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Klem v. Access Insurance Co.

California Court of Appeals, Fourth District, First Division

November 20, 2017

ROBERT KLEM, Plaintiff and Respondent,
ACCESS INSURANCE COMPANY et al., Defendants and Appellants.

         APPEAL from an order of the Superior Court of San Diego County No. 37-2016-00004859- CU-BT-CTL Joel R. Wohlfeil, Judge. Reversed and remanded with directions.

          Morris, Manning & Martin, Lewis E. Hassett; Boss Law Firm and Daniel R. Salas for Defendants and Appellants.

          Day Law Offices and Montie Stowell Day for Plaintiff and Respondent.

          IRION, J.

         Robert Klem sued Access Insurance Company (Access Insurance) and Access General Insurance Adjusters, LLC (Access Adjusters, and, collectively with Access Insurance, Access) after he was in a car accident and Access administered his claim. Klem alleged Access falsely notified the California Department of Motor Vehicles (DMV) that his car was a total loss salvage, reducing its value and resulting in loss of use. Access filed a special motion to strike pursuant to Code of Civil Procedure section 425.16, the anti-SLAPP (strategic lawsuit against public participation) statute. The trial court found Access's notice to the DMV was protected communication, but that Klem met his burden in establishing a probability of prevailing on the merits. The court denied the motion, and Access appealed.

         We conclude the court erred as to certain of its evidentiary rulings and by denying the anti-SLAPP motion. Accordingly, we reverse and direct the court to enter a new order granting Access's motion.


         I. Events Giving Rise To The Litigation

         On February 12, 2014, Klem was driving his 1993 Mercury Tracer (the Vehicle) when he was in an accident with a car whose owner was insured by Access. Klem was insured by another company not at issue here. At the time, the Vehicle had approximately 92, 300 miles on it.

         Klem filed a claim with Access. The claims log indicates that on March 21, Access accepted liability for the accident and Klem stated he "want[ed] repairs" through them. Subsequent log entries noted Klem was in a rental car, and that the Vehicle was a total loss. Access Adjusters continued to communicate with Klem, with the log reflecting communications on March 31, April 8, and April 17.

         On April 18, Access Adjusters sent Klem a letter regarding his claim, which stated in relevant part:

         "We have attempted to reach you to discuss the settlement of your total loss claim. Our offer to settle your total loss claim is explained below and it is important that you review the offer and contact me to discuss the resolution of your claim. [¶] We have completed the inspection of your vehicle and it has been determined to be a Total Loss. Enclosed is a Total Loss Evaluation, which is an independent market evaluation of your vehicle. This evaluation was prepared based on the inspection of your vehicle and the comparison of your vehicle to other comparable vehicles.... [¶] This will confirm that you will retain your salvage vehicle in settlement of the total loss. [¶]... [¶]

         "Pursuant to California Vehicle Code Section 11515(b), we have notified the [DMV] of the total loss of your vehicle and your retention of the salvage. A copy of the Notice of the Retention of Salvage has been enclosed for your records.... It is your responsibility, within ten days from the settlement of the loss, to forward the properly endorsed ownership certificate or other evidence of ownership to the [DMV] for the issuance of a Salvage Certificate.... [¶] If you keep your vehicle salvage.... Please be advised that the cost of the vehicle at resale and/or the insured value of the vehicle may be affected."

         The notice of retention is DMV form REG 481, titled "Salvage Vehicle Retention by Owner." It states, in part:

         "Insurance Company Reporting Retention of this Salvage Vehicle [¶] I, the undersigned, certify that the above described salvage vehicle has been retained by the owner(s) and, as required by California Vehicle Code § 11515(b), he/she has been notified that, within 10 days of the settlement of loss date, he/she must surrender the vehicle's Certificate of Title and license plates, and apply for a Salvage Certificate. The vehicle owner(s) has also been notified that the [DMVs'] database record for the vehicle will reflect a "Salvaged" notation (brand)."

         Finally, the April 18 letter stated a check for the net settlement amount of $1, 744.84 had been sent to Klem. Klem neither cashed the check, nor returned it. Klem and Access communicated on several more occasions, with Klem expressing his view that the Vehicle "should be worth more" and that he did not "agree with the comps."

