Category: Daily News

The plaintiffs in this Ninth Circuit Court of Appeals case are current or former enlisted members of the U.S. military who hold automobile insurance through USAA General Indemnity Company (GIC), one of several affiliated insurers within the United Services Automobile Association family that sell auto coverage to military members and their families in California. USAA’s underwriting rules route policyholders to different affiliates based on military rank: United Services Automobile Association insures officers and senior enlisted members (paygrade E-7 and above), while GIC insures more junior enlisted members (E-6 and below). United Services offers its policyholders a larger “good driver” discount than GIC offers to its policyholders. The plaintiffs sued in federal court, arguing that California’s Insurance Code required USAA to give them the same lowest-available discount offered to the higher-ranking affiliate’s policyholders, and sought both an injunction barring the practice going forward and refunds for amounts already overcharged.

The dispute turns on how two provisions of the Insurance Code interact. Section 1861.02, part of the voter-approved Proposition 103 (1988), requires auto insurers to offer a “good driver” discount to policyholders who qualify for one. Section 1861.16(b), enacted afterward to close what lawmakers saw as a loophole, requires that when affiliated insurers operate under common ownership or control, they must sell good-driver policies at the lowest rate available anywhere in the affiliated group. Still later, the Legislature enacted section 11628(f)(1), which allows insurers to limit the issuance of coverage to military members or “segments of categories thereof” without running afoul of certain other Code provisions, including the article containing section 1861.16(b). The plaintiffs read section 11628(f)(1) as permitting USAA to serve different military segments through different affiliates, but not as excusing USAA from giving policyholders in any segment the group’s lowest available rate; USAA reads the same language as authorizing exactly the rank-based, differently priced structure it uses.

The case was filed in the U.S. District Court for the Southern District of California. USAA moved to dismiss, and Judge Bencivengo denied the motion, ruling that section 11628(f)(1) might authorize limiting coverage to a particular military segment but said nothing excusing compliance with section 1861.16(b)’s lowest-rate requirement. The case was later reassigned to Judge Huie, and the parties cross-moved for summary judgment. Judge Huie reached the opposite conclusion from her predecessor, granting summary judgment to USAA and denying the plaintiffs’ motion; in her view, section 11628(f)(1) shields USAA’s practice of serving different military segments through separately priced affiliates from section 1861.16(b)’s reach. The district court also rejected the plaintiffs’ fallback argument that, if section 11628(f)(1) does excuse compliance, it must be an invalid legislative amendment to Proposition 103 (which cannot be amended except to further its purposes); the court reasoned that section 1861.16(b) was never itself part of Proposition 103, so the later statute did not “amend” the initiative at all.

In the published case of Coleman v. United Services Automobile Association, No. 25-793 (9th Cir., filed Sept. 10, 2026). Rather than affirming or reversing the district court’s summary judgment ruling, the Ninth Circuit panel (Circuit Judges Friedland, Forrest, and Tung) has certified two questions of California law to the California Supreme Court under California Rule of Court 8.548, has withdrawn the case from submission, and has stayed the appeal pending the state court’s decision whether to accept certification and, if so, its answer. No merits ruling has yet been made on the underlying summary judgment order.

The panel found no controlling California authority resolving either question, and concluded both were better resolved by California’s own courts given their significant implications for California insurance regulation; the parties do not dispute that nearly 200,000 California policyholders are affected. On the first question, the panel noted that two federal district judges reached opposite readings of how section 11628(f)(1) and section 1861.16(b) interact, and that if section 11628(f)(1) does excuse compliance with the lowest-rate rule, a further threshold question arises: whether section 1861.16(b) should be treated as part of Proposition 103 at all, since the initiative as originally adopted contained only sections 1861.01 through 1861.14, and section 1861.16(b) was enacted afterward to address a loophole the initiative was seen to have left open. Resolving whether a later, loophole-closing statute becomes incorporated into the initiative it supplements — and is therefore subject to Proposition 103’s restriction on legislative amendment recognized in Amwest Surety Insurance Co. v. Wilson (1995) 11 Cal.4th 1243 — is, the panel concluded, a question of state initiative law California courts are better positioned to answer.

