Recently, the California Supreme Court held that the alleged victims of child abuse by certain priests in the Catholic Church will not have access to the reinsurance information of the defendant Church’s nonparty liability insurers in the course of discovery. The plaintiffs had sought the discovery of reinsurance information under Section 2017 of California’s Code of Civil Procedure, which permits discovery of the existence and extent of a defendant’s liability insurance, claiming they were also entitled to information relating to the defendant’s reinsurance in order to facilitate settlement. See Catholic Mutual Relief Society et al. v. Superior Court of L.A. County. Specifically, the plaintiffs sought information concerning the reinsurance agreements entered into by the nonparty liability insurers and 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.”
The trial court had ruled in favor of the plaintiffs, authorizing them to serve deposition subpoenas on the nonparty liability insurers for the requested reinsurance information. That ruling was short-lived, however, as both the California Court of Appeals and California Supreme Court decided that the statute only permits discovery of a liability insurer’s reinsurance information under limited circumstances, such as those in which “a reinsurance agreement [functions] in the same way as a liability policy (such as a fronting arrangement), or where the reinsurance agreement itself is the subject matter of the litigation (e.g., a coverage action between the liability insurer and its reinsurer)….” The Court held that this limited exception did not apply, noting that “[a] nonparty insurer’s reinsurance information would not be of any relevance to plaintiffs in the vast majority of cases.” The Court further emphasized that “an essential feature of the reinsurance contract is that it does not alter the terms, conditions or provisions of the contract of liability insurance between the direct liability insurer and its insured.”
The reinsurers from which discovery was sought, Certain Underwriters at Lloyd’s, London and Certain London Market Insurance and Reinsurance Companies, filed amicus briefs urging the court to reject the plaintiffs’ discovery request, arguing that a decision to the contrary would increase the burden on the nonparty insurers enormously by forcing them to locate and produce every reinsurance and retrocessional agreement for hundreds of syndicates in any tort action against their insured.
Click here to review the California Supreme Court’s decision.
