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Mahmoud Alzayat, on behalf of the People of the State of California, filed a qui tam action against his employer, Sunline Transit Agency, and his supervisor, Gerald Hebb, alleging a violation of the Insurance Frauds Prevention Act (IFPA or the Act). (Ins. Code, § 1871 et seq.)

Sunline is a public entity that provides regional transportation services and oversight of other transportation entities such as taxi companies. Alzayat was employed by Sunline as a stops and zones technician, and in that capacity he maintained bus stop infrastructure. Hebb was Alzayat’s supervisor.

On the day of the injury, Alzayat was working on a bus stop. The only available bags of concrete mix weighed 90 pounds. Alzayat asked Hebb for permission to either break down a 90-pound bag into lighter ones or to have another employee help him. Hebb refused Alzayat’s requests, and the two argued for about two minutes. Hebb ultimately ordered Alzayat to lift the 90-pound bag by himself without breaking it down first. Alzayat complied and, immediately upon lifting the bag, felt intense pain in his lumbar spine, and he partially collapsed. Alzayat dropped the bag and its contents spilled out. When Hebb asked Alzayat why he had dropped the bag, Alzayat complained he had injured his back when lifting the bag.

In the report, Hebb wrote he did not witness Alzayat’s injury. Alzayat alleged Hebb made false statements in the incident report submitted in response to Alzayat’s claim for workers’ compensation, and Hebb repeated those false statements in a deposition taken during the investigation into Alzayat’s claim for compensation.

Hebb testified under oath that he had no conversation with Alzayat about the request to either break down the bag of concrete mix or to obtain help in lifting the bag. Hebb also denied having witnessed Alzayat injure himself when he lifted and then dropped the bag. Hebb’s false statements resulted in Alzayat’s claim being initially denied.

Alzayat filed a lawsuit alleging Hebb’s false statements in relation to Alzayat’s claim for workers’ compensation benefits constituted violations of Penal Code section 550, and formed predicate offenses for liability under the Insurance Frauds Prevention Act (IFPA). Alzayat prayed for a civil penalty against Hebb and Sunline of no less than $5,000 and no more than $10,000, an assessment of no more than three times the amount of his workers’ compensation claim, attorney fees, and costs.

The employer filed motions for judgment on the pleadings contending: (1) this lawsuit is based on allegedly false and fraudulent statements Hebb made in connection with a workers’ compensation proceeding and is, therefore, barred by the litigation privilege under Civil Code section 47, subdivision (b) and (2) Alzayat’s claim is barred by the workers’ compensation exclusivity rule.

The superior court concluded the workers’ compensation exclusivity rule is inapplicable, but ruled the litigation privilege bars Alzayat’s claim. Therefore, the court granted the motions without leave to amend and entered judgment dismissing the lawsuit.

Alzayat appealed from the judgment, contending the litigation privilege only applies to tort claims and not to statutory claims such as an action under the IFPA, and the IFPA is a specific statute that prevails over the general litigation privilege. The employer cross-appealed, arguing that, even if Alzayat’s lawsuit is not barred by the litigation privilege, the superior court erred by not granting judgment on the pleadings on the ground that Alzayat’s claim is barred by the workers’ compensation exclusivity rule.

The Court of Appeal agreed with Alzayat that his lawsuit is not barred by the litigation privilege nor by the workers’ compensation exclusivity rule in the published case of The People ex. rel. Mahmoud Alzayat v Gerald Hebb et. al.

The IFPA was in large measure designed to prevent workers’ compensation insurance fraud, and the Act includes a number of legislative findings and declarations that are relevant here. “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.”

The IFPA provides for civil liability for various forms of workers’ compensation insurance fraud. “Every person who violates any provision of this section or Section 549, 550, or 551 of the Penal Code shall be subject, in addition to any other penalties that may be prescribed by law, to a civil penalty of not less than five thousand dollars ($5,000) nor more than ten thousand dollars ($10,000), plus an assessment of not more than three times the amount of each claim for compensation, as defined in Section 3207 of the Labor Code…”

The litigation privilege, codified at Civil Code section 47, subdivision (b), provides that a ‘publication or broadcast’ made as part of a ‘judicial proceeding’ is privileged. This privilege is absolute in nature, applying “to all publications, irrespective of their maliciousness.” The litigation privilege is broad, but it has its limits. Like any statute, Civil Code section 47(b) is subject to the rule of statutory construction that a particular provision prevails over a general one.