank Kim, was under investigation by the National Insurance Crime Bureau, and that Hui had “prior suspensions and a prior license revocation.” In 2010, after learning that Hui was under investigation by the Department of Insurance, Sturbaum cooperated with the department’s probe.

In November 2010, Hui filed a complaint against fictitiously named defendants. He alleged that he had recently learned about the DOI investigation and that the defendants had committed trade libel, libel per se, and slander.

Prior to amending the complaint, Hui’s attorney deposed Kim’s assistant, who said she had spoken to Sturbaum regarding settlement of the accident claim. Hui then amended his defamation complaint, substituting Sturbaum for Doe 1 and alleging that she had made “false reports” to DOI and told personal injury attorneys not to refer patients to him because insurers or DOI were going to “put [him] out of business.”

In a support of her anti-SLAPP motion, Sturbaum said she had little contact with Hui and bore him no ill will, but that she believed that his billing practices violated state statutes and regulations; that she had made no statements about him other than those she reasonably believed to be true; and that she never told any lawyers not to send their clients to Hui.

Hui replied that the anti-SLAPP law did not apply because Sturbaum’s statements about him were not made in a public forum and that the “general topic of insurance fraud” was not a matter of public interest within the meaning of the statute. He also argued that her communications were defamatory and unprivileged, and that he was therefore likely to prevail at trial.

Hui submitted a transcript of the deposition of Winnie Yu, Kim’s assistant—taken before Sturbaum was named as defendant—who said that Sturbaum called the billings excessive, “may have” accused Hui of fraud, and said she “made a complaint or [was] going to make a complaint” about the doctor.

Prior Disciplinary Case

Sturbaum also mentioned a prior disciplinary case against the doctor, Yu testified. The case arose from a patient’s allegation of sexual misconduct, and resulted in the doctor being placed on five years’ probation, ending in 2008, a condition of which was that the doctor not see female patients without a third person present.

Hui alleged that he experienced a precipitous drop in business after Sturbaum made her statements, as a result of which he had to stop making house payments, filed for bankruptcy, and closed the practice.

Kahn said the defendant’s communications with the DOI were absolutely privileged, and that her statements to Yu were protected by the qualified common interest privilege of Civil Code §47(c). Hui could not overcome the privilege, the judge said, because no reasonable juror could conclude the statements were made with malice.

 Presiding Justice Barbara J.R. Jones, writing for the Court of Appeal, noted that Hui did not challenge the trial judge’s ruling that Sturbaum’s statements to the DOI were absolutely privileged. Jones further concluded that the defendant’s statements to Yu were protected by the common interest privilege.

Sturbaum’s employer, Jones reasoned, shared with Yu’s employer an interest in knowing whether Kim’s clients were fraudulently being billed for Hui’s services.

Jones wrote:

“If Dr. Hui was engaging in fraudulent or unethical activity, it was important for Sturbaum to notify those with whom Dr. Hui did business and who were affected by the improprieties, particularly Kim. In addition, Sturbaum had a direct and immediate concern in protecting Federated’s interest in settling meritorious claims....Assuming it occurred, Sturbaum’s suggestion that Kim’s firm ‘should stop doing business with Dr. Hui’ was not extraneous or irrelevant to protecting Federated’s pecuniary interests and its business relationship with National Legal Associates.”

In an unpublished portion of the opinion, Jones said Hui’s alleged insurance fraud was a matter of public interest—giving the term a broad interpretation as required by the statute—because they concerned the ongoing investigations of Kim and Hui, and because Sturbaum, as an insurance company employee, had a statutory duty to report suspected fraud to the DOI.

The case is Hui v. Sturbaum, 13 S.O.S. 123.


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