Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of San Bernardino County No. FSB035679 Michael A. Smith, Judge.
IRION, J.
A jury convicted Randolph Justin Zane of nine counts of making a false and misleading statement regarding insurance benefits (Pen. Code, § 550, subd. (b)(1)) and two counts of concealment of, or failure to disclose, material facts regarding insurance benefits (§ 550, subd. (b)(3)). The trial court sentenced Zane to five years supervised probation and ordered him to serve 90 days in local custody.
Unless otherwise indicated, all further statutory references are to the Penal Code.
Zane contends (1) that insufficient evidence supports his conviction for nine counts of making a false and misleading statement regarding insurance benefits (§ 550, subd. (b)(1)) and (2) that the trial court committed multiple instances of instructional error. As we will explain, we agree with Zane that the trial court prejudicially erred in giving certain jury instructions, and accordingly we reverse the judgment.
I
FACTUAL AND PROCEDURAL BACKGROUND
Zane was employed as a public school teacher for 30 years. In 1993, an agent from Colonial Life & Accident Insurance Company (Colonial) was promoting disability insurance in the teachers' lounge at Zane's school. According to Zane, he was attracted by the agent's sales pitch because the agent told him that (1) Colonial did not object to policyholders having disability insurance from other companies, and (2) the Colonial policy had an "incontestable clause" guaranteeing that "whatever is said on the application cannot be contested" after two years have elapsed.
According to Zane's testimony, he asked the Colonial agent how, if he applied for subsequent policies from other companies, he could get those other companies to agree that he could hold multiple disability insurance policies. The agent purportedly told Zane that on subsequent insurance applications he should omit any information about other disability insurance policies, and that the underwriters reviewing his applications would nevertheless know that Zane held other policies because "insurance companies use a variety of electronic screeners" that "can tell insurance companies whether you're telling the truth or whether you're not telling the truth." The agent mentioned the Medical Information Bureau (MIB), the Disability Insurance Registry (DIR) and the Health Claims Index as the source of the insurance company's information about insurance applicants.
According to an expert witness, the MIB is a clearinghouse for medical information that insurance companies share with each other, containing information about diagnoses of patients who have submitted an insurance claim. The DIR is a listing of disability policies taken out by individuals. Typically when people fill out an application for disability insurance, they sign a waiver that allows the insurance company to use information in the MIB and the DIR. As Zane described it, the Health Claims Index "tells an insurance company exactly who you've made claims with."
Based on what the Colonial agent told him, Zane decided that he would enter into contracts with the other insurance carriers through the "waiver estoppel method" without mentioning his other disability insurance coverage or claims made against those policies. As Zane explained, "the agent told me that in the waiver estoppel approach to [a] contract, that if you happen to make an untrue statement about something... the insurance underwriter would be aware of the... misrepresentation, and that because everything was subjective she could decide whether she wanted to enter a contract with you or not." As the agent purportedly explained to Zane, the underwriter "could... neglect to inquire about a misrepresentation, which is considered a waiver under the Insurance Code." As the concept was purportedly explained to Zane, "the insurer is required by law that when he sees contrary information on the application to what he knows to be the truth, he must contact you.... 'The law says if you don't call up and inquire of the guy, then the issue is waived.' " The Colonial agent purportedly told Zane that the "waiver estoppel method of entering a contract" was "controversial, unorthodox, but completely legal."
According to Zane, the Colonial agent assured him that he would not be committing fraud by failing to disclose his other disability insurance policies or the claims made against those policies because fraud required the presence of a "material fact" and "the intent to deceive, " and " 'it's not fraud because they know that you're lying' " based on their access to the electronic databases.
Zane proceeded to obtain five disability insurance policies between 1993 and 1996 using the method purportedly described by the Colonial agent. The first policy was issued by Colonial. Subsequent policies were issued by Continental Insurance, The Paul Revere Life Insurance Company (Paul Revere), Capitol American Life Insurance (Capitol) and Allianz Life Insurance Company of North America (Allianz). On the applications for the policies with Paul Revere and Capitol, Zane stated that he was not covered by other disability insurance policies. Further, although Zane admitted to receiving medical treatment in March 1994 for a deviated septum, and documents show that Zane made several disability claims and saw doctors for other medical conditions starting in September 1994, he stated in his June 1994 application to Paul Revere, his July 1995 application to Capitol, and his March 1996 application to Allianz that he had not consulted a doctor or received medical treatment in the last five years.
The application for the Continental Insurance policy was not an exhibit at trial.
