Applying California law, a federal district court has held that an insured is not entitled to discovery of information in its insurer’s claims-handling file that post-dated the filing of coverage litigation. Genesis Ins. Co. v. Magma Design Automation, Inc., 2016 WL 3057375 (N.D. Cal. May 31, 2016).
A patent infringement lawsuit and two shareholder securities actions were filed against the insured technology company. The technology company sought coverage for the securities actions from its D&O insurers. In the coverage litigation that followed, the technology company requested discovery of its excess insurer’s “claims handling information.” The excess insurer had previously produced all of its claim file documents for the time period from the initiation of the securities lawsuits through the date when the technology company had sued the excess insurer in the coverage action. The technology company then sought the excess insurer’s claim file for the period following the initiation of the coverage litigation, including information about the excess insurer’s reinsurance and reserves. The excess insurer objected on the basis of the litigation privilege created by California Civil Code § 47(b), which protects any “publication” made “[i]n any … judicial proceeding.”
The court denied the technology company’s discovery request, holding that post-litigation claims-handling information was not discoverable. The court rejected as purely speculative the insured’s rationale that the excess insurer’s continued refusal to acknowledge coverage for the securities actions must be in bad faith. Deeming the request a “fishing expedition into the heart of the insurer’s litigation strategy,” the court held that “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.”