Fremont Compensation Insurance v. Superior Court

The nub of this case is whether relatively recent legislation to deter workers’ compensation fraud left insurers with less protection to report insurance fraud to police and prosecutors than they had before the legislation was enacted. The answer is no.

The legislation resulted in the addition of section 1877.5 to the Insurance Code in 1991. (See Stats. 1991, ch. 116, § 19.) Section 1877.5 affords insurers a qualified, immunity to report workers’ compensation fraud to a local prosecutor or the Department of Insurance. The qualified immunity does not extend to reports made in bad faith.

This lawsuit was filed by a doctor who alleges that two workers’ compensation insurers acted in bad faith in reporting the doctor for overbilling. However, the last sentence in Insurance Code section 1877.5 provides that “existing common law or statutory privileges and immunities” of insurers were not to be lessened by the statute. As we demonstrate below, another statute, section 47 of the Civil Code, already gives everybody—including insurers—the right to report crimes to the police, the local prosecutor or the appropriate regulatory agency, even if the report is made in bad faith.…