District Court Rejects Insured’s Attempts to Compel Production of Post-Suit Claims Handling Information
Genesis Ins. Co. v. Magma Design Automation, Inc., 2016 U.S. Dist. LEXIS 70886 (May 31, 2016)
Categories: Discovery – Post-Litigation Claims File
In Genesis Ins. Co. v. Magma Design Automation, Inc., the insured, Magma Design Automation, Inc. (“Magma”), unsuccessfully attempted to compel the production of its insurer’s claim file relating to the very claim in litigation between them.
In 2004, a patent infringement action was filed against Magma, which spawned two shareholder securities lawsuits against Magma the following year. A dispute arose over which of Magma’s excess insurers -- Genesis Insurance Co. or National Union Fire Insurance Co. -- owed coverage for the shareholder suits. The shareholder suits were filed during National Union’s policy period; however, the earlier patent action was filed during Genesis’ policy period.
Both Genesis and National Union previously had declaratory judgments entered against them by the district court and reversed at the appellate level. Despite this convoluted history, the district court eventually determined (yet subject to another pending appeal that National Union subsequently filed) that coverage was triggered in 2005, that the limits of Magma’s applicable primary policies were exhausted, and thus that National Union owed coverage. Accordingly, Magma proceeded with breach of contract claims against National Union.
Magma demanded production of National Union’s claims handling information in discovery. National Union produced its materials relating to the shareholder lawsuits from the time of their initiation to the date of their settlement. Not satisfied, Magma sought to compel the production of National Union’s claim file materials relating to its very claim against National Union for excess coverage.
Opposing Magma’s request, National Union primarily relied on the litigation privilege under California Civil Code § 47(b), which protects “publications” made “[i]n any … judicial proceeding ….” Magma argued that when litigation is between an insured an insurer, there still exists a contractual duty of good faith and fair dealing owed by the insurer, and thus Magma was entitled to documents that may prove bad faith.
The district court ruled in National Union’s favor, refusing to authorize “a fishing expedition into the heart of the insurer’s litigation strategy.” It concluded “the insurer has an absolute right to defend against its insured’s claims, and opening up its litigation file to its insured would undermine its right to a fair day in court.”
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