Calif. High Court Rules Discovery Does Not Apply to Reinsurance Documents

By | August 29, 2007

The California Supreme Court has ruled that a statute authorizing limited discovery of a defendant’s insurance coverage does not include authorization to look into reinsurance agreements as part of facilitating a pretrial settlement.

In Catholic Mutual Relief Society et al. v. The Superior Court of Los Angeles County, 140 people alleged they had suffered childhood abuse by certain priests in the Roman Catholic Archdiocese of San Diego. In September 2003, as part of an order regarding settlement and mediation proceedings, the trial court issued an initial case management order that, among other things, directed the church to turn over copies of all of its insurance policies that might provide coverage for the plaintiffs’ claims. The church turned over copies of its liability insurance policies, but the plaintiffs contended that the information was insufficient. They said they also needed to know whether the church was financially sound enough to cover their policy obligations.

The trial court allowed the plaintiffs to serve a series of “interrogatories” aimed at obtaining the desired information, according to court documents. But the petitioners objected, noting that “information concerning their financial condition, reserves and reinsurance agreements were not relevant for discovery purposes” and that much of the material was “privileged.”

The court allowed the plaintiffs to serve deposition subpoenas on the petitioners to secure the requested information. And the church moved to quash the subpoenas on the grounds that the documents requested “were not reasonably calculated to lead to discovery of admissible evidence and were therefore beyond the permissible scope of discovery.”

The state high court agreed with the Court of Appeals and the church that the law authorizing discovery does not apply to reinsurance agreements, it is intended only to reach a defendant’s direct insurance agreements.

“As a general matter, information is discoverable if it is relevant to the subject matter of an action and, additionally, is either admissible in evidence or reasonably calculated to lead to the discovery of admissible evidence. In contrast to liability insurance, [a] contract of reinsurance is one by which an insurer procures a third person to insure him against loss or liability by reason of such original insurance. A reinsurance is presumed to be a contract of indemnity against liability, and not merely against damage. Because a contract of reinsurance is defined by statute as a contract of indemnity made for the benefit of the liability insurer, as a general matter it has no relevance in an underlying tort action brought against an insured under the policy of liability insurance,” the court wrote.

The Supreme Court remanded the case for further proceedings that are consistent with its views.

To view the entire decision, visit http://www.courtinfo.ca.gov/opinions/documents/S134545.PDF.

Source: California Courts

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