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Filed 3/18/22; Certified for Publication 4/11/22 (order attached)

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

THE PEOPLE ex rel. GILBERT 

ELLINGER,

Plaintiff and Appellant,

v.

STEPHANIE ANN MAGILL et al.,

Defendants and Respondents.

E076378

(Super.Ct.No. PSC1908114)

OPINION

APPEAL from the Superior Court of Riverside County. Kira L. Klatchko, Judge. 

Affirmed.

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

London Fischer, Richard S. Endres and Patrick G. Bollig for Defendants and 

Respondents Stefanie Ann Magill and ESIS, Inc.

Cozen O’Connor, Maria Louise Cousineau and Mark A. Talise for Defendant and 

Respondent Zurich American Insurance Company.
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In this qui tam action, relator Gilbert Ellinger brought suit on behalf of the People 

of the State of California against Zurich American Insurance Company (Zurich), ESIS, 

Inc. (ESIS), and Stephanie Ann Magill under Insurance Code section 1871.7, a provision 

of the Insurance Frauds Prevention Act (IFPA). (Undesignated statutory references are to 

the Insurance Code.) The trial court sustained defendants’ demurrers without leave to 

amend. Ellinger appeals from the judgment. We affirm.

BACKGROUND

The following factual summary is drawn from the allegations of the qui tam action

that Ellinger filed in November 2019 against Zurich, ESIS, and Magill. In January 2016,

Ellinger injured his back while working, and he immediately informed his supervisor. 

The following month, Ellinger reported to his employer’s human resources manager that 

he had sustained a work-related injury and had told his supervisor about it. The human 

resources manager created a “time line memorandum” summarizing the conversations 

she had with Ellinger about the injury. She placed the memorandum in Ellinger’s 

personnel file.

Ellinger filed a workers’ compensation claim based on the injury. Zurich was the 

workers’ compensation insurance carrier for Ellinger’s employer, and ESIS was Zurich’s 

claims administrator. Magill worked as a senior claims examiner for ESIS and was the 

adjuster assigned to investigate Ellinger’s claim. 

ESIS denied Ellinger’s claim on an unspecified date. Magill later testified that she 

denied the claim because of an April 2016 written statement from Ellinger’s supervisor in 

which the supervisor claimed that Ellinger had not reported the injury to him. 
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When the human resources manager was deposed in November 2016, she 

produced the time line memorandum, which Ellinger’s counsel in the workers’

compensation action did not know about until then. Nearly eight months after that 

disclosure, in July 2017, ESIS reversed its denial of the claim and stipulated that Ellinger 

was injured while working, as he had alleged.

When Magill was deposed in September 2018 in an unspecified proceeding, she 

testified that she was unaware of the time line memorandum. Magill believed that the 

memorandum would have been useful in her investigation of Ellinger’s claim because it 

tended to corroborate his claim and to discredit his supervisor’s denial that he had been 

told about the injury. Contrary to Magill’s testimony, her email messages show that the 

human resources manager had emailed Magill the time line memorandum in March and 

April 2016, and Magill thanked the manager for sending it.

Ellinger alleged that Magill’s concealment of or failure to disclose the time line 

memorandum violated Penal Code section 550, subdivision (b)(1) to (3). On the basis of 

those alleged violations, Ellinger alleged that defendants were liable under section 

1871.7. Against each defendant, Ellington sought a civil penalty and an assessment of no

greater than three times the amount of his workers’ compensation claim.

Defendants filed demurrers. They argued that insurers and their agents, such as a 

claims administration company and a claims adjuster, could not be held liable in a qui 

tam action under section 1871.7. 

The trial court sustained defendants’ demurrers without leave to amend. It 

concluded that defendants could not be held liable under section 1871.7 for any failures 
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of Magill in the claims handling or review process. The court found persuasive State of 

California ex rel. Nee v. Unumprovident Corp. (2006) 140 Cal.App.4th 442, 450 (Nee) 

and State of California ex rel. Metz v. Farmers Group, Inc. (2007) 156 Cal.App.4th 1063, 

1066 (Metz) and concluded that insurance carriers are not subject to liability under the 

IFPA for claims handling practices.

DISCUSSION

“We independently review the ruling on a demurrer and determine de novo 

whether the complaint alleges facts sufficient to state a cause of action.” (Fremont 

Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 111.) “We assume 

the truth of the properly pleaded factual allegations, facts that reasonably can be inferred 

from those expressly pleaded, and matters of which judicial notice has been taken.” 

(Ibid.) 

