Tonna K. Faxon, Esq., Managing Partner

Part One:

It is a well-established rule in California that discovery targeted to elicit evidence that an insurance company has engaged in a widespread illegal practice or a practice that has been harmful to its insureds is directly relevant to not only proving bad faith, but also to establishing punitive-damages claims. Thus, the discovery sought by a plaintiff can be upheld as proper discovery by Colonial Life and by the California Insurance Code.

Insurance code section 791.13 sets forth the limitations on disclosure of personal or privileged information about an individual collected or received in connection with an insurance transaction unless the disclosure is authorized under Section 791.13. The California Court of Appeals opined that “[t]he act applies to, and restricts, information gathering practices and disclosures of information by insurers. It does not purport to create a privilege against discovery by an insured party who is a party to a lawsuit. Moreover, according to Irvington-Moore, Inc. v. Superior Court, the provisions of the insurance act yield where disclosure is ‘[o]therwise permitted or required by law’ or is ‘[i]n response to a facially valid administrative or judicial order, including a search warrant or subpoena’ (Irvington-Moore, Inc. v. Superior Court (1993) 14 Cal.App.4th 733).

Thus, an insurance company’s objections regarding privacy cannot limit Colonial Life discovery. The Insurance Information and Privacy Protection Act codifies the state’s regulation of the business of insurance.  Insurance Code section 791.02(v) defines “privileged information” as “any individually identifiable information that both: (1) Relates to a claim for insurance benefits or a civil or criminal proceeding involving an individual; and (2) Is collected in connection with or in reasonable anticipation of a claim for insurance benefits or civil or criminal proceeding involving an individual.” 

In Colonial Life & Accident Ins. Co. v. Superior Court, supra (1982) 31 Cal.3d 785, the California Supreme Court required an insurance company sued for a breach of the duty of fair dealing and good faith to reveal the names, addresses and records of all claimants whose claims were handled by the same adjuster and allowed the plaintiff to contact these claimants about the conduct of the adjuster. The Colonial Life court found that information regarding the insurance company’s handling of other insureds’ claims was relevant to establishing a general business practice of unfair settlement practices and, thus, the information was discoverable. 

See: “Property-Loss Litigation”