Catholic Mut. Relief Soc. v. Superior Court

• Decision Date: 27 August 2007
• Docket Number: No. S134545.,S134545.
• Citation: 42 Cal.4th 358,64 Cal.Rptr.3d 434,165 P.3d 154
• Court: California Supreme Court
• Parties: CATHOLIC MUTUAL RELIEF SOCIETY et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent, Roman Catholic Archdiocese of San Diego et al., Real Parties in Interest.

64 Cal.Rptr.3d 434

42 Cal.4th 358

165 P.3d 154

CATHOLIC MUTUAL RELIEF SOCIETY et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent Roman Catholic Archdiocese of San Diego et al., Real Parties in Interest.

No. S134545.

Supreme Court of California.

August 27, 2007.

Borton, Petrini & Conron, Rocky K. Copley, Jonathan P. Geen and Paul Kissel, San Diego, for Petitioners.

Hancock Rothert & Bunshoft, Paul J. Killion, Heidi H. Frenzel, Kathryn C. Ashton and Allegra A. Jones, San Francisco, for Certain Underwriters at Lloyd's, London

and Certain London Market Insurance and Reinsurance Companies as Amici Curiae on behalf of Petitioners.

No appearance for Respondent.

Kiesel Boucher & Larson, Raymond P. Boucher, Patrick DeBlase, Beverly Hills, and Anthony M. DeMarco, for Real Parties in Interest.

BAXTER, J.

INTRODUCTION

In this case we must determine whether Code of Civil Procedure section 2017.210,¹ the statutory provision authorizing limited discovery of a defendant's insurance coverage information, authorizes pretrial discovery of a nonparty liability insurer's reinsurance agreements for purposes of facilitating settlement of an underlying tort action. We conclude that it does not.

As will further be explained, there may be unusual circumstances in which a reinsurance agreement is functioning 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 (e.g., coverage action between liability insurer and its reinsurer). In such instances, discovery of such agreements would be appropriate. In this matter, however, there is no evidence that any reinsurance agreements for which pretrial discovery was being sought fall within those narrow exceptions.

The judgment of the Court of Appeal, which interpreted section 2017.210 consistently with the views expressed herein, shall accordingly be affirmed.

FACTS AND PROCEDURAL BACKGROUND

The Roman Catholic Archdiocese of San Diego is the principal defendant in an action brought by approximately 140 persons (plaintiffs) for alleged childhood abuse by certain priests. Those cases, along with others involving the San Bernardino Archdiocese, are known collectively as Clergy Cases II, and were coordinated within the Los Angeles County Superior Court with claims against dioceses from other parts of California.

In September 2003, pursuant to a stipulated order regarding settlement and mediation proceedings, the trial court issued an initial case management order which, among other things, directed the Roman Catholic Archdiocese of San Diego (Church) to turn over copies of all insurance policies that might provide coverage for plaintiffs' claims. Petitioner Catholic Mutual Relief Society is a nonprofit 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 Mutual Relief Society is not an insurance company, but its wholly owned subsidiary, petitioner Catholic Relief Insurance Company of America, is the Church's liability insurer.²

In compliance with the case management order, the Church produced copies of its liability insurance policies issued by petitioners. Plaintiffs contended this information was insufficient. According to plaintiffs, they also need to know whether petitioners were financially sound enough to cover their policy obligations. In April 2004, in an attempt to resolve the matter informally, the trial court allowed plaintiffs to serve on petitioners a series of "interrogatories" aimed at obtaining the desired information.³ Petitioners objected to those questions on grounds that (1) the questions sought information concerning their financial condition, reserves, and reinsurance agreements, none of which was relevant for discovery purposes or was otherwise nondiscoverable; (2) that much of the material sought was privileged; (3) that the requests were overbroad and ambiguous; and (4) that the trial court lacked authority to require interrogatory responses from nonparty insurers.