Ellinger argues that the trial court erred by concluding that insurers and their 

agents cannot be liable under the IFPA for claims handling practices. He contends that

strong policy considerations support holding insurers liable under the IFPA and that he 

has properly alleged a cause of action under the IFPA. We are not persuaded.

I. Legal Background

The legislative findings and declarations concerning the IFPA begin as follows: 

“The business of insurance involves many transactions that have the potential for abuse 

and illegal activities. . . . This chapter is intended to permit the full utilization of the 

expertise of the commissioner and the department so that they may more effectively 

investigate and discover insurance frauds, halt fraudulent activities, and assist and receive 
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assistance from federal, state, local, and administrative law enforcement agencies in the 

prosecution of persons who are parties in insurance frauds.” (§ 1871, subd. (a).) The 

findings and declarations go on to describe various types of insurance fraud, including 

automobile insurance fraud, workers’ compensation fraud, and health insurance fraud. 

(Id., subds. (b)-(h); Nee, supra, 140 Cal.App.4th at p. 448.) Concerning workers’ 

compensation, the Legislature found: “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.” (§ 1871, subd. (d).) 

We agree with other courts’ interpretation of those legislative findings: “The clear 

import of the legislation is to reduce fraud against insurers in order to benefit 

policyholders.” (Nee, supra, 140 Cal.App.4th at p. 448; see also State ex rel. Aetna

Health of California, Inc. v. Pain Management Specialist Medical Group (2020) 58 

Cal.App.5th 1064, 1069 (Aetna) [“The Legislature enacted the IFPA to combat insurance 

fraud committed against insurers by individuals, organizations, and companies”].)

Notably, the IFPA’s legislative findings make “no mention of a problem with insurance 

claims handling practices.” (Nee, at p. 448; § 1871.) 

Section 1871.7 of the IFPA provides that any interested person may bring a qui 

tam action to recover penalties, damages, and other relief for certain deceptive acts

directed at insurers. (§ 1871.7, subd. (e)(1); Aetna, supra, 58 Cal.App.5th at p. 1069.) 

The penalties are “assessed for each fraudulent claim presented to an insurance company 

by a defendant and not for each violation.” (§ 1871.7, subd. (b).)
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Prohibited conduct in support of or in opposition to an insurance claim is 

actionable. (People ex rel. Alzayat v. Hebb (2017) 18 Cal.App.5th 801, 816; see also 

Nee, supra, 140 Cal.App.4th at pp. 450-451.) Some kinds of actionable conduct are 

described in section 1871.7 itself (§ 1871.7, subd. (a)), while other kinds are identified by 

incorporation of separate statutes (id., subd. (b)). 

One such statute is Penal Code section 550, which criminalizes a broad range of 

deceptive acts in connection with making, supporting, or opposing claims for payment, 

including but not limited to insurance claims. (Pen. Code, § 550, subds. (a), (b).) Thus, 

some but not all violations of Penal Code section 550 can serve as the basis for a section 

1871.7 action, because section 1871.7 concerns only claims presented to insurance 

companies and Penal Code section 550 is not so limited. 

Nee, supra,140 Cal.App.4th 442 and Metz, supra, 156 Cal.App.4th 1063 held that

liability under section 1871.7 does not extend to insurers and their agents based on claims 

handling practices. (Nee, at p. 451; Metz, at pp. 1068-1070.) Nee explained that this 

conclusion is consistent with the IFPA’s purpose of “preventing and punishing the 

making of fraudulent claims to insurance companies”; the statute does not target the 

conduct of insurance companies themselves. (Nee, at p. 449.)

II. Ellinger’s Arguments

Ellinger argues that the trial court erred by concluding that defendants could not 

be held liable under section 1871.7 for Magill’s alleged mishandling of his claim. 

Ellinger contends that the trial court erred by relying on Nee, supra,140 Cal.App.4th 442 

and Metz, supra, 156 Cal.App.4th 1063 in concluding that the IFPA does not impose 
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liability on insurers based on such practices. He contends that Nee and Metz involved 

only general claims handling practices and not allegations related to the mishandling of a 

specific claim. The argument lacks merit. Contrary to Ellinger’s characterization, Metz 

involved a specific automobile insurance claim in which the relator alleged that several 

named insurance companies and their agents had made false or misleading statements

about the settlement of the relator’s claim. (Metz, at pp. 1065, fn. 1, & 1067.) Metz

followed Nee and concluded that the insurers’ alleged misconduct in handling a specific 

claim was not subject to liability under the IFPA because insurers and their agents are not 

proper defendants under section 1871.7. (Metz, at pp. 1068-1070.)