Starting in September 1994, Zane made claims against his disability insurance policies for various medical conditions that prevented him from working for a period of time. These medical conditions included two heel injuries, a toe injury, a groin injury, a back sprain and interstitial lung disease. The parties stipulated at trial that "there is no dispute about the accuracy or the legitimacy of the various medical diagnoses on all of the claim forms filed by Mr. Zane."
At issue in this case were claim forms submitted by Zane to Colonial and Capitol, but not to the other insurance companies. The Colonial and Capitol claim forms both had sections in which Zane was to obtain a signature from his employer to verify the dates that he was absent from work. Zane admits, and the parties stipulated at trial, that Zane forged the signatures of school officials on the claim forms. Zane explained at trial that school officials had a policy against signing claim forms, and he therefore asked the Colonial claims adjuster what he should do. According to Zane, the claims adjuster told him that she would call his employer to verify the dates he was absent. She also purportedly told him, " 'I'm the one that's handling your claim form, and I can waive any issue. Go ahead and sign it for the principal. I know who you are and I'll take it and send you a check.' " According to Zane, he followed that procedure for some time, but then, because a different claims adjuster was assigned to handle his claims, he decided to put Colonial on notice that he was signing for the school principal, and he sent Colonial an affidavit stating that he would be signing for the principal by "proxy."
Specifically, the parties stipulated that Zane "signed the names of Herbert Jones and Kenneth Hood on all of the claim forms without their knowledge or permission. [¶] Additionally, neither Mr. Hood nor Mr. Jones gave anyone authorization to sign those forms."
The exhibits at trial included a notarized affidavit from Zane dated August 1997, which explains that Zane was having difficulty obtaining a signature from school personnel and states that "[a]ll future claims will be signed by myself in proxy...." The document does not indicate which insurance company Zane sent the affidavit to, but Zane testified that he sent it to Colonial. Further, claim forms that Zane sent to Colonial in November 1997 and July 1998 in fact did have the word "proxy" written in parenthesis next to the school official's signature. Zane was not charged with insurance fraud for submittal of those claim forms.
During a routine investigation in 1999, a fraud investigator from Paul Revere discovered that Zane had multiple insurance policies that he had not disclosed. The matter of Zane's disability insurance coverage was eventually referred for criminal prosecution, and an amended information charged Zane with 29 counts of insurance fraud. Three counts alleged that Zane concealed or failed to disclose material facts (§ 550, subd. (b)(3)) in the applications for the Paul Revere, Capitol and Allianz policies (counts 1, 28, 29). The remaining 26 counts alleged that Zane made false and misleading statements (§ 550, subd. (b)(1)) in claim forms that he submitted to Colonial and Capitol on 26 different dates ranging from September 29, 1994, to July 9, 1998 (counts 2 27).
The jury convicted Zane of two of the counts of concealing or failing to disclose material facts regarding insurance benefits (§ 550, subd. (b)(3)), finding that he committed insurance fraud with respect to the applications for the Capitol and Allianz policies (counts 28, 29). It acquitted Zane of insurance fraud with respect to his application for the Paul Revere policy (count 1). The jury also convicted Zane of nine counts of making false and misleading statements regarding insurance benefits (§ 550, subd. (b)(1)), finding that he committed insurance fraud with respect to the nine claim forms submitted to Colonial and Capitol between January 12, 1996, and July 9, 1998 (counts 19 27). It acquitted Zane of insurance fraud with respect to the claim forms submitted to Colonial between September 29, 1994, and September 7, 1995 (counts 2 18). The jury also made true findings on allegations that Zane took property with a value exceeding $50,000 and that the statute of limitations was tolled (§ 803).
II
DISCUSSION
A. Challenges to the Sufficiency of the Evidence
We first consider Zane's challenge to the sufficiency of the evidence to support his convictions on counts 19 through 27 for making false and misleading statements in the claim forms submitted to Colonial and Capitol between January 12, 1996, and July 9, 1998.
1. Standard of Review
" 'In reviewing a challenge to the sufficiency of the evidence..., we review the entire record in the light most favorable to the judgment to determine whether it discloses substantial evidence - that is, evidence that is reasonable, credible, and of solid value - from which a reasonable trier of fact could have found the defendant guilty beyond a reasonable doubt.' [Citation.] 'The appellate court presumes in support of the judgment the existence of every fact the trier could reasonably deduce from the evidence.' " (People v. Ramirez (2006) 39 Cal.4th 398, 464.) Reversal is not warranted "unless it appears 'that upon no hypothesis whatever is there sufficient substantial evidence to support [the conviction].' " (People v. Bolin (1998) 18 Cal.4th 297, 331.) "[I]t is not within our province to reweigh the evidence or redetermine issues of credibility." (People v. Martinez (2003) 113 Cal.App.4th 400, 412.) Significantly too, " '[i]f the circumstances reasonably justify the verdict of the [trier of fact], the opinion of the reviewing court that those circumstances might also reasonably be reconciled with the innocence of the defendant will not warrant interference with the determination of the [trier of fact].' " (People v. Love (1960) 53 Cal.2d 843, 850-851, italics added.) We apply the same substantial evidence standard of review in a case where the verdict was based on the jury's evaluation of circumstantial evidence as we do in a case involving direct evidence. (See People v. Kraft (2000) 23 Cal.4th 978, 1053-1054.)
