Reporting on an Accusation of Insurance Fraud Results in Defamation Suit

Fair Report Privilege Protects Reports of Insurance Fraud

Jun 08, 2022

Barry Zalma, Esq., CFE

Insurance claims expert, consultant at Barry Zalma, Inc. and author/Publisher at ClaimSchool, Inc.

Posted on June 8, 2022 by Barry Zalma

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Fox Television Stations, LLC (Fox), William Melugin, Daniel Leighton, and Kris Knutsen (collectively, the Fox defendants) appealed from orders denying their special motions to strike (Code Civ. Proc., § 425.16; anti-SLAPP statute) the complaint filed by Dr. Jay W. Calvert, a nationally recognized plastic surgeon, and Jay Calvert, M.D., Professional Corporation (the professional corporation) (collectively, the Calvert plaintiffs). In Jay W. Calvert et al. v. Fox Television Stations, LLC et al., B310772, California Court of Appeals, (May 25, 2022) the Court of Appeal reversed the trial court’s decision.

FACTS

This case arises from the Fox defendants broadcasting and publishing news reports about a civil lawsuit filed against Dr. Calvert by his former patient Natalie West alleging insurance fraud and medical battery. In response, the Calvert plaintiffs sued the Fox defendants and Houston for defamation. The trial court found that although the defamation claims arose from protected activity, the Calvert plaintiffs had shown a probability of prevailing on their claims.

On appeal, the Fox defendants and Houston contend Fox’s reporting, including its interview with Houston, is absolutely privileged under Civil Code section 47, subdivision (d), as a fair and true report of a judicial proceeding. Further, the Calvert plaintiffs failed to plead and prove actual malice. The Fox defendants also argue several of the statements at issue do not constitute actionable defamation.

On May 31, 2018 West filed a lawsuit against Dr. Calvert, the professional corporation, the University of Southern California (USC), and others, alleging causes of action for fraud, medical battery, breach of contract, and forcible sexual penetration of an unconscious person with a foreign object. West alleged in her second amended complaint that in 2013 Dr. Calvert performed a cosmetic nasal surgery to reconstruct West’s nose after a failed reconstructive surgery by another doctor. West paid for the surgery in full, but Dr. Calvert fraudulently billed West’s medical insurer for the procedure by falsely characterizing the surgery as a medically necessary correction of a nasal airway obstruction.

West alleged that after the surgery, Dr. Calvert told her the surgery had been “a complete success” but he needed to do two “‘tweaks'” in a second surgery. From 2013 through 2017, Dr. Calvert persuaded West to undergo 12 additional unnecessary and harmful nasal surgeries, in order to bill West’s insurance carrier for additional procedures. West alleged Dr. Calvert “essentially treat[ed]” West’s health insurance policies as “his own personal ATM machine.”

Letters from Dr. Calvert’s Counsel to Leighton and Melugin

On April 25, 2019 Dr. Calvert’s attorney, Arthur H. Barens, in response to an inquiry regarding Fox-owned television station KTTV’s intention to broadcast a report on West’s allegations against Dr. Calvert, wrote to KTTV senior producer Leighton, requesting Leighton review West’s medical files before airing the report.

KTTV published a written version of the report on its website.

The May 15, 2019 Report

On May 15, 2019 KTTV broadcast a second news report on West’s allegations against Dr. Calvert. Melugin reported, “A lot of new details [are] coming out after our investigation into Dr. Jay Calvert first aired on Monday night.” Melugin reported USC had “removed all affiliation with [Dr. Calvert] off of their plastic surgery website.” Melugin stated Hakala held a press conference that day, in which she indicated more than 20 “new alleged victims” had contacted her to make similar allegations of insurance fraud and unnecessary surgeries. In footage of the press conference, Hakala opined USC would not have been in “a huge rush” to distance itself from Dr. Calvert if USC had full confidence in him.

Dr. Calvert’s Demand for Retraction

On May 30, 2018 Neville L. Johnson, attorney for Dr. Calvert, sent a letter to Melugin, KTTV news director Kris Knutsen, and the Fox legal department demanding retraction of the May 13 and 15 reports and accompanying online articles.

The Fox defendants made no retraction.

Dr. Calvert’s Complaint Against the Fox Defendants and Houston

On June 9, 2020 the Calvert plaintiffs sued the Fox defendants alleging a single cause of action for libel. The complaint alleged 60 statements made in the May 13 and 15 reports were “[f]alse [a]ccusations.”

