Fact of Settlement Communications in Underlying Lawsuits is Not Ground for Anti-SLAPP Motion in Subsequent Bad Faith Lawsuit

Christopher Kendrick and Valerie A. Moore | Haight Brown and Bonesteel

In Trilogy Plumbing, Inc. v. Navigators Specialty Ins. Co. (No. G057796, filed 5/27/20, ord. pub. 6/18/20), a California appeals court ruled that an insurance bad faith lawsuit alleging a variety of claim handling misconduct in defending the insured was not subject to an insurer’s special Strategic Lawsuit Against Public Participation (SLAPP) motion to strike because, while the alleged acts were generally connected to litigation, they did not include any written or oral statement or writing made in connection with an issue under consideration or review by a judicial body and, therefore, did not constitute protected activity under California’s anti-SLAPP statute.

In Trilogy Plumbing, the policyholder was sued in 33 different construction defect lawsuits, some of which Navigators defended, and others which were denied or had the defense withdrawn. The Navigators’ policies were subject to a $5,000 deductible, and Trilogy alleged that Navigators breached the contracts by “demanding deductible reimbursement amounts greater than the policies’ $5,000 stated deductible, and by seeking reimbursement of ordinary defense fees and expenses as if they were subject to deductible reimbursement,” “claiming a right to seek reimbursement from Trilogy for defense fees and expenses Navigators paid for the benefit of third-party additional insureds,” “providing conflicted defense counsel who took instructions only from Navigators without disclosing conflicts of interest,” “failing to reasonably settle cases and by withdrawing [the] defense as a strategic means of trying to force Trilogy to fund its own settlements,” “misrepresenting its deductible provisions,” “refusing to account for deductible amounts it charges and collects,” and others.

Based on the anti-SLAPP statute, Code of Civil Procedure section 425.16, Navigators moved to strike over a dozen allegations from Trilogy’s amended complaint, all basically centered on alleged conflicts of interest by the attorneys appointed to defend Trilogy in relation to the policies’ deductibles, exemplified in such allegations as:

“Trilogy’s liability and damages exposure in the construction defect cases was generally non-existent or very, very minimal, and Trilogy was often dismissed from construction defect suits for waiver of costs or with payment of very little money. But Navigators directed its attorneys to avoid vigorously defending Trilogy and to try to use money Trilogy would have to reimburse to resolve claims.” Likewise: “Navigators breached the policies by . . . providing conflicted defense counsel who took instruction only from Navigators . . . even when their actions directly conflicted with Trilogy’s instructions and Trilogy’s interests.” Also: “Navigators used conflicted counsel to threaten Trilogy and to commit Trilogy to making payments and taking actions Trilogy did not approve,” all of which and other similar allegations Navigators sought to strike from Trilogy’s bad faith complaint using the anti-SLAPP statute.

Navigators’ motion relied on subdivision (e)(2) of section 425.16, which provides that “any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law” is an “act in furtherance of a person’s right of petition or free speech under the United States or California Constitution in connection with a public issue,” and therefore protected by the statute. Navigators argued that the specific allegations it sought to strike “involved settlement negotiations that are protected by section 425.16, subdivision (e)(2).”

The trial and appeals courts disagreed, citing numerous authorities to the contrary. The appeals court said that “conduct is not automatically protected merely because it is related to pending litigation; the conduct must arise from the litigation.” (Quoting Optional Capital, Inc. v. Akin Gump Strauss, Hauer & Feld LLP (2017) 18 Cal.App.5th 95, 113-114.) Further, “it is insufficient to assert that the acts alleged were ‘in connection with’ an official proceeding.’ [] Instead, ‘[t]here must be a connection with an issue under review in that proceeding.’” (Quoting Rand Resources, LLC v. City of Carson (2019) 6 Cal.5th 610, 620.)

Although noting that “courts have adopted ‘a fairly expansive view of what constitutes litigation related activities within the scope of section 425.16,’” the Trilogy Plumbing court went on stating that “[t]he allegations of the amended complaint that were the object of the anti-SLAPP motion do not refer to any oral or written statements or communicative conduct by anyone, whether in relation to the lawsuits in which Trilogy had been named a defendant, or in the context of settlement discussions. Instead, the anti-SLAPP motion sought to strike allegations pertaining to Navigators’ conduct generally in mishandling the claims process.”