2. Substantial Evidence Supports a Finding of the Materiality Required for a Conviction Under Section 550, Subdivision (b)(1)
Zane was convicted of counts 19 through 27 pursuant to section 550, subdivision (b)(1), which makes it a crime to "[p]resent or cause to be presented any written or oral statement as part of, or in support of or opposition to, a claim for payment or other benefit pursuant to an insurance policy, knowing that the statement contains any false or misleading information concerning any material fact." (Ibid., italics added.)
Zane argues that insufficient evidence supports a finding that he presented false information concerning a material fact, as required by the statute. He argues that the presence of the forged signatures on the claim forms were immaterial because he "had valid medical disabilities causing him to miss work" and because he submitted signed doctors' statements to the insurance companies indicating the dates of his disabilities.
The requirement for "materiality of false statements to obtain insurance benefits is met if the statements convey information on subjects which are 'germane' or 'reasonably relevant' to the insurer's investigation and which could bear directly and importantly on the investigation and evaluation of the bona fides of the claim." (People v. Gillard (1997) 57 Cal.App.4th 136, 152 (Gillard).) Notably, "the materiality of a statement is not determined by the actual effect the statement had on the outcome of the investigation: 'Rather, a question and [an] answer are material when they relate to the insured's duty to give to the insurer all the information he has as well as other sources of information so that the insurer can make a determination of its obligations. Thus, materiality is determined by its prospective reasonable relevance to the insurer's inquiry.... [I]f the misrepresentation concerns a subject reasonably relevant to the insured's investigation, and if a reasonable insurer would attach importance to the fact misrepresented, then it is material.' " (Id. at p. 151.)
Applying this standard of materiality, we conclude that substantial evidence supports a finding that the presence of the school officials' signatures on the claim forms were material to the insurance companies reviewing the claims. According to the testimony of Christopher DeLuca, who worked for Paul Revere as a field representative and fraud investigator, the "period that you were out of work, the timeframe, the dates, " are material aspects of a claim for benefits. The school officials' signatures on the claim forms served as a verification from a third party that Zane was in fact disabled and unable to work during the period for which he claimed benefits. Therefore, Zane's false representations - through the forged signatures of the school officials - that a third party had verified the dates he was absent from work, are representations that are " 'germane' or 'reasonably relevant' to the insurer's investigation" of Zane's claim for benefits. (Gillard, supra, 57 Cal.App.4th at p. 152.)
Although, as Zane points out, his doctors' statements also indicated the dates during which Zane's disabilities rendered him unable to work, a reasonable juror could conclude that an insurance company would nevertheless consider the employer signatures to be relevant to its evaluation of a claim, because the employer, not a doctor, was the person with actual knowledge of the dates that Zane was not at work.
Further, it is irrelevant that the validity of Zane's disabilities were undisputed at trial. The issue here is whether the insurance companies would have considered the employer signatures to be relevant at the time they were evaluating Zane's claims. At that time, there was no stipulation that Zane's disabilities were valid. Moreover, the parties never stipulated that Zane was actually absent from work on the days indicated by the school officials' forged signatures. The forged signatures therefore remain material to the issue of whether Zane actually missed work because of his medical conditions.
The People point out that not only did the claim forms submitted to Capitol contain forged signatures, they each contained false statements about whether Zane was "covered under any other accident/disability programs." The People argue that these false statements present an independent basis for determining that Zane made material false statements with respect to counts 22 through 27. According to our review of the record, the prosecutor did not argue to the jury that these additional misstatements could form the factual basis for a conviction on counts 22 through 27. As we have concluded that sufficient evidence supports a finding that the forged signatures were material misrepresentations, we need not and do not consider whether the false information about the existence of other disability insurance policies could also be found to constitute material misrepresentations.
We therefore conclude that substantial evidence supports a finding of materiality as required for the convictions on counts 19 through 27.
