Post-Litigation Claims Documents Not Discoverable, Court Rules

OAKLAND, May 31 – A California federal district magistrate has shielded from discovery  information in its insurer’s file generated after  the filing of coverage litigation.

Magma, a technology company,  sought coverage for underlying securities litigation from Genesis, which had written Magma’s excess  directors and officers insurers coverage.  Magma requested discovery of its excess insurer’s “claims handling information.” After Genesis provided information up to but not following the date of the coverage suit against it, Magma requested  the excess insurer’s file for the period following the beginning of the coverage litigation, including information about the excess insurer’s reinsurance and reserves.

Magma argued that Genesis’ duty of good faith and fair dealing continued even after coverage litigation commences, and on that basis argued the post litigation claims documents were discoverable .

White and the cases that followed it concerned whether an insured’s bad faith claim could be based on evidence of an insurer’s conduct during coverage litigation — but in all of those cases, the conduct at issue was already known to the insured. In Magma, by contrast, the insured technology company was seeking discovery of information unknown to it, contained within the excess insurer’s own internal files.

District Magistrate Howard R. Lloyd wrote that the possibility of post litigation bad faith conduct was not sufficient grounds to make the post-litigation information discoverable.  Lloyd called the company’s discovery request on that basis speculative, and without more, a “fishing expedition into the heart of the insurer’s litigation strategy. . . the insurer has an absolute right to defend against the insured’s claims, and opening up its litigation file to its insured would undermine its fair day in court.”

Judge Lloyd ruled, that the work product privilege of  Federal Rule of Civil Procedure 26(b)(3)(A) protected the information.

Genesis Insurance Company v. Magma Design Automation, Inc. No. 5:06-cv-05526, (N.D. Cal. May 31, 2016)

Author: CJ Haddick

C.J. Haddick is a Director with the law firm of Dickie, McCamey, & Chilcote, PC, based in Pittsburgh, Pa. He has advised and represented insurers in insurance coverage and bad faith litigation for more than a quarter of a century, and written and spoken throughout the United States on insurance coverage and bad faith prevention and litigation. He is Managing Director of the firm's Harrisburg, Pa. office. Reach him at chaddick@dmclaw.com or 717-731-4800. View all posts by CJ Haddick