CALIFORNIA SUPREME COURT HOLDS THAT EVIDENCE REGARDING REINSURANCE AGREEMENTS IS NOT DISCOVERABLE

In Catholic Mutual Relief Society v. Superior Court (S134545) (to see the opinion filed August 27, 2007, click here), the plaintiffs suing the Roman Catholic Archdiocese of San Diego for alleged childhood abuse secured an order compelling discovery of reinsurance agreements covering the potential liability of the Archdiocese's primary liability insurer, the Catholic Mutual Relief Society. The plaintiffs contended that such discovery was authorized by Code of Civil Procedure section 2017.210, and was necessary to facilitate settlement of the underlying tort action.

(Code of Civil Procedure section 2017.210 allows litigants to secure pre-trial discovery of "the existence and contents of any agreement under which any insurance carrier may be liable to satisfy in whole or in part a judgment that may be entered in the action or to indemnify or reimburse for payments made to satisfy the judgment.")

In a 4-3 split decision, the California Supreme Court held that section 2017.210 does not apply to reinsurance agreements, which are ordinarily not discoverable in a tort action against an insured defendant. The majority held the statute was ambiguous, and the Legislative history indicated that it authorized discovery only regarding the existence and terms of the primary liability policy potentially covering the defendant's tort liability and whether the primary carrier contested coverage. The majority also explained that section 2017.210 does not authorize plaintiffs to discover "the assets of the insurance companies" providing primary liability insurance, including those companies' reinsurance and capital reserves.

Three justices dissented on the ground that, in their view, section 2017.210 was not ambiguous and was worded broadly enough to authorize discovery of reinsurance policies. However, the dissenting justices agreed that "section 2017.210 does not 'authorize broad discovery of the financial health of the liability insurer or its ability to meet its contractual obligations under its policies.'"

For additional information, contact H. Thomas Watson at (818) 995-0800 or htwatson@horvitzlevy.com.

www.horvitzlevy.com

If you do not wish to continue to receive these informational bulletins, please e-mail
jpaul@horvitzlevy.com with a subject line "UNSUBSCRIBE."