3. Substantial Evidence Supports a Finding of the Specific Intent Required for Conviction Under Section 550, Subdivision (b)(1)
The parties agree that an offense under section 550, subdivision (b)(1) is a specific intent crime requiring the defendant to have a specific intent to defraud. (See People v. Blick (2007) 153 Cal.App.4th 759, 774, 772-773 (Blick) [concluding that § 550, subd. (b)(3) "requires a specific intent to defraud, " based on reasoning that is equally applicable to § 550, subd. (b)(1), and observing generally that "[t]he clear import of section 550 is to criminalize the making of false or fraudulent claims the ultimate objective of which is to obtain benefits to which the offender is not entitled.... [F]raud is integral to the offense." (Citations omitted.)].) The jurors were accordingly instructed that to convict Zane of the counts charged under section 550, subdivision (b)(1), they must find, among other things, that when Zane presented a false or fraudulent claim for payment, "he intended to defraud."
Further, the jury was instructed that "[s]omeone intends to defraud if he intends to deceive another person, either to cause a loss of money, goods or services, or anything else of value, or to cause damage to a legal, financial, or property right." This instruction reflects the legal principle that "[a]n intent to defraud is an intent to deceive another person for the purpose of gaining a material advantage over that person or to induce that person to part with property or alter that person's position by some false statement or false representation of fact, wrongful concealment or suppression of the truth or by any artifice or act designed to deceive." (People v. Pugh (2002) 104 Cal.App.4th 66, 72.)
Zane contends that the record contains insufficient evidence that he forged the signatures of the school officials with an intent to defraud. Zane's argument on this issue is very similar to his argument on the issue of materiality. Pointing to the parties' stipulation about the validity of his disabilities and the doctor statements about the dates on which he was unable to work, Zane contends that "the fact that the claims were based on legitimate disabilities and actual time missed from work undermines the assertion that [Zane] intended to commit fraud." He argues, "even without the employer signatures, the claims were proper demonstrations of [Zane's] medical disabilities, and that he had valid excuses for missing work." Zane contends that the evidence was therefore insufficient to establish that he acted with an intent to defraud when he forged the school officials' signatures.
However, as we have explained, neither the doctor statements nor the parties' stipulation at trial established that Zane actually missed worked on certain days. To establish that fact, the insurance companies asked Zane to obtain a signature from a school official. A jury could reasonably find that by forging the signatures, Zane acted with the intent to deceive the insurance companies about whether his employers had verified the date of his absences from work. Further, a jury reasonably could infer that Zane engaged in the deceptive conduct for the purpose of inducing his insurers to pay money that they would not have paid if they did not have sufficient verification of his dates away from work. Therefore, the record sufficiently supports a finding that Zane forged the signatures with a specific intent to defraud: Zane's intent was to deceive the insurer into thinking that school officials had verified the date of his absences, and Zane's purpose was to cause the insurers to pay benefits.
Zane points to a provision in the Colonial policy, which states that "[w]ritten proof of loss includes one or more of the following: an attending doctor's statement, a doctor's bill, a hospital bill, an employer's statement or your statement." (Italics omitted.) Zane argues that because of this provision, he thought that the employer signatures were not necessary to prove his claim, and thus he was not acting with the specific intent to defraud when forging the school officials' signatures. This argument fails because a jury could reasonably conclude that Zane did not have that policy provision in mind when forging the signatures and that his argument based on the policy provision is therefore an after-the-fact rationalization of his intentionally deceptive conduct. Further, as the People point out, the policy provision is far from clear. The People state that "one or more" of certain documents constitute a written proof of loss. The provision could reasonably be interpreted as giving Colonial the discretion to require more than one type of document to verify a claimed disability, and the jury therefore may have adopted that understanding of the provision rather than the one that Zane claimed to rely upon.
In his reply brief, Zane argues that "the appropriate inquiry is to look at whether one had the specific intent to defraud from benefits of which one is not entitled to receive." Zane contends that he was entitled to receive the benefits because he submitted the doctor statement and therefore did not have the specific intent to defraud. We reject this argument for two reasons. First, the only authority that Zane cites for his contention that specific intent to defraud can only exist when the individual is not otherwise entitled to receive the benefit is Blick, supra, 153 Cal.App.4th at pages 772-773 ("The clear import of section 550 is to criminalize the making of false or fraudulent claims the ultimate objective of which is to obtain benefits to which the offender is not entitled."). However, the language that Zane cites from Blick is dicta and does not directly lend support. Second, even assuming the validity of the principle advanced by Zane, the relevant inquiry here would be whether Zane believed, when he was making the deceptive statement, that he was otherwise already going to receive the benefits. If Zane believed he was already going to receive the benefits, then he would not be making the deceptive statement with the intent to obtain those benefits. Here, however, a jury could reasonably conclude that at the time Zane forged the signatures, he did not believe that he would be entitled to receive the benefits without obtaining his employer's signature. Indeed, the fact that Zane went to the trouble to forge the signatures, instead of simply leaving the section blank, supports an inference that he believed the signatures were necessary to obtain insurance benefits.