On the second question, the panel pointed to a three-way tension in the Insurance Code: sections 1860.1 and 1860.2 broadly shield actions taken under the Code’s rate-filing chapter from liability under other state laws, while section 1861.03, added by Proposition 103, subjects the business of insurance to the state’s ordinary business laws, including unfair-competition law. The California Supreme Court’s decision in Villanueva v. Fidelity National Title Co. (2021) 482 P.3d 989 touched on sections 1860.1 and 1860.2 but did not resolve the tension, and California’s Courts of Appeal have split on whether a “filed-rate doctrine” limiting such claims applies in the insurance context at all: Fogel v. Farmers Group, Inc. (2008) 74 Cal.Rptr.3d 61 held no such doctrine applies to approved insurance rates, while MacKay v. Superior Court (2010) 115 Cal.Rptr.3d 893 disagreed and recognized one. The panel also questioned whether, if a filed-rate doctrine does apply, the standard should mirror the one the California Supreme Court applied to public utilities in Waters v. Pacific Telephone Co. (1974) 12 Cal.3d 1, which limited a utility’s immunity to situations where allowing relief would frustrate the regulator’s supervisory policies, and whether a recent Court of Appeal decision permitting insurers to keep commissioner-approved rates even when challenged as “excessive,” Davis v. CSAA Insurance Exchange (2025) 336 Cal.Rptr.3d 789, would extend to a challenge like this one that does not center on whether the rates themselves are excessive.

In April 2024, a former SpaceX employee filed an administrative complaint with California’s Civil Rights Department (CRD), alleging the company violated the Fair Employment and Housing Act (FEHA) by paying her less than a male colleague hired around the same time, passing her over for a promotion in favor of a less experienced man, and firing her in retaliation for helping draft and circulate an open letter accusing the company and its CEO of fostering a hostile work environment and engaging in sexual harassment and gender discrimination. The employee listed a California address for SpaceX.

CRD served SpaceX with interrogatories and a subpoena seeking records related to the employee and her allegations. SpaceX objected on the ground that CRD lacked jurisdiction because the employee resided in Washington state and worked out of SpaceX’s Redmond, Washington office, and FEHA does not apply outside California. CRD narrowed its request to fourteen items aimed at the jurisdictional question. Based on SpaceX’s supplemental responses, CRD concluded it had jurisdiction over the retaliation claim but needed more information to assess jurisdiction over the discrimination claims. SpaceX declined to provide it, prompting CRD to go to court. In its filings, CRD pointed to a related lawsuit in which the employee alleged she reported to a SpaceX vice president based in California, her direct manager since 2021 was located in California, her pay statements were issued from and listed a California facility, and her new-hire paperwork referenced California employment law.

In April 2025, CRD petitioned the Los Angeles County Superior Court to compel SpaceX’s compliance with the subpoena, both on the merits of the retaliation claim and on the jurisdictional question underlying the discrimination claims. SpaceX opposed, submitting a declaration from a Redmond-based HR director asserting that Washington-based managers made the relevant compensation, promotion, and termination decisions, and that the employee was hired, worked, and lived in Washington throughout. On May 23, 2025, Judge Maureen Duffy-Lewis granted CRD’s petition without stating her reasons, and set a further hearing on the scope of the requests. SpaceX appealed.

In the partially published opinion of Civil Rights Department v. Space Exploration Technologies Corp., No. B346853 (Cal. Ct. App., 2d Dist., Div. 3, filed Aug. 11, 2026; certified for partial pub. Sept. 9, 2026). The Court of Appeal affirmed the order compelling SpaceX to comply with CRD’s subpoena, and awarded CRD its costs on appeal.The Second Appellate District expressly excluded Part 2 of its Discussion section (the portion addressing SpaceX’s federal constitutional arguments) from publication

The panel first addressed — in the unpublished portion of the opinion — SpaceX’s argument that enforcing the subpoena violates the federal constitution. It found SpaceX’s briefing on the commerce clause, due process, full faith and credit, and supremacy clause theories too cursory to preserve any of them, noting that “the most fundamental rule of appellate review is that the judgment or order challenged on appeal is presumed to be correct,” placing the burden on the appellant to show error with reasoned legal argument (citing Argueta v. Worldwide Flight Services, Inc. (2023) 97 Cal.App.5th 822, and City of Santa Maria v. Adam (2012) 211 Cal.App.4th 266). A “fishing expedition”/unreasonable-search theory raised for the first time in SpaceX’s reply brief was forfeited on the same basis.

