Connecticut Indem. Co. v. Superior Court

Decision Date12 July 1999
Docket NumberNos. C027794,C027795,s. C027794
Citation73 Cal.App.4th 540,86 Cal.Rptr.2d 515
CourtCalifornia Court of Appeals Court of Appeals
PartiesPreviously published at 73 Cal.App.4th 540 73 Cal.App.4th 540, 99 Cal. Daily Op. Serv. 5567, 1999 Daily Journal D.A.R. 7065 CONNECTICUT INDEMNITY COMPANY et al., Petitioners, v. SUPERIOR COURT of San Joaquin County, Respondent; City of Lodi, Real Party in Interest. Maryland Casualty Company et al., Petitioners, v. Superior Court of San Joaquin County, Respondent; City of Lodi, Real Party in Interest.

Archer, McComas, Breslin, McMahon & Chritton, W. Eric Blumhardt, Sean D. White, Walnut Creek, for Petitioner Connecticut Indemnity Company.

Sinnott, Dito, Moura & Puebla, Randolph P. Sinnott, James M. Ratzer, Kathleen Hurly, Los Angeles, for Petitioner LMI Insurance Company.

Wiley, Rein & Fielding, Thomas W. Brunner, Daniel E. Troy, C. Russell Clause; Kroloff, Belcher, Smart, Perry & Christopherson, Thomas O. Perry, Stockton; O'Connor, Cohn, Dillon and Barr, Holly S. Burgess, Ranch Cordova, for Petitioners Maryland Casualty Company, Maryland Insurance Group, and Northern Insurance Company of New York.

Rivkin, Radler & Kremer, Donald T. McMillan, George J. Keller, Santa Rosa, for Petitioner Fireman's Fund Insurance Company.

Bien & Summers, Elliot L. Bien, for Insurance Environmental Litigation Association as Amicus Curiae on behalf of Petitioners.

No appearance for Respondent.

Randall A. Hays, City Attorney; Envision Law Group, Michael C. Donovan, Assistant City Attorney; Zevnik, Horton, Guibord, McGovern, Palmer & Fognani, John R. Till, Adam Babich, Deputy City Attorneys, for Real Party in Interest.


In this consolidated matter several insurance companies (the Insurers) seek writs of mandate to compel the Superior Court of San Joaquin County to quash administrative subpoenas duces tecum issued by the City of Lodi (Lodi) under Government Code section 37104 1 or to grant protective orders limiting the documents which they may compelled to produce. We issued alternative writs of mandate upon direction from the Supreme Court.

Lodi is charged with the responsibility for cleaning up a contaminated groundwater site within the city by prosecuting enforcement actions against the other potentially responsible parties (PRPs) or by doing the cleanup itself and seeking reimbursement. It served notices on the PRPs asserting it would sue them if settlement was not reached.

Lodi seeks the Insurers' entire files on the PRPs, their insureds, pursuant to a resolution by the Lodi City Council (the City Council) authorizing inter alia an investigation into potential financial mechanisms to fund the cleanup. The Insurers contend the subpoenas should be quashed as an unlawful device to obtain prelitigation discovery or, in the alternative, they should be granted protective orders limiting the scope of the subpoenas to production that could be compelled in discovery if the litigation had already commenced.

The Insurers' core claim is grounded on the privacy interest of their insureds. Property and privacy are deeply intertwined; the law recognizes a legally protected interest in keeping financial information private. The use of the power of government to compel the production of financial information requires a legally recognized justification. The justification is then weighed against the privacy interest and if found sufficient will warrant the compelled production under appropriate safeguards to minimize the scope of intrusion and disclosure.

In the case of a novel claim of justification the court must exercise discretion to perform this weighing and balancing task. As with every exercise of discretion the court must attend to the analogies and examples of existing law. To the extent the claimed justification implicates a policy embedded in the existing law, the policy constrains the exercise of discretion.

In this case Lodi seeks a particular kind of financial information: the nature and extent of potential liability insurance coverage of the insureds. The justification that Lodi tenders is its interest as a prospective litigant in assessing the ability of potential defendants to respond in damages if it is successful in obtaining a judgment against them.

As we will show, there are several pertinent rules of law. The most important is the Legislature has limited the insurance information which may be obtained by a litigant. As a litigant a city has no greater right to obtain information by means of its subpoena power than it would have if it were employing the judicial subpoena power. Hence, a city is entitled, at most, to what it would receive in litigation--the insurance discovery allowed by Code of Civil Procedure section 2017, subdivision (b).