B. Claims of Instructional Error
We next consider Zane's contention that the trial court prejudicially erred in giving certain jury instructions. "Errors in jury instructions are questions of law, which we review de novo." (People v. Russell (2006) 144 Cal.App.4th 1415, 1424 (Russell).)
1. The Trial Court Prejudicially Erred in Failing to Instruct on the Element of Materiality Regarding the Counts Charging a Violation of Section 550, Subdivision (b)(1)
a. The trial court erred
As we have discussed, Zane was convicted on counts 19 through 27 for committing insurance fraud in violation of section 550, subdivision (b)(1), which makes it a crime to "[p]resent or cause to be presented any written or oral statement as part of, or in support of or opposition to, a claim for payment or other benefit pursuant to an insurance policy, knowing that the statement contains any false or misleading information concerning any material fact." As we have noted above, the statute incorporates the element of materiality. The misrepresentation must concern a material fact.
When instructing the jury regarding the elements necessary to convict under section 550, subdivision (b)(1), the trial court did not use an instruction that followed the statutory language. Instead, the trial court used CALCRIM No. 2000, which is expressly applicable to offenses committed in violation of section 550, subdivision (a), rather than subdivision (b). (CALCRIM No. 2000 [titled "Insurance Fraud: Fraudulent Claims (Pen. Code, § 550(a)(1), (4)-(7) & (9))"].) As provided to the jury, the instruction defined the element of the crime as follows:
"The defendant is charged in Counts 2-27 with insurance fraud committed by fraudulent claim.
"To provide that the defendant is guilty of this crime, the People must prove that:
"1. The defendant presented/ [or] caused to be presented a false or fraudulent claim for payment for a loss or injury;
"2. The defendant knew that the claim was false or fraudulent;
"AND
"3. When the defendant did that act he intended to defraud."
In addition, nowhere in the instructions was the term "false or fraudulent claim" further defined.
Zane contends that the trial court erred because the instruction did not reflect the requirement in section 550, subdivision (b)(1) that the misrepresentation concern a "material fact." (Ibid.) Further, Zane contends that the error relieved the prosecution of the burden of proving the element of materiality beyond a reasonable doubt in violation of Zane's federal right to due process, so that the harmless error standard applicable to federal constitutional error set forth in Chapman v. California (1967) 386 U.S. 18, 24, applies. (See People v. Sengpadychith (2001) 26 Cal.4th 316, 324 ["a trial court's failure to instruct on an element of a crime is federal constitutional error [citation] that requires reversal of the conviction unless it can be shown 'beyond a reasonable doubt' that the error did not contribute to the jury's verdict"].)
The People agree with both of Zane's contentions, conceding that the trial court erred in not instructing on the element of materiality and that the Chapman standard applies for assessing whether the error was prejudicial. The People contend, however, that the error was harmless beyond a reasonable doubt. As we will explain, we conclude that error was not harmless beyond a reasonable doubt.
Citing People v. Van Winkle (1999) 75 Cal.App.4th 133, 139, the People further concede that because the instructional error affected Zane's substantial rights, Zane may assert the error on appeal even though defense counsel did not object to the instruction. Based on the authority cited, we agree.
b. The error was prejudicial
The erroneous instruction omitting the element of materiality was prejudicial to Zane because the issue of materiality played a central role in Zane's defense to the charges that he committed insurance fraud by forging his employers' signatures on the claim forms. During closing argument, defense counsel argued: "It doesn't matter whose signature it is. [T]he signature is important to verify whether the guy is off work or not. He was, in fact, off work. So who cares whose signature it is. Nobody cares." Also, as the People acknowledge, when defense counsel argued to the jury that " '[t]here's no such thing as a fraudulent claim about an actual injury..., ' " the "thrust of counsel's statement was that [Zane's] act of forging the signatures to the claim form was immaterial because the claims were bonafide." (Italics added.) Further, during Zane's testimony, he expressed the belief that the employer signatures were not important. "It's not a necessary thing. The policy says all I need is the doctor."
The People appear to believe that defense counsel's focus on materiality tends to show lack of prejudice from the omission of the materiality element from the jury instruction, as the concept of materiality was sufficiently raised by defense counsel, even if it wasn't specified in the instruction. We disagree. Even if the jury found defense counsel's arguments concerning materiality to be compelling, the jury instructions left the jurors with no legal basis to incorporate the concept of materiality into their deliberations and verdict.
