California law expressly provides for discovery of information about the evidence and contents of any insurance agreement under which a carrier may be liable to satisfy all or part of a potential judgement or to indemnify or reimburse payments made to satisfy the judgment. C.C.P. §2017.210. The statute also provides for discovery of whether coverage of the claim involved in the action is disputed, “but not as to the nature and substance of that dispute.” C.C.P. §2017.210.
This section illustrates the tension between using insurance information to guide the parties toward resolution on the one hand, but recognizing that insurance and disputes with the insured are irrelevant to the issues in the case and confidential.
Trying to further clarify the limited use of insurance in discovery, the legislature included cautionary language in C.C.P. §2017.210 stating that information about insurance is not admissible in evidence at trial by reason of disclosure. Evid. Code §1155
In compliance with C.C.P. §2017.210, the Judicial Council approved Form Interrogatory (General) #4.1, which asks:
At the time of the INCIDENT, was there in effect any policy of insurance through which you were or might be insured in any manner (for example, primary, pro-rata, or excess liability coverage or medical expense coverage) for the damages, claims, or actions that have arisen out of the INCIDENT? If so, for each policy state:
(a) the kind of coverage;
(b) the name and ADDRESS of the insurance company;
(c) the name, ADDRESS, and telephone number of each named insured;
(d) the policy number;
(e) the limits of coverage for each type of coverage contained in the policy;
(f) whether any reservation of rights or controversy or coverage dispute exists between you and the insurance company;
(g) and the name, ADDRESS, and telephone number of the custodian of the policy.
Case law further supports the limited information a party can obtain regarding opposing party’s insurance. The courts allow a party to obtain production of relevant insurance policies in a personal injury action. The rationale being that insurance information allows settlement to be “worked out on the basis of realities.” Irvington-Moore, Inc. v. Superior Court (1993) 24 CA4th 733.
An area that causes some confusion is the reservation of rights letter, or coverage position letter. An insurer’s duty to defend is separate from its duty to indemnify or settle claims on behalf of an insured. An insurer may agree to defend its insured but asserts that the policy may not cover all of the damage claims asserted and presents the insured with a letter explaining that. Under C.C.P. §2017.210, the injured party is not entitled to a copy of that letter. In other states following the Federal Rules, the reservation of rights letter must be disclosed. (i.e., NRCP 16.1(a)(1)(A)(v))
There are other limits, hinting at this balancing act. An application for insurance can reveal a lot about the defendant, including sales and payroll information, related companies and officers and directors. However, unless the insurance application is incorporated into the policy, the application itself is not discoverable. California Civil Discovery Practice (CEB 2024) §1.44. Another example is Reinsurance, which is also not discoverable. “Because a contract of reinsurance is…made for the benefit of the liability insurer…it has no relevance in an underlying tort action brought against an insured under the policy of liability.” Cal. Prac. Guide: Civil Procedure Before Trial (TRG 2024) §8:92.3 citing Catholic Mut. Relief Soc. v. Sup. Ct. (2007) 42 C4th 358, 368.
These rules, however, do not apply to insurance litigation, where the insurer is a party. Then, the rules of relevance, privilege, and work product apply as with any other lawsuit. Insurance reserves, internal claim notes and communications relating to such reserves, and criteria or considerations used to establish size of reserves, are only discoverable when relevant in insurance bad faith litigation. California Civil Discovery Practice (CEB 2024) §1.47 citing Lipton v. Superior Court (1996) CA4th, 1959. By way of example, assume the case involves an auto accident, but the defendant’s insurer denied coverage. The injured plaintiff may only obtain the policy and a statement that the insurer disputed coverage. However, if the insured defendant sued the insurer over the denial, the entire underwriting file and whether the insurer placed a reserve on the file indicating it expected to pay out a claim may be directly relevant. It’s the same accident but two different results as to discoverability of insurance information.