Discovery

Odyssey Reinsurance Company (“Odyssey”) has obtained an order compelling John Scannell to produce subpoenaed documents related to Odyssey’s efforts to collect a $3.2 million judgment rendered against Richard and Diane Nagby. The judgment stems from a reinsurance contract between Odyssey and Cal-Regent Insurance Services. We previously wrote about this dispute here.

Scannell objected that the documents were protected by California’s taxpayer privilege. California courts have determined the state’s taxation statutes provide the privilege “to encourage the voluntary filing of tax returns and truthful reporting of income,” thereby facilitating tax collection. The privilege may be overcome where it is intentionally waived, the gravamen of the lawsuit is inconsistent with the privilege, or by a public policy “greater than that of the confidentiality of tax returns.”

The court found the privilege was overcome in this matter, which it described as an effort by Odyssey “to recover that money from sources that it contends have actively endeavored to thwart collection efforts.” As such, the Nagby’s privacy concerns “shrink in the shadow of the public policy subversion” that would result if their effort to hide behind the privilege were successful.

In addition, the court determined that Scannell had waived any objection to the subpoena under Federal Rule of Civil Procedure 45 by failing to raise it within 14 days of service of the subpoena. The waiver may be overcome by demonstrating that the failure to assert the objection was due to unusual circumstances and a good cause, but Scannell could not meet either requirement. Odyssey Reinsurance Co. v. Nagby, Case No. 16-CV-3038-BTM (USDC S.D. Cal. March 29, 2018).

This post written by Benjamin E. Stearns.

See our disclaimer.

Defendants wanted to examine GEICO’s Rule 30(b)(6) witness about GEICO’s special investigation unit practices, protocols and guidelines, as well as its resources and procedures devoted to claim verification and fraud detection, as GEICO’s complaint alleged the defendants engaged in insurance fraud. The Court allowed few topics to proceed.

Rule 30(b)(6) depositions are intended to discover the facts and it is improper to use them in order to “ascertain how a party intends to marshal the facts and support its legal theories.” The topics that required GEICO to marshal the evidence GEICO believes constitutes or supports any potential defense to the Complaint were not allowed, nor were topics unrelated to the defendants’ claims or issues in the case.

GEICO also moved to quash two non-party subpoenas it believed was a “back-door attempt by defendants to improperly seek information that was previously requested in counsel’s Fed.R.Civ.P. 30(b)(6) Notice.” GEICO stated the non-parties had no involvement in investigating the insurance claims at issue and the Court agreed, finding the subpoenas to be harassing and unwarranted, granting the motion to quash.

Gov’t Employees Ins. Co. v. Lenex Services, Inc., et al., 16-cv-6030 (USDC EDNY Mar. 16, 2018)

This post written by Nora A. Valenza-Frost.

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On November 15, 2017, we reported  on two class actions alleging that the “EquityComp” workers’ compensation insurance program marketed and sold by Applied Underwriters (“defendants”) violated California insurance law and regulations.  The class actions had been consolidated for pre-trial purposes.  Defendants recently moved for a protective order and sought protection from discovery on a host of interrogatories and requests for production.  The Eastern District of California granted the motion in part and denied it in part on the following grounds, largely rejecting defendants’ bid for protection against the discovery.

First, the court held plaintiffs were entitled to pre-certification discovery regarding absent class members, including personal and contact information. It noted that disclosure of putative class members’ information is “common practice” in this context and concluded defendants had failed to show any specific prejudice or harm associated with such production.

Second, the court described as “moot” a dispute over whether plaintiffs were entitled to documents regarding the SolutionOne program—different than the EquityComp program which the original plaintiffs participated in—because an amended complaint added a new plaintiff who did participate in the SolutionOne program. Even if it were not moot, the court said, defendants would not be entitled to protective order because they failed to allege more than a general “burden” to justify prevention.

Third, the court granted the protective order regarding plaintiffs’ request for defendants’ communications with non-California state regulators.  It concluded the requests were disproportionate where there was at most “slight” relevance because of the wide variety in state insurance regulatory regimes and the lack of a “specific factual basis” for believing the non-California communications would be relevant to defendants’ compliance with California law.

Fourth, the court ordered production regarding the submission of a Reinsurance Participation Agreement to the California Department of Insurance for approval because such information is relevant and because defendants did not satisfy their burden of showing harm or prejudice.

Fifth, the court rejected defendants’ request for a protective order regarding recently requested segregated “cell” accounts because there is a year left before the close of discovery, so defendants would not be harmed by the recent timing of the request.

Finally, the court allowed discovery of defendants’ total revenues related to the EquityComp program because it was relevant to plaintiffs’ central argument that defendants’ unfair and fraudulent business practices allowed them to “make hundreds of millions of dollars.” Nor, the court found, did defendants show harm from divulging their revenues.

Shasta Linen Supply, Inc. v. Applied Underwriters Inc., Case No. 16-158 (E.D. Cal. Jan. 12, 2018).

This post written by Thaddeus Ewald .
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In a breach of contract and bad faith case emanating from an insurer’s refusal to settle an underlying case within policy limits, the insurer was unsuccessful in its attempt to protect documents from discovery by assertion of a “mediation privilege” and another set of documents related to reinsurance information via a relevancy objection. The court ruled that the documents did not qualify as “mediation documents” because the insurer was not a party to the underlying litigation, which was a “requirement under the plain meaning of the definition of ‘mediation document.’” The documents also did not qualify as “mediation communications” because they involved statements “made by a person present at the mediation outside the mediation session.” As such, in order to qualify, the communications must have either been made by the mediator, or to the mediator. They were not. Another set of documents containing statements “which were made by a person who may have been present at the mediation session to someone (not the mediator) outside the mediation session” also did not qualify for protection.

With regard to the reinsurance documents, the court stated that there is “no absolute exclusion of reinsurance information.” Rather, discovery of such information may be allowed in the context of claims for bad faith involving an insurer’s failure to settle in order to “equalize the knowledge of both parties and give the plaintiff ‘assurance that there can be recovery in the event of a favorable verdict to justify the time, effort and expense of preparing for trial.’” The fact that such information may be discoverable, however, does not guarantee that it will be admissible at trial.

Subsequent to the ruling described above, the court denied a motion for reconsideration, finding that it had not committed an error of law. The court “reiterate[d] that it considers the mediation privilege a very important privilege in jurisprudence; however, for the Court to stretch the mediation privilege beyond its plain meaning and ambit of protection, in fact, would undercut the privilege itself and exceed this Court’s power and authority.” Golon, Inc. v. Selective Ins. Co. of the Southeast, Case No. 17-cv-0819 (W.D. Pa. Dec. 7, 2017 and Dec. 14, 2017).

This post written by Benjamin E. Stearns.
See our disclaimer.