Turning to the published portion, the court addressed whether enforcing the subpoena violates the presumption against extraterritorial application of California law. Applying the California Supreme Court’s framework in Ward v. United Airlines, Inc. (2020) 9 Cal.5th 732, the panel explained that because SpaceX did not argue any extraterritorial effect categorically bars applying FEHA, the real question is what California connections are sufficient to trigger the statute — a question that must be answered separately for CRD’s investigatory authority (Gov. Code §§ 12930, 12963.1, 12963.5) than for FEHA’s substantive prohibitions, since a subpoena carries less risk of conflict with another state’s law than an injunction would.

The court rejected SpaceX’s proposed categorical rule, drawn from Kearney v. Salomon Smith Barney, Inc. (2006) 39 Cal.4th 95, that FEHA applies only if the adverse employment action itself occurred in California. It found SpaceX never explained where an “adverse employment action” occurs when employer and employee touch multiple states, and that the complaint’s actual California connections — including allegations the employee’s manager and reporting chain were based in California and her pay statements issued from California — undercut SpaceX’s characterization that everything happened in Washington. The court likewise rejected a broader rule, urged at oral argument, that California labor and employment statutes never protect a worker who did not work in California, distinguishing Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, Sullivan v. Oracle Corp. (2011) 51 Cal.4th 1191, and Oman v. Delta Air Lines, Inc. (2020) 9 Cal.5th 762, as wage-and-hour decisions that left open the possibility of extraterritorial application and that, per Ward, must be read statute-by-statute rather than as announcing a blanket rule for all California employment law.

Finally, the court distinguished Campbell v. Arco Marine, Inc. (1996) 42 Cal.App.4th 1850, where FEHA was held inapplicable to a Washington-based employee’s shipboard harassment claims, because there the relevant California connections were undisputed and absent, whereas here the very purpose of the subpoena was to determine whether sufficient California connections exist. The court added that SpaceX’s reliance on earlier cases involving conduct that was not actionable under FEHA at all was misplaced, since it is undisputed the conduct the employee alleges — sex/gender discrimination and retaliation — is unlawful under FEHA; the only open question is whether the California nexus is sufficient, which is precisely what CRD’s subpoena seeks to investigate.

A federal grand jury in Boston has indicted a 33-year-old Georgian national on a single count of conspiracy to launder money, in a case federal prosecutors say is tied to the largest health care fraud scheme the Department of Justice has ever prosecuted.

The U.S. Department of Justice announced that Erekle Gugava was charged in the District of Massachusetts in connection with Operation Gold Rush, the government’s name for its investigation into a transnational fraud and money-laundering network that DOJ says targeted Medicare and other health insurers. According to a companion release from the U.S. Attorney’s Office for the District of Massachusetts, Gugava fled the United States in July 2025, after the conduct alleged in the indictment.

Gugava served as a money launderer for a criminal organization based in Russia and elsewhere that prosecutors describe as responsible for the largest health care fraud case the department has ever brought. Gugava is alleged to have owned ND Medical Solutions LLC, a durable medical equipment supplier based in Pennsylvania, between February and July 2025. During that roughly five-month period, ND Medical is alleged to have submitted at least $1.3 billion in fraudulent equipment claims to Medicare, to private insurers that sell Medicare supplemental coverage, to employer-sponsored health plans, and to other insurers. DOJ states that insurers actually paid out approximately $6.5 million on those claims before the scheme was uncovered — a gap the department attributes to the claims being caught before most of the billed amount was paid.