Important also to our prejudice analysis is the fact that the record contained evidence that the jury could have relied upon for a finding that the forged signatures were not material. Each claim form contained a doctor's statement indicating the period during which Zane was disabled and the date on which he was able to return to work. The jury was presented with the Colonial insurance policy stating that a proof of claim consists of "one or more" type of documents, including an employer's statement and a doctor's statement, which the jury might have understood to mean - as Zane argued - that the insurance company did not consider an employer statement to be necessary, and that the forged signatures were therefore not material.
In addition, during deliberations a note from the jury indicated that jurors were unsure about whether the forged signatures alone could form the basis for the insurance fraud alleged in counts 2 through 27. The jury inquired, "Is forgery an indication of or constitutes [sic] fraudulent or false claim?" The trial court replied, "[T]he only answer I can give you is that [it] is up to you to decide." If the jury had been instructed regarding the required element of materiality, it may well have focused on that concept to help it in deciding whether the forgery in this case could constitute the basis for an insurance fraud conviction.
Focusing again on the fact that Zane falsely stated on the Capitol claim forms (at issue in counts 22 27) that he was not covered by other disability insurance, the People argue that the instructional error was harmless beyond a reasonable doubt because the jury without a doubt would have concluded that the incorrect information about the other insurance policies was material and convicted Zane on that basis. We disagree. For one thing, the prosecutor never argued that the misstatement about other insurance policies could form the basis for a conviction on counts 22 through 27. Thus, we find it doubtful that the jury would have considered that misstatement when determining the issue of materiality. Second, it is far from certain whether the jury would have considered the information about other insurance policies to be material to Capitol when evaluating a claim submitted by Zane. Although the People argue on appeal that the information would be material because Capitol could have rescinded Zane's policy if it found out he had not disclosed the existence of other insurance, that issue was not highlighted to the jury.
In sum, although we have determined above that sufficient evidence supports a finding that the forged signatures were material, it is certainly nevertheless possible that a jury, focusing on the evidence we have cited above as highlighted by defense counsel's argument and Zane's testimony, could find that that the forged signatures were not material to the insurance company's claim process. We accordingly conclude that the instructional error concerning the element of materiality was not harmless beyond a reasonable doubt as to the convictions on counts 19 through 27.
c. The conviction will not be reduced to a lesser included offense
The People argue that in the event we conclude the trial court prejudicially erred in failing to instruct on materiality, we should not reverse, but instead should reduce the convictions in counts 19 through 27 to convictions on a lesser included offense. The People rely on the rule that " '[w]here the prejudicial error goes only to the degree of the offense for which the defendant was convicted, the appellate court may reduce the conviction to a lesser degree and affirm the judgment as modified, thereby obviating the necessity for a retrial.' " (People v. Edwards (1985) 39 Cal.3d 107, 118.) According to the People, section 550, subdivision (a)(1) is a lesser included offense of section 550, subdivision (b)(1), but does not require the element of materiality, so that a conviction under section 550, subdivision (a)(1) would not be impacted by the trial court's instructional error omitting the materiality element. As we will explain, we reject the People's suggested approach because we do not agree that section 550, subdivision (a)(1) is a lesser included offense of section 550, subdivision (b)(1).
An appellate court may reduce a conviction to a lesser included offense, but not to a lesser related offense. (People v. Navarro (2007) 40 Cal.4th 668, 678, citing People v. Lagunas (1994) 8 Cal.4th 1030.)
"There are two tests for determining whether one offense is necessarily included in another: the 'elements' test and the 'accusatory pleading' test.... 'Courts should consider [both] the statutory elements and accusatory pleading in deciding whether a defendant received notice, and therefore may be convicted, of an uncharged crime....' " (People v. Ramirez (2009) 45 Cal.4th 980, 984, citation omitted.) "Under the elements test, if the statutory elements of the greater offense include all of the statutory elements of the lesser offense, the latter is necessarily included in the former." (People v. Reed (2006) 38 Cal.4th 1224, 1227 (Reed).) "Stated differently, if a crime cannot be committed without also necessarily committing a lesser offense, the latter is a lesser included offense within the former." (People v. Lopez (1998) 19 Cal.4th 282, 288 (Lopez).) "Under the accusatory pleading test, if the facts actually alleged in the accusatory pleading include all of the elements of the lesser offense, the latter is necessarily included in the former." (Reed, supra, 38 Cal.4th at pp. 1227-1228.)
Here, the amended indictment alleged as to counts 19 through 27: "On our about [relevant date of the claim form] in the above named judicial district, the crime of insurance fraud, in violation of... section 550[, subdivision ](b)(1), a felony, was committed by... Zane, who presented and caused to be presented a written and oral statement as part of, and in support of and opposition to, a claim for payment and other benefits to an insurance policy, knowing that the statement contained false and misleading information concerning a material fact." (Capitalization omitted.)