On May 6, 2004, the settlement judge issued an order permitting plaintiffs to serve deposition subpoenas on petitioners in an attempt to secure the information requested by plaintiffs'"interrogatories." The subpoenas sought broad categories of financial documents, including a request for all writings reflecting the total amount of funds available from reinsurance "to satisfy any defense expenses or indemnify losses in connection with sexual abuse claims against the [Church]."⁴

Petitioners moved to quash the subpoenas, arguing that to the extent the document requests sought information about the overall strength of petitioners' financial condition, they were not reasonably calculated to lead to the discovery of admissible evidence and were therefore beyond the permissible scope of discovery. The settlement judge denied the motions to quash, finding that the subpoena requests—aimed at determining whether petitioners were financially able to pay any judgment that might be entered against their insured—were "clearly relevant and discoverable" to inform and facilitate settlement.

Petitioners sought a writ of mandate from the Court of Appeal to vacate the settlement judge's order. The Court of Appeal granted relief, concluding the documents and information sought were not discoverable under either the general statutory discovery provision (§ 2017.010) or the specific provision authorizing limited discovery of insurance information as a matter of right (§ 2017.210). The court found that "section [2017.210] was intended to reach only a defendant's [direct] insurer, not that insurer's reinsurance agreements."⁵

We granted review of the issue framed by plaintiffs as follows: "Whether the long-standing California rule that `has permitted ' discovery of the existence and extent of liability insurance' (Laddon v. Superior Court (1959) 167 Cal.App.2d 391, 394-395) allows discovery of reinsurance information that is critical to determine the `nature and limits' of coverage that may be available to satisfy a judgment as set forth in California Code of Civil Procedure section [2017.210]."

DISCUSSION

Plaintiffs sought broad pretrial discovery of financial information regarding the assets and overall financial health of petitioners' insurance operations. Petitioners are not parties to the consolidated actions below. The information requested included total funds and reserves available to settle claims, satisfy judgments, and indemnify defense expenses in connection with sexual abuse claims brought against the Catholic Church and its numerous dioceses nationwide. The information was sought for the exclusive purpose of informing and facilitating pretrial settlement of the 140 such claims brought against the Roman Catholic Archdiocese of San Diego in the consolidated litigation.

In this state pretrial discovery in a civil action is governed by the Civil Discovery Act. (Code of Civ. Proc., § 2016.010 et seq. (former § 2016 et seq.).) 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. (§ 2017.010.) The Court of Appeal concluded none of the broad financial information sought from these nonparty insurers⁶ in connection with potential settlement of the underlying sexual abuse claims was relevant or discoverable on a showing of good cause under section 2017.010. Plaintiffs have not challenged that aspect of the Court of Appeal's holding on review. Instead, plaintiffs sought review only of the specific question whether section 2017.210, which authorizes limited discovery of a defendant's liability insurance coverage as a matter of right, likewise authorizes discovery of the nonparty liability insurer's reinsurance agreements, assertedly for purposes of facilitating pretrial settlement of underlying tort claims.

Evidence of a tort defendant's liability insurance is generally unrelated to a party's claims or defenses at trial; hence the common law rule has long been that such insurance coverage evidence is inadmissible at trial. (Laddon v. Superior Court (1959) 167 Cal.App.2d 391, 396, 334 P.2d 638 (Laddon); Fettle v. Superior Court (1960) 178 Cal.App.2d 680, 690, 3 Cal. Rptr. 267 (Pettie).) The rule is codified in Evidence Code section 1155, which provides that "[e]vidence that a person was, at the time a harm was suffered by another, insured wholly or partially against loss arising from liability for that harm is inadmissible to prove negligence or other wrongdoing."

Section 2017.210 nonetheless creates a statutory exception that allows limited discovery of a defendant's liability insurance coverage as a matter of right; that is to say, without the need for a threshold showing of relevancy and admissibility as is required under the general discovery statute, section 2017.010. Under section 2017.210, a party is entitled to discover 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. This discovery may include the identity of the carrier and the nature and limits of the coverage. A party may also obtain discovery as to whether that insurance carrier is disputing the agreement's coverage of the claim involved in the action, but not as to the nature and substance of that dispute."

Plaintiffs argue that the plain language of section 2017.210 authorizes discovery of reinsurance agreements. They point out that the section specifically permits discovery of "any agreement under which any insurance carrier" may be liable to satisfy a judgment "or to indemnify or reimburse for payments...