The fraudulent billings relied in part on stolen identities of Medicare beneficiaries, including elderly and disabled Americans across New England and elsewhere in the country, some of whom reported concerns to Medicare after receiving explanation-of-benefit notices for equipment they say they never received, prescribed by doctors they say they never saw. Prosecutors allege Gugava opened several bank accounts in ND Medical’s name, was the sole signatory on those accounts, deposited insurance reimbursement checks into them, and then moved the funds to overseas accounts for the benefit of the broader organization. DOJ’s release notes that health care fraud proceeds are especially attractive to launderers because they originate from legitimate payors — Medicare and established private carriers — which gives the funds an initial appearance of legitimacy.

Assistant Attorney General Colin M. McDonald of DOJ’s National Fraud Enforcement Division was quoted in the department’s release saying deterring “facilitators is essential to safeguarding taxpayer resources,” and that the indictment reflects the department’s “resolve to hold all participants in fraud networks accountable.” Those are characterizations from a DOJ official, not adjudicated findings, and the indictment itself remains only an accusation — DOJ’s own release states that Gugava is presumed innocent unless and until the government proves the charge beyond a reasonable doubt.

Gugava is charged with one count of conspiracy to commit money laundering and faces a maximum of 20 years in prison if convicted. The case was announced jointly by the National Fraud Enforcement Division, the U.S. Attorney’s Office for Massachusetts, and investigators from HHS’s Office of Inspector General, the FBI, the U.S. Postal Inspection Service, IRS Criminal Investigation, Homeland Security Investigations, and the Department of Labor’s Employee Benefits Security Administration. DOJ’s release places the case in the context of its Health Care Fraud Strike Force Program, which it says has charged more than 6,200 defendants tied to over $45 billion in claims billed to federal health programs and private insurers since 2007, and notes that its fraud-enforcement work supports the White House’s Task Force to Eliminate Fraud, chaired by Vice President J.D. Vance.

For employers and insurers, the case is a reminder that durable medical equipment billing — an area with comparatively light utilization review compared to other claim types — remains a favored vector for large-scale, organized fraud rings, and that fraudulent claims can flow not just to Medicare but directly into employer-sponsored plans and Medicare supplemental products. Claims and special-investigations units may want to revisit DME billing controls and identity-verification protocols for beneficiaries in light of the pattern DOJ describes.

The FDA updated its safety communication regarding the Hintermann Series H3 Total Ankle Replacement (TAR) System, manufactured by DT MedTech LLC of Towson, Maryland. The agency stated it is now recommending that surgeons and patients “consider using other available treatment options where possible.” That language represents a meaningful escalation from the FDA’s two earlier communications on the device, issued in February 2024 and October 2025, which flagged higher-than-expected failure rates but stopped short of recommending alternatives.

The H3 TAR system is a three-component, mobile-bearing ankle prosthesis consisting of a metal tibial plate, a metal talar component, and a mobile polyethylene (plastic) bearing that sits between them. It is indicated for use as a non-cemented artificial ankle joint to replace a painful arthritic ankle caused by osteoarthritis, post-traumatic osteoarthritis, or inflammatory arthritis. The FDA approved the device in 2019, making it only the second total ankle replacement to receive full FDA premarket approval following the Scandinavian Total Ankle Replacement (STAR) system cleared in 2009.

The updated safety communication draws on three independent data sources, and the findings from each tell a consistent story. The manufacturer’s own FDA-mandated post-approval study — a prospective cohort tracking 280 patients from the original premarket clinical trials — found that 31.8% of patients required revision surgery within 10 years. That includes revisions of both the metal and polyethylene components. Even when only metal component revisions are counted, the rate was 14.9% at 10 years, more than double the 6.5% rate observed at 5 years. Notably, the FDA flagged significant data quality concerns with the study: 55.7% of patients were lost to follow-up or had missing data at the 10-year mark, a limitation that could make the actual revision rate either higher or lower than the reported figure.