Section 550, subdivision (b)(1), under which Zane was convicted for the forged signatures, makes it a crime to "[p]resent or cause to be presented any written or oral statement as part of, or in support of or opposition to, a claim for payment or other benefit pursuant to an insurance policy, knowing that the statement contains any false or misleading information concerning any material fact." (Ibid.)
Section 550, subdivision (a)(1), which the People contend is a lesser included offense, makes it a crime to "[k]nowingly present or cause to be presented any false or fraudulent claim for the payment of a loss or injury, including payment of a loss or injury under a contract of insurance." (Ibid.)
As the People explain the difference between the two statutes, "subdivision (a)(1) of... section [550] involves a claim and subdivision (b)(1) a supporting portion of a claim." We agree with this reading of the plain language of the statute. Section 550, subdivision (a)(1) criminalizes the conduct of presenting a false or fraudulent claim for insurance benefits, but section 550, subdivision (b)(1) specifically criminalizes the conduct of presenting a false or misleading statement of "material fact" in connection with a claim for insurance benefits (ibid.).
Thus, it will not always be the case that a violation of section 550, subdivision (b)(1) necessarily includes a violation of section 550, subdivision (a)(1). Indeed, Zane contends that his case illustrates precisely such a situation, and we agree. Here, Zane contends that the claim itself was not false or fraudulent in violation of section 550, subdivision (a)(1), because he was actually disabled, he missed work, and his disabilities were covered by his policies. Nevertheless, because his employer would not sign the claim forms, he presented forged signatures to the insurance companies, and the jury found those forged signatures to constitute false and misleading information in violation of section 550, subdivision (b)(1).
Because, as this case illustrates, it is not true that a violation of section 550, subdivision (b)(1) "cannot be committed without also necessarily committing" a violation of section 550, subdivision (a)(1) (Lopez, supra, 19 Cal.4th at p. 288, italics added), the latter provision is not a lesser included offense of the former. Accordingly, it would not be proper for us to follow the People's suggestion that we reduce the conviction under section 550, subdivision (b)(1) to a conviction under section 550, subdivision (a)(1). Instead, the convictions on counts 19 through 27 will be reversed due to prejudicial instructional error.
Further, under the accusatory pleading test, the facts alleged in the amended indictment did not include all of the elements of a violation of section 550, subdivision (a)(1), because the indictment alleged only that Zane presented a statement containing false and misleading information, not that the claim itself was false or fraudulent. Accordingly, under the accusatory pleading test, section 550, subdivision (a)(1) cannot be considered a lesser included offense of section 550, subdivision (b)(1) in this case. (Reed, supra, 38 Cal.4th at pp. 1227-1228.)
2. The Trial Court Erred in Instructing on Mistake of Fact
Zane next contends that the trial court erred in instructing the jury on mistake of fact. The jury was instructed based on CALCRIM No. 3406: "The defendant is not guilty of a crime if he did not have the intent required to commit the crime because he reasonably but mistakenly believed facts, which, if true, would negate the required specific intent."
The mistake-of-fact instruction set forth in CALCRIM No. 3406 is premised on section 26, which excludes "[p]ersons who committed the act or made the omission charged under an ignorance or mistake of fact, which disproves any criminal intent" from the category of persons capable of committing crimes. (Ibid.)
Zane argues, and the People agree, that it is error for a court to insert the concept of reasonableness into a mistake of fact instruction when the defendant is charged with a specific intent crime. (See People v. Navarro (1979) 99 Cal.App.3d Supp. 1, 10-11 ["In the instant case the trial court in effect instructed the jury that even though defendant in good faith believed he had the right to take the [items he allegedly stole], and thus lacked the specific intent required for the crime of theft, he should be convicted unless such belief was reasonable. In doing so it erred."]; Russell, supra, 144 Cal.App.4th at p. 1427 [quoting People v. Navarro, supra, at pp. Supp. 10-11].) Indeed, citing Russell, the bench notes to CALCRIM No. 3406 state: "If the mental state element at issue is either specific criminal intent or knowledge, do not use the bracketed language requiring the belief to be reasonable." Here, as we have discussed, the crimes of insurance fraud under section 550, subdivision (b)(1) and section 550, subdivision (b)(3) are both specific intent crimes in that they require a finding that the defendant had the specific intent to defraud. (Blick, supra, 153 Cal.App.4th at pp. 772, 774.) Accordingly, as the People concede, the trial court erred in inserting the concept of reasonableness in the mistake-of-fact instruction.