The Trilogy court quoted at length from Miller v. Zurich American Ins. Co. (2019) 41 Cal.App.5th 247, where the plaintiff “sought relief from the insurance company, and not against any counsel, ‘based on the overarching premise that [the insurance company] did not meet its duty to defend as it failed to provide independent conflict-free counsel to represent them in defending against [a] counterclaim.’” The Miller court stated: “Despite the insurance company’s blanket contention to the contrary, not all attorney conduct in connection with litigation, or in the course of representing clients, is protected by section 425.16. There is a distinction between activities that form the basis for a claim and those that merely lead to the liability-creating activity or provide evidentiary support for the claim. Assertions that are ‘merely incidental’ or ‘collateral’ are not subject to section 425.16. Allegations of protected activity that merely provide context, without supporting a claim for recovery, cannot be stricken under the anti-SLAPP statute. While a breach of the implied covenant of good faith and fair dealing may be carried out by means of communications between the parties’ respective counsel, the fact of counsel’s communications does not transform the claim to one arising from protected activity within the meaning of section 425.16. The allegations of counsel’s communications do not concern the substantive issue of the plaintiffs’ liability as alleged in the counterclaim or any coverage matter. Instead, the communications concern procedural matters regarding discovery, correspondence with the insurance company’s claims handlers, and payments to the plaintiffs, directly related to the insurance company’s duty to defend obligations owed to the plaintiffs by appointing panel counsel to represent them in defending the counterclaim.” (Miller, supra, 41 Cal.App.5th at 257-258 (internal quotes and citations omitted).)

“Thus, what gives rise to liability is not the fact of counsel’s communications, but that the insurance company allegedly denied the plaintiffs the ‘benefit’ of panel counsel’s independent professional judgment in rendering legal services to them. Consequently, we reject the insurance company’s argument that the allegations of counsel’s communications give rise to its liability for an action for breach of the implied covenant of good faith and fair dealing. The lawsuit concerns a breach of duty that does not depend on the insurance company’s exercise of a constitutional right. In other words, and contrary to the insurance company’s contention, the allegations of counsel’s communications are only evidence that provides the context for the allegation that the insurance company unreasonably and without proper cause interfered with panel counsel’s representation of the plaintiffs in defending against the counterclaim.” (Miller, supra, 41 Cal.App.5th at 258-259 (internal quotes and citations omitted).)

And for the same reason, the Trilogy Plumbing court affirmed the denial of Navigators’ anti-SLAPP motion, stating that “references to settlement and other potentially protected activity in the allegations challenged by Navigators in the anti-SLAPP motion reflect evidence that provides context for the allegation Navigators failed to perform under the terms of the policies. Such references do not establish that Trilogy’s action arises out of any protected activity. . . . . Navigators thus failed to show the conduct described by the challenged allegations of the amended complaint constitute protected activity within the meaning of section 425.16, subdivision (e)(2).”

Bad Faith Litigation – Something to Avoid

C. Iglesias – December 12, 2012

“Bad Faith”…almost sounds like an oxymoron.  And while the use of the word ‘rages’ to describe the prevalence of bad faith litigation against insurance carriers seems a tad…overwrought, the usage of the term ‘rages’ is correct when describing the general perspective of insureds when they are forced to engage in litigation against their carrier.  (Specifically, we at Sabal have never met an insured forced to take legal action for nonpayment of a claim…who didn’t have a pretty well-defined sense of rage regarding the matter.)

 

Insurance carrier bad faith is never fun to discuss and carriers DEFINITELY don’t like to do so (recall the Progressive Insurance social media debacle from earlier in 2012), but there are those instances where the insured-insurer relationship frays to the point that legal action is the final remedy for securing full and proper payment of a claim.  The commentary piece on bad faith (link) includes some cases that are, likely, among the most egregious.  But the underlying lessons would serve the observer (and insured) well to take note.  That is…keep accurate records, make sure to maintain an objective history of the claim (i.e., don’t embellish facts…in the event of litigation, that HURTS…it does not HELP.)  And also, insurance carriers DO have to perform some due diligence in order to process claims (on their end).  But the primary takeaway – from our perspective – is the same as many insurance claims matters…that is?  Document Document Document.  Because that will be necessary if the matter gets to the point that only the attorneys are charged with sifting through the rubble to discern the final outcome (and payment!)