The most striking data, however, came from outside the manufacturer’s study. The Australian Orthopaedic Association’s National Joint Replacement Registry analyzed 573 H3 TAR implants alongside 4,806 other total ankle replacements performed in Australia through 2024. The 15-year cumulative revision rate for the H3 was 25.7%, compared to 15.2% for all other total ankle devices — nearly 70% higher. After adjusting for patient age and sex, the H3 carried a statistically significant hazard ratio of 1.93 for revision compared to other devices, meaning patients with the H3 were roughly twice as likely to need additional surgery. The United Kingdom’s National Joint Registry reported a 9.5% revision rate for the H3 at 10 years, though the UK registry acknowledged that up to one-third of ankle revisions in Britain go unreported, suggesting the actual rate may be higher.

Polyethylene fracture — breakage of the plastic bearing component — emerged as a particularly concerning failure mode. The Australian registry data showed the 10-year cumulative incidence of revision due to polyethylene fracture was approximately four times higher for the H3 than for all other ankle replacement devices. While loosening was the most common reason for H3 revision overall at 25%, polyethylene breakage was the second most common at 16.7%, followed by infection and instability at 10.2% each. For comparison, among all other total ankle devices, polyethylene breakage ranked fifth as a reason for revision, accounting for only 6.3% of cases.

The regulatory response has been swift and international. Australia’s Therapeutic Goods Administration went further than the FDA, issuing a market action on February 12, 2026 and banning the sale and distribution of the H3 TAR system in Australia entirely as of May 5, 2026. The device remains available in the United States, but the FDA’s updated recommendation to consider alternatives is the strongest language the agency has used short of ordering a market withdrawal.

The FDA’s safety communication does not recommend removal of functioning H3 implants. Patients whose devices are working well and who have no new or worsening symptoms should continue with their existing follow-up schedules. However, the FDA does recommend close monitoring for loosening, polyethylene fracture, and wear-related complications, and notes that CT imaging may be needed because the signs of plastic component fracture can be subtle even on standard X-rays. For adjusters and case managers overseeing claims involving workers with H3 implants already in place, this means ongoing surveillance costs and the potential for future revision surgery should be factored into reserve estimates.

The FDA has stated it will continue reviewing data from all available sources and will keep the public informed if significant new information emerges. Given the trajectory of the agency’s communications — from alerting, to updating, to now recommending alternatives — further action remains a possibility. Stakeholders with open claims involving the H3 TAR system, or with pending treatment authorizations for total ankle replacement, should be tracking this issue closely.

California does not yet have a single, fully enacted statute or amended Rule of Professional Conduct that is uniquely dedicated to attorney use of AI. As of September 2, 2026, the governing framework is a combination of existing ethics rules, detailed State Bar guidance, court rules for the judiciary, and pending legislation and rule amendments.

Since ABA Formal Opinion 512 gave lawyers nationwide their first real ethical roadmap for generative AI in July 2024, California has moved further and faster than any other state, shifting from advisory guidance toward binding rules with real teeth. Below is where the rules actually stand today, what’s still just proposed, and other relevant information.

Attorneys must comply with the existing California Rules of Professional Conduct and the State Bar Act when using any technology, including generative or agentic AI. The most relevant existing rules are:

– – Rule 1.1 (Competence) — Includes keeping abreast of relevant technology. A lawyer remains responsible for the work product and cannot delegate professional judgment to AI. Outputs must be reviewed and verified.
– – Rule 1.6 and Bus. & Prof. Code § 6068(e) (Confidentiality) — Do not input confidential client information into a public or inadequately secured generative AI system. “Reveal” can include exposing information to an AI tool that trains on inputs or lacks adequate security.
– – Rule 3.3 (Candor toward the tribunal) — A lawyer must not make false statements of law or fact. Courts have sanctioned lawyers for filing briefs with AI-hallucinated citations that the lawyer did not personally read and verify.
– – Rules 5.1 and 5.3 (Supervision) — Firm leaders must have policies on AI use; lawyers must supervise nonlawyer assistants (and, by extension, AI tools) so that ethical duties are met.
– – Rule 1.4 (Communication) — Clients must be kept reasonably informed. Material use of AI that affects cost, risk, or the manner of representation may need to be discussed.
– – Rule 1.5 (Fees) — You may charge for time spent prompting, reviewing, and editing AI output. You generally should not bill as if you performed the work the AI performed without adjustment for efficiency.

These duties already apply; the State Bar’s guidance simply maps them onto AI.

