Cal Supremes Forbid Discovery of Reinsurance Information to Assist Settlement Efforts in Clergy Abuse Cases

Business Insurance reported yesterday that the California Supreme Court has Shield[ed] Reinsurance Details in Abuse Case.  As B.I. wrote,

In Catholic Mutual Relief Society et al. vs. The Superior Court . . . , victims sought to learn whether the nonprofit entity, which administers self-insurance funds for more than 300 archdioceses and other Roman Catholic entities in the United States and Canada, could meet its policy obligation should they enter into a settlement with the Archdiocese of San Diego.

In 2004, a Los Angeles County trial court judge said the victims could seek reinsurance information . . . A state Court of Appeal . . . rul[ed] that California law authorizing limited discovery of a defendant’s insurance coverage does not authorize pretrial discovery of reinsurance agreements with a “nonparty” liability insurer.

On Monday, the California Supreme Court agreed. It found that discovery of reinsurance is allowed when a reinsurer’s policy functions “in the same way as a liability policy (fronting arrangement), or where the reinsurance agreement is itself the subject matter of the litigation at hand.”

I’d just been musing on this issue (really! — listen, only nerds blog) because I think attorneys should use discovery as much as possible to settle litigation as to try it.

Conducting Discovery to Settle the Case

I’m just back from vacation so I haven’t yet read this Supreme Court opinion.  I have, however, fought the reinsurance issue more times than I care to remember.  I also once sought to discover the extent of a privately owned corporation’s ability to pay a sizable judgment only to be thwarted by the rule that discovery must be relevant to the subject matter of the action (etc.)

Still, I recommend that counsel find creative ways to learn facts that will assist them in settling the case during depositions (where “background” questions receive less scrutiny than interrogatories).

What information pertinent to settlement is useful to obtain other than the ability to fund an award?  Plenty! but since I’m still on Hawaiian time and in an Hawaiian mind, I’ll provide only a few — let your own imagination make far longer lists than the following.

  1. The identity of those making the settlement decision is question number one, not only to assure that you have the proper parties at your first settlement conference, but also because — as McElhaney recently suggested — you want to “hip” corporate deciders to some of the dangers of proceeding that the company’s attorneys might not have mentioned (or couldn’t stress strongly enough).
  2. Where the corporate entity is split into operating divisions, which division is going to take the “hit” if the case settles.
  3. Whether there are any corporate acquisitions or mergers on the horizon — or any major upheavals in management — that might suggest that the executive team green-lighting the litigation is on its way out and less litigation-friendly management about to come on the scene.
  4. Whether other litigation on this same issue, product, financial practice, etc. is pending, making the possibility of bad precedent an issue for any eventual settlement “team.”

How can you obtain answers to these questions during a deposition when none of them are relevant to the subject matter of the action or likely to lead to the discovery of admissible evidence?  The same way you do everything else in your legal practice — with chutzpah, imagination, creativity, preparation and sheer good luck.

I’d innocently sprinkle most of these questions into the background portion of the deposition when opposing counsel is generally less attentive than during “substantive” questioning.  You can also get away with “it’s just background, counsel” when s/he begins to awake with his/her morning latte.  If it’s a big case with less experienced attorneys assigned to less important depositions, I’d first ask these questions of low level corporate representatives who might be, shall we say, under-represented.

Then there’s always simple dumb luck.  When I was a first year taking one of my first depositions, opposing counsel fell asleep after lunch!  He was snoring while his client innocently waited for me to continue questioning him as if this were a normal event!

I genuinely didn’t know what to do. Could I legitimately and ethically continue to question my opponent’s client in his “absence”?  I suppose a more experienced or aggressive attorney might have done so.  But because it just didn’t seem right to me, I woke him up before continuing with my line of questioning.

Some defenders, however, might just as well be asleep.  As I teach my NITA students, you can do that which you can (ethically) get away with in a deposition.  And that is quite a lot if you are a skillful poker player who doesn’t let on that the questions you’re asking might be strategically beneficial even though entirely irrelevant to the substance of the litigation.

It’s the beginning of a new “school” year.  Go get ’em!

                        author

Victoria Pynchon

Attorney-mediator Victoria Pynchon is a panelist with ADR Services, Inc. Ms. Pynchon was awarded her LL.M Degree in Dispute Resolution from the Straus Institute in May of 2006, after 25 years of complex commercial litigation practice, with sub-specialties in intellectual property, securities fraud, antitrust, insurance coverage, consumer class actions and all… MORE >

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