Appellate court vindicates Debber and Insurance Journal in libel case.

GRASS VALLEY, Calif.--(BUSINESS WIRE)--March 7, 1996--In a decision that has underscored and clarified the ground rules protecting free speech and journalistic integrity, the Second District Appellate Court in Los Angeles has affirmed a judgment of dismissal by the Superior Court of Los Angeles of a libel case brought by California Compensation Insurance Co. (Cal Comp) against the Insurance Journal and J. Dale Debber, the article's author.

Cal Comp, with headquarters in Rancho Cordova, Calif., is a wholly owned subsidiary of Foundation Health Corp. (NYSE:FH).

The court wrote: ``In the case of Wells Publishing (Debber) v. Cal Comp in which Cal Comp (the appellant) appeals from a summary judgment granted to defendant Wells. We conclude that appellant is a limited public figure, there was no clear and convincing evidence of actual malice by respondent and affirm the judgment.''

``The decision is an actual and complete vindication of the article, my intent, the article's accuracy and most importantly the ethical, moral and journalistic principles to which I stuck throughout this whole horrible ordeal,'' Debber said. ``The court took apart Cal Comp's arguments as to the issues, and showed this case for the blatantly vindictive farce that it was.''

On the issue of limited public figure, the court found that ``... its (Cal Comp's) activities were regulated by the California Department of Insurance, its financial condition regularly reported by public media; there was widespread interest -- state and national -- in the solvency of insurance companies; in 1990, Cal Comp took steps toward a public offering of securities and in 1991, intended to make such an offering; in May 1991, Cal Comp fired its independent accountant and reported that fact to the Securities and Exchange Commission; in June 1991, a magazine article described the Cal Comp firing.''

As to the issue of malice, the court wrote: ``We have examined the record and find no triable issue of actual malice. We explain: There is no direct evidence that Mark Wells, the owner of Insurance Journal, or J. Dale Debber, the author of the subject article, believed the article false. To the contrary, both declared they believed the article entirely accurate. The article, a lengthy one, is largely unchallenged in its accuracy. Only six matters are relied upon by appellant to show actual malice. We consider each.

``... J. Dale Debber -- a frequent contributor to Insurance Journal, an experienced journalist specializing in workers' compensation insurance, and president of his own company -- was a reputable source. Second, Mr. Wells had both his editor, John P. McCann and his attorney ... fact check the article.

``Appellant next singles out this sentence from the article: `The A.M. Best Company takes issue with Marken's ``better than industry results.'' Marken is Don Marken, president of Cal Comp, who used the `better than industry results' phrase in an internal memo not provided to or commented upon by A.M. Best Company. Appellant asserts this sentence falsely implies `A.M. Best Company reviewed the statements ... and affirmatively disputed those statements.' We disagree.

``In context, the sentence denotes no more than an assessment contrast between Marken and A.M. Best Company.

``Appellant further claims actual malice by Wells because Debber, in his first draft, captioned his article `Cal Comp All Fucked Up,' which showed his bias, a fact known to Wells. We disagree.

``As Debber explained in his declaration, this first draft was shown to only a few intimates who, Debber believed, would be amused by the profane and, he hoped, humorous caption.''

Debber authored the article about a dispute between Cal Comp and its independent accounting firm over the adequacy of the insurer's reserves, and a subsequent investigation of the firm by the California Department of Insurance.

In its ruling last week, the appellate court found that:

1) California Compensation, as a major workers' compensation

insurance company, met the standard of a ``limited public

figure'' and was, therefore, a legitimate subject for the

article;

2) the standard of malice was not met; and

3) the facts as reported were correct.

``What this means is that a powerful corporate officer with deep corporate pockets cannot win when he uses those assets in a personal vendetta against a journalist or a publication in order to squelch honest, though unpleasant, reporting of the facts,'' said Debber.

The officer -- then Cal Comp President Marken -- was a primary instigator of the suit. The suit was continued by current President Maury Costa.

In stating the reasons for its findings, the court explained: ``In early 1991, a significant disagreement developed between Cal Comp and its independent accountant, Coopers & Lybrand, over the adequacy of Cal Comp's reserves. On May 10, 1991, Cal Comp fired Coopers & Lybrand. On May 16, 1991, Cal Comp filed an `8-K' form with the Securities and Exchange Commission disclosing the disagreement with and the firing of Coopers & Lybrand. Cal Comp did not report these events to the California Department of Insurance.

``On June 10, 1991, an article in Accounting Today described the disagreement and firing.

``On July 8, 1991, Insurance Journal published an article about Cal Comp, its firing of Coopers & Lybrand and the resulting review of Cal Comp by the Department of Insurance. The article was written by J. Dale Debber, president of Data Control Corporation and a frequent contributor to Insurance Journal.''

``I felt a personal duty to report on a significant problem in a company that's a key player in the industry,'' Debber explained.

The court also dismissed claims of inaccuracy regarding the fired auditor's advice to the carrier that it would need to increase its loss reserves by some $41 million. It also supported Debber's reliance on an official source at the Department of Insurance regarding the subsequent investigation.

``We're delighted and relieved by this outcome,'' said Debber. ``Ultimately, the truth will and did prevail. It's been four years of hell, but the good guys won.''

Data Control Corp., based in Grass Valley, is a provider of on-line insurance industry databases. Debber is also publisher of The Workers' Comp Executive and The Cal-OSHA Reporter.

CONTACT: Data Control Corp., Grass Valley

Dale Debber, 916/477-4000

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