Another binding rule is California Rule of Court 10.430, effective September 1, 2025 — but it’s worth being precise about who it actually governs. Rule 10.430 requires every California court that permits generative AI use to adopt a written AI use policy by December 15, 2025, covering court staff for any purpose and judicial officers for any task outside their adjudicative role (a companion provision, Standard of Judicial Administration 10.80, separately covers judges’ adjudicative use). It is a rule for the courts themselves, not a rule directly regulating how outside attorneys or law firms use AI in their own practices.

The Standing Committee on Professional Responsibility and Conduct (COPRAC) issued Practical Guidance for the Use of Generative Artificial Intelligence in the Practice of Law in November 2023 and replaced it with an updated version approved by the Board of Trustees in May 2026. The update specifically addresses agentic AI (systems that can plan and execute tasks with limited human prompting). It is guidance, not a disciplinary rule, but it is the most detailed official statement and is the document the California Supreme Court directed the Bar to consider incorporating into the Rules.

Core principles from the 2026 Guidance:

– – Do not input confidential or nonpublic client information into a public generative AI system that lacks adequate security and confidentiality protections.
– – Attain a reasonable understanding of the specific tool’s capabilities, limitations, data sources, and risks before using it.
– – Independently review, verify, and exercise professional judgment over every output used in a representation. Detecting hallucinations is necessary but not sufficient.
– – Do not let agentic systems make substantive legal determinations, give legal advice, or file pleadings without meaningful lawyer supervision and review.
– – The lawyer remains fully responsible for all work product.
– – Take reasonable steps to avoid biased or discriminatory outputs.
– – Fees should reflect actual time and value; AI efficiency should not be billed as if the lawyer performed the work unaided.
– – Comply with all other applicable law (privacy, IP, cybersecurity, AI-specific statutes, etc.).

The rule that will actually bind practicing attorneys directly is still in progress. On direct order from the California Supreme Court, the State Bar’s Committee on Professional Responsibility and Conduct (COPRAC) has drafted proposed amendments to six Rules of Professional Conduct addressing AI. In response to an August 22, 2025 letter from the California Supreme Court, COPRAC proposed comments to Rules 1.1, 1.4, 1.6, 3.3, 5.1, and 5.3. A second public-comment period ran after the June 12, 2026 COPRAC meeting (deadline August 6, 2026). The proposals still require Board of Trustees and Supreme Court approval and are not yet binding. If adopted they would, among other things:

– – Explicitly require independent review and verification of AI (and other technology) outputs.
– – Clarify that “reveal” under Rule 1.6 includes exposing confidential information to AI systems that create a substantial risk of inconsistent use.
– – Require verification that cited authorities exist and are accurate before submission to a tribunal (including AI-assisted citations).
– – Require managerial lawyers to establish internal AI policies and to instruct/supervise nonlawyer assistants on ethical use of AI.

Legislation is moving on a parallel, faster track. Senate Bill 574, introduced by Senate Judiciary Chair Tom Umberg passed both houses unanimously and was ordered to engrossing and enrolling on August 31, 2026. As of September 2, 2026 it has been sent to Governor Newsom but has not yet been signed. The Governor typically has until September 30 to act on end-of-session bills.

If enacted, SB 574 would add a new Business and Professions Code section 6068.1 codifying attorneys’ AI duties (protecting confidentiality, verifying accuracy, avoiding bias, considering disclosure for public-facing content), and would amend the state’s existing sanctions statute, Code of Civil Procedure section 128.7, to make it explicit grounds for sanctions if a court filing contains any citation the responsible attorney has not personally read and verified — whether or not AI produced it.

Separately, the bill would add Code of Civil Procedure section 1282.1, barring arbitrators from delegating any part of their decision-making to generative AI, barring reliance on AI-sourced information outside the arbitration record without disclosure, and holding the arbitrator personally responsible for the award regardless of AI assistance used along the way.

The landscape is moving quickly. The Practical Guidance is the best current official map; the proposed rule comments and SB 574, if they become law, will convert much of that guidance into enforceable duties. Check the State Bar’s Ethics & Technology page and the official bill status for updates.