The parties disagree over which standard applies to determine whether the error was prejudicial. Zane contends that the erroneous instruction violated his federal constitutional right to due process and thus the standard for federal constitutional error applies. We disagree and concur with the People on the applicability of the standard for state law error set forth in People v. Watson (1956) 46 Cal.2d 818, 836 (Watson). (Russell, supra, 144 Cal.App.4th at p. 1431 ["Error in failing to instruct on the mistake-of-fact defense is subject to the harmless error test set forth in [Watson].") The Watson standard "requires a reasonable probability, not a mere theoretical possibility, that the instructional error affected the outcome of the trial." (People v. Blakeley (2000) 23 Cal.4th 82, 94.)
We begin our analysis of the prejudicial nature of the mistake-of-fact instruction by specifically defining what mistake of fact was at issue in this case. Based on our review of the record, the central mistake of fact that Zane relied upon in his defense was his alleged belief, based on information given to him by the Colonial sales agent, that when reviewing an application for disability insurance, the insurance company would have information from electronic databases about an applicant's other disability insurance and his past medical treatment. Zane testified that based on this purported fact, he did not believe that he was committing fraud when he failed to disclose other insurance or medical treatment because he thought that the insurance companies already had that information and would contact him if they did not want to issue him a policy in light of those facts. This mistake of fact relates to Zane's defense to the counts for which he was convicted of failing to disclose information on the applications for disability insurance with Allianz and Capitol (counts 28, 29). It goes directly to the issue of whether Zane acted with the specific intent to commit fraud when he failed to disclose his other disability insurance and his past medical treatment.
Zane contends that his defense to the counts arising from the forged signatures on the Colonial and Capitol claim forms was based on a mistake-of-fact theory for the further reason that "he had a mistaken belief... that he was permitted to sign for his employers on claim forms to expedite the payment process" based on information from the Colonial claims adjuster. However, Zane's mistaken belief that he was legally permitted to sign for his supervisors would constitute a mistake of law, not a mistake of fact. (People v. Lamarr (1942) 20 Cal.2d 705, 710 [" ' "A mistake of fact" is where a person understands the facts to be other than they are; whereas a "mistake of law" is where a person knows the facts as they really are, but has a mistaken belief as to the legal consequences of those facts.' "].) In any event, as discussed above, we have already concluded that the convictions on counts 19 through 27 must be reversed because of another instructional error, and it is therefore not necessary for us to determine whether those counts should also be reversed due to an erroneous mistake-of-fact instruction.
Zane's mistake of fact about whether the insurance companies had access to the information he omitted from his applications was a central focus of his defense. As Zane testified in explaining his state of mind when failing to disclose information on his insurance applications, "I followed the law. The law said I need not disclose that which they already know."
However, because the instruction on mistake of fact erroneously included the concept that Zane's mistaken belief had to be reasonable, both defense counsel and the prosecutor highlighted the concept of reasonableness for the jury. Defense counsel argued, "The People have to prove that [Zane] had the specific intent to defraud when, in fact, the evidence fairly conclusively shows that he reasonably believed that he wasn't defrauding anyone. He reasonably believed he could put a false statement on that application." (Italics added.) "He had a reasonable belief that he was fully justified as far as the criminal law goes." (Italics added.) The prosecutor also highlighted the concept of a "reasonable" mistake of fact, presenting a lengthy and colorful illustration to the jury to reinforce the difference between a reasonable and unreasonable belief.
To any reasonable juror, Zane's belief in "electronic screeners" that would enable insurance companies to spot every misstatement on an insurance application could seem far fetched and irrational. As we have seen, the prosecutor emphasized that impression by arguing that Zane's mistaken belief was unreasonable. Accordingly, there is a reasonable probability that jurors concluded that Zane unreasonably believed that the insurance companies already knew all of the information that he omitted from his applications, and that the jurors therefore - as instructed - did not consider whether Zane's mistaken belief impacted his specific intent to defraud. It is thus reasonably probable that, absent the erroneous mistake-of-fact instruction requiring the mistake of fact to be reasonable, Zane would have obtained a different result at trial. Specifically, absent the instruction stating Zane's mistaken belief had to be reasonable, jurors may have concluded that Zane did not have the specific intent to defraud when omitting information on his insurance applications. Accordingly, we conclude that the instructional error was prejudicial under the standard set forth in Watson, supra, 46 Cal.2d 818, 836, and the conviction on counts 28 and 29 must be reversed.
Because we have concluded that all of the counts on which Zane was convicted must be reversed due to prejudicial instructional error regarding materiality and mistake of fact, we need not and do not reach Zane's remaining claims of error.
DISPOSITION
The judgment is reversed.
WE CONCUR: McDONALD, Acting P. J., O'ROURKE, J.