Labor & Employment Law Daily Wrap Up, TORT CLAIMS—N.D. Cal.: Insurance brokers, fired for failure to investigate fraud, cannot advance defamation claims, (Jul 29, 2025)

By Todd Harrison, J.D.

An email sent to clients serviced by the brokers’ team outlined the allegations, the employer’s reason for the termination, and consisted of statements that were either true or non-defamatory opinion.

Summary judgment was granted against the defamation and derivative claims brought by a pair of insurance brokers against their former employer in a ruling by a federal district court in California. The two had managed a San Francisco private risk management group of their employer, and a client determined that one of their team members had submitted a falsified city building inspection report, a violation of the employer’s code of conduct. The brokers stated that they had notified HR and would be auditing the accounts of the team member but ultimately failed to do so. Subsequently, they were terminated and an email was sent to clients serviced by their team explaining the situation, which the brokers alleged, among other things, was defamatory (Motekaitis v. USI Insurance Services, LLC, No. 24-cv-00885-RS (N.D. Cal. July 24, 2025)).

The two insurance brokers who filed this lawsuit had managed the San Francisco private risk management group of USI Insurance Services (USI), a national insurance brokerage firm.

Falsified report. In December 2022, Cincinnati Insurance Company (CIC), an insurance carrier that partners with USI, alerted one of the brokers that another USI employee in her office had submitted a falsified city inspection report, a violation of USI’s code of conduct.

The brokers responded to CIC, stating that they had notified USI’s HR department and that they would be auditing all accounts the employee had worked on over the past six months. The brokers failed to carry out this promise, instead conducting a “spot audit” of the employee and allowing her to continue working on CIC business.

Second contact. In April 2023, CIC contacted one of the brokers again because the employee was still working on CIC accounts. The broker stated that she was unaware of this fact and would put a stop to it. She failed to do so.

Second falsified report. On September 18, 2023, CIC discovered another falsified document submitted by the brokers’ team. It also learned that the employee in question was still working on its business. At this point, it escalated matters to USI, which launched an extensive investigation.

During the course of USI’s review, the scrutinized employee and another employee admitted to falsifying the two documents CIC identified. USI decided to terminate the two for ethical violations, but they resigned before this could occur. USI also notified the brokers that they were being terminated as well.

Email. The same day the brokers were told they were being terminated, USI sent an email to clients serviced by the brokers’ team explaining the situation. Following the email, the brokers filed this claim for defamation and derivative claims, including blacklisting, tortious interference, and intentional infliction of emotional distress.

Defamation claims. According to the brokers, USI published false and defamatory statements in its email, including that they had intentionally or negligently failed to notify USI leadership of the falsified documents, did not adequately investigate CIC’s concerns, had engaged in criminal acts, and engaged in a cover-up of wrongdoing.

Common interest doctrine. At the outset, USI mounted a “compelling argument” that the email was privileged under the common interest doctrine, said the court. That doctrine protects “communications made in good faith on a subject in which the speaker and hearer share[] an interest or duty.”

Determining whether common interest privilege applies requires a two-step analysis, explained the court. First, USI must demonstrate the statements in question occurred on a “privileged occasion.” If so, then the brokers must prove through actual evidence that the statement was made with malice. If the brokers fail to do so, then summary judgment is warranted. The court addressed each step in turn.

Potential interest? According to USI, its clients comprised the majority of the email’s recipients, all of whom shared a common interest in broker missteps. In response, the brokers highlighted the extent to which the email was sent to non-USI clients, including at least one of its competitors. USI replied that even if the email went to competing brokers, they too shared a potential common interest given the subject matter and its potential professional importance.

Here, the court determined that the question was close but found that summary judgment was not warranted as to common interest privilege because a dispute of fact remained—whether all recipients shared a potential interest in the email’s contents. Thus, the court did not have to reach the question of whether the brokers demonstrated the malice necessary to defeat the privilege.

Falsity and opinion. Nevertheless, the court determined that USI was entitled to summary judgment because the factual statements in the email were demonstrably true and any non-factual statements were unactionable opinions. It was undisputed that USI had terminated the brokers’ employment. Further, it was a statement of fact that the brokers failed to notify USI of CIC’s concerns.

As to the email’s assertion that the brokers did not adequately investigate or respond to CIC’s concerns, the court explained that a statement accusing someone of poor performance is clearly a statement of opinion and is not defamatory so long as it does not suggest any lack of honesty, integrity, or competency nor impute any reprehensible personal characteristic. Thus, this portion of the email was not defamatory.

Finally, the email stated that USI had lost confidence in the ability of the brokers to lead their team. USI testified that this was true and the brokers presented no evidence to the contrary.

Derivative claims. With regard to the derivative claims for tortious interference, blacklisting, and IIED, the court found that these claims also failed because the defamation claim failed to survive USI’s motion for summary judgment.

The case is No. 24-cv-00885-RS.

Judge: Seeborg, R.

Attorneys: Richard Alan Tamor (Law Offices of Tamor & Tamor) for Paul Motekaitis. Alexander Nestor (Allen Matkins Leck Gamble Mallory & Natsis) for USI Insurance Services National, Inc.

Companies: USI Insurance Services National, Inc.

Cases: TortClaims Discharge StateLawClaims CaliforniaNews