The remaining question is whether this information should be made available to Lodi as a prospective litigant. The subpoena power asserted by Lodi may be enforced by the sanction of contempt. (§ 37109.) This poses the danger of one prospective litigant sitting in judgment on another with potential criminal sanctions, requiring as a practical matter court supervision, i.e., litigation in any event. In view of this consideration and that all Lodi can obtain is what they could obtain in litigation, we conclude a city's interest in disclosure, as a prospective litigant, does not overcome the privacy interests of prospective defendants.

We will issue a writ directing the trial court to render a judgment declaring that Lodi has no right to employ its subpoena power to obtain the demanded insurance information.


In 1994, the California Department of Toxic Substances Control (DTSC) began an investigation into the responsibility of Lodi and three PRPs for a contaminated groundwater site in Lodi. The three PRPs are a printing business named Lustre-Cal Nameplate Corporation, and two dry cleaners--Guild Cleaners and Busy Bee Cleaners. Discussions between DTSC, Lodi and the PRPs continued through late 1996.

In January 1997, the City Council adopted Resolution No. 97-09. It establishes a legislative proceeding to investigate the adequacy of existing environmental legislation, to craft legislative measures and to investigate potential financial mechanisms to abate the contamination. 2 In May 1997, DTSC and Lodi announced they had entered into a "Comprehensive Joint Cooperative Agreement" (Agreement). Under the Agreement, Lodi and DTSC apparently resolved Lodi's liability as a PRP; Lodi promised to pay the DTSC $1 million for preliminary cleanup assessment, and the DTSC appointed Lodi as the lead cleanup agency for the contaminated site. Pursuant to the Agreement, Lodi promised to start the actual cleanup within 24 months, by prosecuting enforcement actions against the other PRPs or by doing the cleanup itself and seeking reimbursement.

Around the time of the Agreement, Lodi served subpoenas on the known liability insurers of the PRPs, the Insurers. Lodi conceded that "[s]ubject to valid claims of privilege or immunity, ... City Council is essentially seeking [through the subpoenas] the [insurers'] entire files on the policyholders at issue." 3 Lodi asserts it wants to determine the existence and terms of liability policies insuring the PRPs during the entire time they have been in business. Some of them have been in business for several decades. Lodi refers to this inquiry as "insurance archeology."

On May 30, 1997, several of the Insurers, collectively referred to as Maryland Insurance, moved for protective orders or to quash the subpoenas on the grounds, inter alia, the subpoenas sought premature prelitigation discovery prohibited under Code of Civil Procedure section 2017, and sought documents protected by constitutional or statutory protections of the right of privacy (e.g., Ins.Code, § 791), the attorney client privilege, or the attorney work product privilege.

In June 1997, Lodi sent Notices of Endangerment to the PRPs. They assert that Lodi would sue the PRPs if settlement was not reached. Enclosed with the notices were offers to settle for the limits of their liability insurance policies.

On July 16, 1997, and July 22, 1997, some of the Insurers, collectively Connecticut Indemnity, filed motions to quash or for protective orders pertaining to other subpoenas on grounds similar to those asserted in the Maryland Insurance motions.

On July 22, 1997, the Maryland Insurance motions to quash or for protective orders came on for hearing. At the conclusion of the hearing the superior court said the motions to quash were denied and the protective orders would not be granted and directed Lodi to prepare a formal order.

On August 29, 1997, the superior court entered an order declaring that Lodi has a serious groundwater contamination problem, it can exercise legislative and regulatory power to deal with the problem, and the Maryland Insurance motions were denied based on the briefs and arguments of the parties, but that enforcement of the subpoenas would be stayed pending completion of anticipated extraordinary writ proceedings in the court of appeal by Maryland Insurance.

On September 10, 1997, the Connecticut Indemnity motions came on for hearing. At the outset of the hearing, the superior court said that Lodi requested clarification of the stay provisions of the Maryland Insurance order. The superior court then made the following remarks concerning the Maryland Insurance order.

The parties had challenged the process by which the subpoenas were issued as inappropriate and the court had rejected these arguments. That ruling would now be the subject of writ proceedings in the court of appeal and thereafter the court would consider a number of different objections to specific areas of inquiry. In the interim the stay would be in effect.

The court then heard argument concerning the Connecticut Indemnity motions. Counsel for the Insurers argued that, assuming the subpoenas were not entirely inappropriate, all of the ...

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