Ellinger next argues that People v. Butler (2011) 195 Cal.App.4th 535 (Butler), 

supports his position because it explains that Nee and Metz did not hold that “only those 

who make claims can be liable under the IFPA.” The argument fails because Ellinger’s 

description of Butler is incorrect.

In Butler, the defendant was convicted of making false claims to manufacturers,

not to insurers. (Butler, supra, 195 Cal.App.4th at pp. 537-538.) Butler held that 

violations of Penal Code section 550 are not limited to claims made to insurers. (Butler, 

at p. 538.)

Butler thus provides no support for Ellinger’s contention that insurers and their 

agents can be sued under the IFPA. Butler does not say anything about that issue. 

Rather, Butler merely confirms that a violation of Penal Code section 550 need not 

involve an insurance claim at all. (Butler, supra, 195 Cal.App.4th at p. 538.)
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Moreover, contrary to Ellinger’s argument, Butler supra, 195 Cal.App.4th 535 did 

not undermine the holdings in Nee, supra,140 Cal.App.4th 442 and Metz, supra, 156 

Cal.App.4th 1063 that insurers and their agents are not proper defendants under the IFPA. 

Butler involved criminal violations of Penal Code section 550 and not liability under the 

IFPA. Butler correctly explained that Nee did not stand for the proposition that “the only 

class of persons who can violate Penal Code section 550 are those who submit fraudulent 

claims to insurers.” (Butler, at pp. 540-541.) That does not cast any doubt on Nee’s 

holding that insurers and their agents are not proper defendants under the IFPA. (Nee, at 

p. 451.)

Ellinger next argues that he properly pleaded violations of Penal Code section 550, 

subdivision (b)(1) to (3), based on Magill’s alleged conduct in handling his claim, so he 

therefore properly seeks relief under section 1871.7. The argument fails for two reasons. 

First, as we have explained, not every violation of Penal Code section 550 is actionable 

under section 1871.7. Second, Ellinger’s contention that he has properly pleaded a 

violation of Penal Code section 550 is based on a mischaracterization of the record. In 

his opening brief, he asserts that “[t]he denial [of his workers’ compensation claim] was 

reversed after Magill’s deposition,” in which Magill claimed not to have known about the 

time line memorandum before the human resources’ manager’s deposition. Ellinger in 

fact alleged that ESIS reversed the denial of his claim in July 2017—more than one year 

before Magill’s deposition. Ellinger does not explain how Magill’s alleged lie at her 

deposition in September 2018 could have affected the handling of his claim, given that 

the denial of his claim had already been reversed in July 2017.
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Finally, Ellinger argues that affirming the trial court order sustaining the 

demurrers is against public policy, as it “would tacitly approve of insurance company 

fraud.” We disagree. First, Ellinger has not sufficiently alleged a violation of Penal 

Code section 550 and thus has not properly alleged that defendants committed any kind 

of fraud. Second, excluding insurers and their agents from liability under section 1871.7 

does not “tacitly approve of insurance company fraud” or otherwise entail that insurers 

and their agents can commit fraud with impunity. It means only that insurers and their 

agents cannot be sued under the IFPA. That holding is not surprising, because the IFPA 

expressly targets only deceptive conduct directed at insurers, not improper conduct by 

insurers. (See § 1871.)

For all of these reasons, we conclude that the trial court did not err by sustaining 

defendants’ demurrers without leave to amend.

DISPOSITION

The judgment is affirmed. Defendants shall recover their costs of appeal.

MENETREZ

J.

We concur:

McKINSTER

Acting P. J.

RAPHAEL

J.
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Filed 4/11/22

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

THE PEOPLE ex rel. GILBERT 

ELLINGER,

Plaintiff and Appellant,

v.

STEPHANIE ANN MAGILL et al.,

Defendants and Respondents.

E076378

(Super.Ct.No. PSC1908114)

ORDER CERTIFYING OPINION

FOR PUBLICATION

THE COURT:

We have received two requests pursuant to California Rules of Court, rule 8.1120(a), to

publish the nonpublished opinion in this matter that was filed on March 18, 2022. Having 

reviewed those requests, we conclude that the opinion meets the standards for publication set 

forth in California Rules of Court, rule 8.1105(c).

We therefore grant the requests and order that this opinion be certified for publication 

pursuant to California Rules of Court, rule 8.1105(b). We consequently certify for publication 

the opinion filed in this matter on March 18, 2022.

CERTIFIED FOR PUBLICATION

MENETREZ

J.

We concur:

McKINSTER

Acting P. J.

RAPHAEL

J.