 

One way to AVOID bad faith litigation is to secure well-worded policies in the first place and to have a broker who understands your needs, concerns, and exposures and can help you navigate the claims process.

via Bad Faith Litigation – Something to Avoid – Sabal Insurance.

Bad Faith Litigation – Something to Avoid

“Bad Faith”…almost sounds like an oxymoron.  And while the use of the word ‘rages’ to describe the prevalence of bad faith litigation against insurance carriers seems a tad…overwrought, the usage of the term ‘rages’ is correct when describing the general perspective of insureds when they are forced to engage in litigation against their carrier.  (Specifically, we at Sabal have never met an insured forced to take legal action for nonpayment of a claim…who didn’t have a pretty well-defined sense of rage regarding the matter.)

Insurance carrier bad faith is never fun to discuss and carriers DEFINITELY don’t like to do so (recall the Progressive Insurance social media debacle from earlier in 2012), but there are those instances where the insured-insurer relationship frays to the point that legal action is the final remedy for securing full and proper payment of a claim.  The commentary piece on bad faith (link) includes some cases that are, likely, among the most egregious.  But the underlying lessons would serve the observer (and insured) well to take note.  That is…keep accurate records, make sure to maintain an objective history of the claim (i.e., don’t embellish facts…in the event of litigation, that HURTS…it does not HELP.)  And also, insurance carriers DO have to perform some due diligence in order to process claims (on their end).  But the primary takeaway – from our perspective – is the same as many insurance claims matters…that is?  Document Document Document.  Because that will be necessary if the matter gets to the point that only the attorneys are charged with sifting through the rubble to discern the final outcome (and payment!)

One way to AVOID bad faith litigation is to secure well-worded policies in the first place and to have a broker who understands your needs, concerns, and exposures and can help you navigate the claims process.

via Bad Faith Litigation – Something to Avoid – Sabal Insurance.

When to Hire a Pro to Settle an Insurance Claim

Ray Martin – November 14, 2012

A few days ago I wrote about how to challenge the first offer from your insurance company in respect to a claim you have filed. In that column, I stressed the importance of carefully reviewing the adjuster’s report and using the documentation you gathered to make your case for a larger settlement.

But if you have a very large insurance claim or there is a significant difference between what the adjuster says the insurance company will pay and what you believe should be paid under your policy, you may want to consider getting a professional to help.

Public adjuster

One such claims professional is a public adjuster, or PA. This is a person who is licensed to represent insured claims for the purposes of seeking a full and timely settlement. When there is a dispute over a claim, the burden of proof is on the insured. A public adjuster will document the loss, gather supporting replacement cost information and negotiate with the insurance company to maximize your settlement. You can find out more about PAs at the National Association of Public Insurance Adjusters website.

When to lawyer up

If your insurance company is digging in its heels and you are getting nowhere, you may have to resort to hiring an attorney. Don’t seek the counsel of just any lawyer, but instead seek an attorney who specializes in the practice of law in the areas of “Plaintiffs Insurance Coverage” or “Bad Faith Litigation.” The insurance company will use a very skilled insurance defense attorney to represent them and your attorney should be a worthy opponent. Check with your county bar association and ask for a referral for attorneys who specialize in this area of the law.

The downside with hiring a PA or an attorney is that you will pay additional costs. PAs and Plaintiffs Insurance Attorneys typically charge either a fee as a percentage of your settlement proceeds (10 to 33 percent) or hourly rates that can range from $75 to $350 per hour.

As should be done before hiring any professional, ask for and check client references of any PA or attorney before you agree to retain their services.

The following excerpt from a policy holders web site sums it up: “If you can communicate effectively in writing and in person with your insurance company, with confidence, polite aggression, and insistence on your rights, you may not need an attorney (or a PA)… If you are feeling frustrated, angry or anxious or are unsure about your rights, a qualified attorney (or PA) can help.”

via When to hire a pro to settle an insurance claim – CBS News.