The Fox Defendants’ and Houston’s Special Motions To Strike

The Fox defendants separately filed special motions to strike the complaint.

Dr. Calvert submitted declarations in support of the Calvert plaintiffs’ oppositions. He attached to his declaration in opposition to the Fox defendants’ motion portions of West’s and Houston’s medical records, consent forms, insurance authorizations, and billing histories, which he asserted contradicted their allegations.

The trial court denied the special motions to strike. The trial court found the remaining 47 statements identified in the Calvert plaintiffs’ complaint fell within the scope of Code of Civil Procedure section 425.16 because they “concerned a public figure and a matter of public interest.” The court found the fair report privilege did not apply to any of the statements.

DISCUSSION

A cause of action arising from an act in furtherance of a defendant’s constitutional right of petition or free speech in connection with a public issue is subject to a special motion to strike unless the plaintiff demonstrates a probability of prevailing on the claim.

If the evidence relied upon cannot be admitted at trial, because it is categorically barred or undisputed factual circumstances show inadmissibility, the court may not consider it in the face of an objection.

Defendants Carried Their Burden To Show Most of Their Claims Arose from Defendants’ Protected Activity

The complaint’s allegations of protected activity that provide only context for the Calvert plaintiffs’ defamation claims must be disregarded for purposes of the anti-SLAPP analysis.

The Law of Defamation

The elements of a defamation claim are (a) a publication that is (b) false, (c) defamatory, and (d) unprivileged, and that (e) has a natural tendency to injure or that causes special damage. Additionally, a libel plaintiff who is a public figure must prove, by clear and convincing evidence, that the defendant made the libelous statement with actual malice that is, with knowledge that it was false or with reckless disregard of whether it was false or not.

The Professional Corporation Failed To Carry Its Burden To Show a Probability of Prevailing on Its Claims Because None of the Challenged Statements Concerned the Professional Corporation

The Fox defendants and Houston contend none of the allegedly defamatory statements concerned the professional corporation. The Calvert plaintiffs make no argument to the contrary.

The Trial Court Erred in Denying the Fox Defendants’ Special Motion To Strike the Complaint as to Dr. Calvert’s Claims

A plaintiff must prove the allegedly defamatory statements are not substantially true. Dr. Calvert submitted no evidence in opposition to the Fox defendants’ special motion to strike to show Melugin’s statements regarding USC were not substantially true. He has therefore failed to carry his burden to show a probability of success on his defamation claims based on these statements.

Civil Code section 47, subdivision (d) confers an absolute privilege on any fair and true report in, or a communication to, a public journal of a judicial proceeding, or anything said in the course thereof. When the fair report privilege applies, the reported statements are absolutely privileged regardless of the defendants’ motive for reporting them. Fair and true in this context does not refer to the truth or accuracy of the matters asserted in the judicial proceedings, but rather to the accuracy of the challenged statements with respect to what occurred in the judicial proceedings.

A media defendant does not have to justify every word of the alleged defamatory material that is published. The reporter is not bound by the straitjacket of the testifier’s exact words; a degree of flexibility is tolerated in deciding what is a “fair report.”

The fair report privilege protects most of the challenged statements by West, Hakala, and Melugin regarding West’s allegations against Dr. Calvert

Most of the statements made by Melugin, West, and Hakala pertaining to West’s second amended complaint are privileged. The trial court, therefore, erred in failing to grant the Fox defendants’ special motion to strike as to these statements in the complaint.

The extent Melugin’s reporting of West’s and Hakala’s statements at the press conference-that more than 20 new alleged victims had contacted Hakala-exceeded the scope of West’s second amended complaint, Dr. Calvert’s claims based on these statements fail because he did not show the Fox defendants published the statements with actual malice.

DISPOSITION

The order denying the Fox defendants’ special motion to strike is reversed. The cause is remanded to the trial court with directions to vacate the order denying the Fox defendants’ special motion to strike and to enter a new order granting the motion. The Fox defendants are to recover their costs on appeal. Houston and the Calvert plaintiffs are to bear their own costs on appeal.

ZALMA OPINION

This case made clear the immunity created by Civil Code Section 47 since it applies to the press and to any SIU investigator who makes a report of a suspected insurance fraud to the state. People, like Dr. Calvert, who are accused of insurance fraud in a civil proceeding cannot stop publication of that information nor may he sue for defamation. The immunity is absolute.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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