The Fourth District Court of Appeal has authorized extraordinarily wide-ranging discovery into an insurer's claim files by a plaintiff claiming that she was subjected to racial discrimination in the handling of her own claim for a theft loss. The Court has, however, conditioned the production of any other claim files on the plaintiff first obtaining the express authorization of the insured involved in each claim.
Maria Luisa Hernandez was insured under an auto policy issued by Permanent General Insurance Corporation. She submitted a claim for the theft of her insured vehicle. When a dispute arose concerning that claim, she brought suit alleging breach of the insurer's obligations of good faith and fair dealing, alleging that the insurer had delayed, underpaid or refused to pay benefits that were owing to her for racially discriminatory reasons. Her attorneys served a discovery request requiring the insurer to produce "all claims files for all of defendant’s insureds who had submitted a claim for vehicle theft since January 1, 1998."
The insurer objected and refused to produce the files, relying principally on the prohibitions of the Insurance Information Privacy Act [Cal. Insurance Code 791, et seq.], which prohibits insurers' disclosure of personal and private information concerning its insureds. The insurer also argued that the materials were irrelevant in their entirety. Ms. Hernandez and her attorneys urged that the content of the files might disclose an ongoing pattern of discriminatory claims handling.
The trial court ordered production of the records, rejecting all of the insurer's objections. However, the court ""failed to condition the order on plaintiff obtaining authorizations from the nonparty insureds in general, and it impliedly ruled that plaintiff need not obtain authorizations specifically for files as to which her attorney had already obtained authorizations in prior litigation involving a different client." The insurer petitioned the Court of Appeal for a writ/order to prevent the disclosure.
The Court of Appeal held that the claim files are all, at least theoretically, potentially relevant and required to be disclosed. However, disclosure of the files is conditioned upon the plaintiff first obtaining express authorization from the insured(s) in each case, including new authorizations as to each file obtained by her counsel in the earlier litigation. (The Court declines to address the insurer's objection that plaintiff's counsel is using the information improperly to solicit new clients. That, the Court notes, "is a matter to be resolved through proper channels within the State Bar.")
Most of the appellate court's decision is concerned with whether the files are discoverable at all. The Court is unswayed by three of the four arguments offered by plaintiff in support of the request to obtain the records, and emphasizes that the existence of a "pattern and practice" of discrimination is largely irrelevant to any claim that the plaintiff may be able to present. However, the Court ultimately concludes that the existence of discriminatory claims handling in other cases may support plaintiff's claim that there was a discriminatory animus at work in her case:
In large part, plaintiff’s bad faith cause of action is predicated on an unpleaded theory that defendant has a pattern and practice of a discriminatory claims handling practice, under which the auto theft claims filed by Hispanic, African-American, and/or low income insureds are singled out for bad faith denial or extraordinary contest. Plaintiff contends production of the claims files is the only avenue by which she may discover evidence supporting her discrimination theory, and thus her bad faith cause of action. We agree that an insurer making decisions about auto theft claims on such bases may well be engaging in bad faith conduct, and that evidence of repeated or habitual discriminatory denial or handling of claims could be used to support plaintiff’s theory that, as an Hispanic, she was subjected to the same bad faith practice. [Citation.] We are not sure plaintiff can expect to find information about ethnicity, race, or income level set forth in the claims files. Nonetheless, plaintiff’s counsel will no doubt have direct contact with those claimants who authorize release of their files, and such contacts may disclose the existence of a common thread of discrimination in defendant’s claims, and thus support plaintiff’s theory that she herself was the victim of discrimination.
The decision in Permanent General Insurance Corp. v. Superior Court (Hernandez) (Oct. 12, 2004), Case No. G033269, can be accessed at these links in PDF and Word formats. [Note: The links will expire in approximately 120 days; the opinion should still be accessible thereafter by substituting "archive" for "documents" in the URL.]
Comments