         Klem described his communications with Access in a declaration opposing Access's anti-SLAPP motion. He stated he advised Access he was repairing the Vehicle, it would "not be negotiated as a salvage vehicle, " and that Access "was not to... report it to the [DMV] as a 'Salvage Title' vehicle." He also stated he refused to negotiate a total loss settlement. Klem represented that, prior to receipt of the April 18 letter, he "demanded $4, 500.00, which would be [his] estimated value of the vehicle at the time of the accident less what [he] though[t] would be the salvage value." Following the letter, he told Access he would not accept the check as payment for a total loss, and "demanded that if the vehicle was to be determined a salvage title by settlement agreement that [he] be paid the full value of the vehicle." Klem stated he was "essentially advised that [he] had to accept the offered payment [for Access to pay the claim]... or that [he] would have to withdraw the claim..., while the vehicle continued to have against it the 'Salvage Title.' "

         Klem also discussed his use and repair of the Vehicle. He had used the Vehicle to transport his severely ill wife (now deceased) to medical appointments, and it was "repaired by [him]... for [his] and [his] wife's benefit... " Klem "caused the necessary repairs to be made to the vehicle for the vehicle to be... in a safe working order" (but not cosmetic repairs), and continued driving it. The Vehicle later "developed an unrelated engine problem, " and because Klem could not register it without salvage title, he "decided it was not economical to repair... and... disposed of the vehicle by selling it to a salvage yard."

         In January 2015, Klem's counsel sent Access's counsel a declaration and asked for it to be signed and returned. It stated, in part: "I, on behalf of 21st Century Insurance Company [sic], request[] that the Form REG 481 erroneously filed by Assess [sic]... be withdrawn. The filing... was erroneous in that the vehicle was not a 'Total Loss Salvage Title' vehicle as described in Vehicle Code section 544." Access did not provide the requested declaration.

         II. Litigation

         Klem sued Access in February 2016, asserting causes of action for slander of title and violation of Business and Professions Code section 17200 (the unfair competition law, or UCL). Klem alleged, in relevant part, that because he repaired the Vehicle, it was not a total loss salvage under Vehicle Code section 544 and, in turn, Access's submission of the REG 481 notice to the DMV was both false and a violation of section 11515 and other statutes.[2] As we discuss post, section 544 defines "total loss salvage vehicle, " and section 11515 sets forth reporting requirements for such vehicles.

         In April 2016, Access filed its anti-SLAPP motion and provided a declaration from Michael H. Meadows, Access Adjusters Senior Vice President, Chief Compliance Officer, which attached copies of the claims log and April 18 letter. Klem opposed the motion and filed his own declaration and that of his counsel in support. The parties objected to each other's declarations.

         The trial court provided a tentative ruling. The court determined Access met its burden to establish protected activity, explaining the DMV notice "was a communication made 'in anticipation of the bringing of an action or other official proceeding.' " The court also noted "reporting of salvage vehicles to appropriate governmental agencies is a matter of significant public concern."

         The court then concluded Klem established a probability of prevailing on his claims. It explained he "provide[d] evidence demonstrating that the vehicle should not have been classified as a 'total loss, ' " while Access's "evidence [in] this regard [was] not admissible." The court also found Access's communication was not privileged. With respect to the absolute privilege under Civil Code section 47, subdivision (b), the court explained that "[a]lthough one potential outcome of the filing required by section 11515(b) is an investigation, it is not intended as a communication concerning possible wrongdoing, made to an official governmental agency such as a local police department."[3] The court then found Klem sufficiently alleged malice to overcome any qualified privilege, malice could be inferred from his evidence, and, again, that Access's evidence was inadmissible. The court also found "damages from the loss of use of the vehicle [were] alleged, " and that the facts alleged gave rise to unfair or fraudulent conduct for purposes of the UCL claim. Finally, the court sustained Klem's objections to the Meadows declaration without analysis.

         After a hearing, the trial court confirmed its tentative ruling and elaborated on its reasoning. Addressing the absolute privilege, the court determined Access presented "no authority that the reporting and licensing requirements mandated by... section 11515" were designed to prompt official action. The court also stated Klem's "lay opinion [was] sufficient prima facie evidence of the subject vehicle[']s status." The court overruled Access's objections to Klem's declaration and sustained most of its objections to his counsel's declaration. Access appealed.[4]


         I. Evidentiary Rulings

         Access contends the trial court erred by (1) sustaining Klem's objections to the claims log and April 18 letter, and (2) denying Access's objections to Klem's statements in his declaration regarding the Vehicle's value and his repairs. We "review the trial court's evidentiary rulings for an abuse of discretion." (Morrow v. Los Angeles Unified School Dist. (2007) 149 Cal.App.4th 1424, 1444 [addressing anti-SLAPP motion; Hall v. Time Warner, Inc. (2007) 153 Cal.App.4th 1337, 1348, fn. 3 [accord].)

         We begin with Access's evidence. Klem objected to the claims log based on lack of personal knowledge, hearsay, multiple hearsay, and "lack of foundation" (for which he cited the business records exception to the hearsay rule). He stated he had no objection to portions of the log that he identified as admissions against interest, consisting of excerpts from various entries and an absence of entries reflecting he agreed to salvage treatment. Klem objected to the April 18 letter on the same grounds, and because there was "No Foundation for Expert Witness Report." Access argues these materials fall within the business records exception to the hearsay rule. We agree.

