Metropolitan News-Enterprise


Tuesday, April 26, 2005


Page 1


Lichtman Ruling on Priest-Abuse Insurer Discovery Overturned

Subpoenas for Information About Financial Condition Should Have Been Quashed, C.A. Says


By DAVID WATSON, Staff Writer


Los Angeles Superior Court Judge Peter Lichtman should have blocked efforts by plaintiffs claiming child sex abuse by San Diego priests to inquire into the financial condition of an insurer for the Archdiocese of San Diego, this district’s Court of Appeal ruled yesterday.

Justice Lawrence D. Rubin of Div. Eight said Lichtman, serving as a settlement judge in coordinated proceedings involving claims child abuse claim against dioceses across the state, erred in denying a motion by the Catholic Mutual Relief Society to quash deposition subpoenas seeking documents.

“Although ‘fishing expeditions’ are sometimes allowed by the discovery rules, there are limits on the catch,” Rubin wrote. “[W]hile a rod and reel may be permitted, gill nets are not.”

CMRS is a is a non-profit corporation that administers a self-insurance fund for more than three hundred archdioceses and other Catholic Church entities in the United States and Canada, including the San Diego Archdiocese. The Catholic Relief Insurance Company of America, a subsidiary wholly owned by CMRS, insured the archdiocese.

The sex abuse plaintiffs sought documentation showing what funds were available under the insurance plan to fund a settlement, what other claims existed against those funds, what other payments for similar claims had been made in the last five years, what reserves had been set aside to pay future claims, and any reinsurance arrangements which might provide additional coverage.

Lichtman denied the CMRS’ motion to quash the subpoenas last year, relying on court decisions holding that information which may facilitate settlement is discoverable. Yesterday the Court of Appeal granted the corporation writ relief.

Discovery Statute

Rubin said information about an insurer’s financial condition is not either “itself admissible in evidence or...reasonably calculated to lead to the discovery of admissible evidence” within the meaning of those phrases as they are used in Code of Civil Procedure Sec. 2017, which sets forth the general scope of discovery. He pointed out that while Sec. 2017(b) makes the identity of an insurer and the limits of its coverage discoverable, the financial condition even of a defendant is not admissible at trial except where relevant to a claim for punitive damages.

The language of Sec. 2017(b) is clear and unambiguous, Rubin said; even if case law prior to its enactment could be read as authorizing broader discovery, such case law was superseded when that section was enacted in 1986, he explained.

“We therefore hold that section 2017(b) does not authorize the discovery of information related to the financial condition of a defendant’s non-party insurer,” the justice declared.

The justice rejected the plaintiffs’ contention that information about reinsurance agreements, at least, is discoverable under the language of Sec. 2017(b), which authorizes discovery of “any agreement under which any insurance carrier” may be liable to satisfy or reimburse a judgment.

Federal Cases

Rubin conceded that two federal district court cases found the former rule of the Federal Rules of Civil Procedure upon which Sec. 2017(b) was based to be applicable to reinsurance, but he said “both statements appear to be dicta and are best viewed skeptically.”

The justice continued:

“Neither case concerned the issue before us: whether the statutory provision permitting discovery of insurance coverage information applied for settlement purposes only to reinsurance information from a non-party insurer.”

Rubin also acknowledged that the California Supreme Court, in Greyhound Corp. v. Superior Court (1961) 56 Cal.2d 355, said that one purpose of the discovery statutes is to “educate the parties in advance of trial as to the real value of their claims and defenses, thereby encouraging settlements.”

He commented:

“Other courts and some commentators have apparently chosen to shorthand Greyhound’s holding, stating that one purpose of discovery was to ‘facilitate settlements,’ but without mention of Greyhound’s qualifying language concerning educating the parties about their claims and defenses in order to encourage settlement....Other courts interpreting discovery statutes similar to ours have rejected attempts to discover the financial condition of a defendant’s liability insurer in order to facilitate settlement.”

Rubin said Lipton v. Superior Court (1996) 48 Cal.App.4th 1599, is the “only reported California decision to allow the discovery of an insurer’s reinsurance information.” He explained:

“In that case, the discovery was allowed because the insurer was the defendant in a bad faith action and the information was relevant to the issues in the case. Discovery was limited to only unprivileged communications between the insurer and reinsurer concerning coverage issues and potential liability.”

The court in Lipton, he noted, relied on the general relevancy test of Sec. 2017(a), not the provisions of Sec. 2017(b).

“At bottom,” Rubin said, “the information plaintiffs seek is simply far too remote from the subject matter of this action to be relevant....Nor, we fear, would allowing this discovery mark the end of plaintiffs’ financial information forays....If plaintiffs obtained the reinsurance information, do they next intend to subpoena documents from the reinsurers concerning their own financial condition? While we do not know the answer, the question illuminates the hazards of extending the concept of relevancy as far as plaintiffs wish it to go.”

In a footnote, the justice added:

“Crafting a broad new rule that would permit discovery on a showing that it would facilitate settlement seems ill advised. For example, undoubtedly inquiry into the financial health of any defendant or a defendant’s insurance company would be useful to a plaintiff in formulating settlement strategy. Conversely, as defendants here argue..., many defendants would certainly find discovery of a plaintiff’s or its attorney’s financial well being helpful to shaping settlement strategy. In any event, given the Legislature’s role in enacting discovery statutes, if such a rule is to be created, changes of this nature should come from that body.”

Justice Madeleine Flier and Presiding Justice Candace Cooper concurred.

The case is Catholic Mutual Relief Society v. Superior Court (Roman Catholic Archdiocese of San Diego), 05 S.O.S. 2022.


Copyright 2005, Metropolitan News Company