         Evidence Code section 1271 provides that "[e]vidence of a writing made as a record of an act, condition, or event is not made inadmissible by the hearsay rule" if it meets the following requirements: "(a) The writing was made in the regular course of a business; [¶] (b) The writing was made at or near the time of the act, condition, or event; [¶] (c) The custodian or other qualified witness testifies to its identity and the mode of its preparation; and [¶] (d) The sources of information and method and time of preparation were such as to indicate its trustworthiness."

         Meadows's declaration was sufficient to establish these requirements. He explained it is the "general business practice" of Access Adjusters to "regularly make entries into the claims log, " and to prepare and send letters. Claims log entries are made "at the time of the conversation or action..., or shortly thereafter, " and logs and letter copies are maintained in the regular course of business. Meadows was a qualified witness (evidenced by his role as a senior compliance officer and familiarity "with the procedures, records, and record-keeping"), and he verified the documents were accurate copies. Lastly, the source of the information and time of preparation provide trustworthiness; the materials were prepared by claims personnel, during the claims process.

         There remains a multiple hearsay issue as to statements within the claims log. (Alvarez v. Jacmar Pacific Pizza Corp. (2002) 100 Cal.App.4th 1190, 1205 [exception necessary "for each level of hearsay"].) Access does not address this issue, and we deem it forfeited. (Tiernan v. Trustees of Cal. State University & Colleges (1982) 33 Cal.3d 211, 216, fn. 4.) However, our review is not materially impacted. Klem voluntarily exempted some statements from his objections, and others still serve as evidence that communications took place. (Stewart v. Estate of Bohnert (1980) 101 Cal.App.3d 978, 990 [statements used to establish conversation took place are not hearsay]; 1 Witkin, Cal. Evidence (5th ed. 2012) Hearsay, § 5.)[5]

         We now turn to Klem's statements regarding the Vehicle's value and his repairs. Access argues Klem had not been qualified as an expert, and his statements were immaterial to value and repair under section 544. These arguments are not persuasive. First, there is no indication Klem offered the statements as expert evidence. Second, even if Klem's statements were irrelevant to whether the Vehicle was actually a total loss salvage under section 544, they were not necessarily irrelevant to other elements of Klem's claims. Access does not establish an abuse of discretion.

         II. Overview Of The Anti-SLAPP Statute

         The anti-SLAPP statute "authorizes defendants to file a special motion to strike '[a] cause of action against a person arising from' the petition or speech activities 'of that person... in connection with a public issue.' (Code Civ. Proc., § 425.16, subd. (b)(1).)" (Barry v. State Bar of California (2017) 2 Cal.5th 318, 321; Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1062 (Park) [accord].) Relevant here, an act in furtherance of speech or petition rights includes a "writing made in connection with an... official proceeding" (Code Civ. Proc., § 425.16, subd. (e)(2)) and "conduct in furtherance of... the constitutional right of free speech in connection with a public issue or an issue of public interest." (Id., subd. (e)(4)). " '[T]he defendant's act underlying the plaintiff's cause of action must itself have been an act in furtherance of the right of petition or free speech.' " (Park, at p. 1063.)

         "Resolution of an anti-SLAPP motion involves two steps. First, the defendant must establish that the challenged claim arises from activity protected by [Code of Civil Procedure, ] section 425.16. [Citation.] If the defendant makes the required showing, the burden shifts to the plaintiff to demonstrate the merit of the claim by establishing a probability of success." (Baral v. Schnitt (2016) 1 Cal.5th 376, 384.) At the second step, the court's "inquiry is limited to whether the plaintiff has stated a legally sufficient claim and made a prima facie factual showing sufficient to sustain a favorable judgment." (Id. at pp. 384-385.)

         " 'We review de novo a ruling on a special motion to strike under [Code of Civil Procedure, ] section 425.16. [Citation.] Thus, we apply our independent judgment, both to the issue of whether the cause of action arises from a protected activity and whether the plaintiff has shown a probability of prevailing on the claim.' " (South Sutter, LLC v. LJ Sutter Partners, L.P. (2011) 193 Cal.App.4th 634, 657 (South Sutter); Park, supra, 2 Cal.5th at p. 1067.)[6]

         III. Analysis

         A. Prong One: The Trial Court Properly Concluded Access's Submission Of The REG 481 Notice Was Protected Communication

         The first issue in our anti-SLAPP analysis is whether, as the trial court determined, Klem's claims arise from protected activity.

         "[T]he focus is on determining what 'the defendant's activity [is] that gives rise to his or her asserted liability-and whether that activity constitutes protected speech or petitioning.' " (Park, supra, 2 Cal.5th at p. 1063.) The activity allegedly giving rise to Access's liability is its submission to the DMV of the REG 481 notice, which indicated the Vehicle was a total loss salvage. The trial court concluded this communication was protected speech. Although we question the court's finding that Access sent the REG 481 notice in anticipation of an official proceeding (and conclude post it was not intended to ...

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