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Lipton v. Superior Court8/28/1996
CROSKEY, J.
In this bad faith action against his professional liability insurer, the petitioner Howard Lipton seeks a writ of mandate compelling the trial court to require the real party in interest, Lawyers' Mutual Insurance Company (LMIC), to produce certain records relating to liability "reserves" which may have been established in a malpractice action brought against Lipton, together with "corresponding reinsurance records." The trial court, after conducting an in camera inspection of the requested records, denied Lipton's discovery request, stating that "it does not appear that the disclosure of setting reserves is likely to lead to [the discovery of] admissible evidence," and that the "percentage of its risk that assigns to other carriers is of no moment."
After a review of the record, we conclude that the trial court erred in denying Lipton any discovery as to the requested reserve and reinsurance documents. We hold, at least for purposes of discovery (Code Civ. Proc., ยง 2017, subd. (a)), loss reserve information cannot be deemed, a priori, irrelevant. Such information may well lead to the discovery of evidence admissible on the issues raised by Lipton in his bad faith action against LMIC.
The same is true with respect to Lipton's demand for production of reinsurance documents although the relevancy issue is more problematic. However, the trial court improperly reached the general Conclusion that such documents had no relevancy whatever. As is the case with loss reserves, documents relating to reinsurance must each be evaluated in the context of the discovery standard of relevancy. However, reinsurance documents will often present an additional, more difficult problem for a party seeking disclosure. They may involve claims of qualified and/or absolute privilege which the trial court, in generally denying Lipton's motion to compel, did not address.
We therefore shall grant a peremptory writ of mandate directing the trial court to vacate its order of denial and to conduct further proceedings in accordance with the views expressed herein.
FACTUAL AND PROCEDURAL BACKGROUND
On April 18, 1990, David and Deanna Pacheco were riding on David's 1980 Yamaha motorcycle when they collided with a 1974 Chevrolet truck. They both suffered personal injuries as a result of this accident. They retained Lipton to represent them in an action for damages on a contingency fee basis.
Due to their subsequent unhappiness with (1) Lipton's settlement of the case against the driver of the truck, (2) his failure to bring a product liability claim against Yamaha, and (3) certain misrepresentations of fact which he allegedly made to induce them to retain his services in the first place, the Pachecos, on November 21, 1991, filed a 16-count complaint against Lipton.
In that action, they alleged counts for legal malpractice, intentional and negligent misrepresentation, conversion, breach of the implied covenant of good faith, spoliation of evidence and conspiracy. All of these counts related to Lipton's acts and omissions in connection with his legal representation of the Pachecos and their claim for damages. They sought recovery of attorney fees paid to Lipton, economic and noneconomic damages and punitive damages, all in excess of $7 million.
Lipton tendered defense of the action to his insurer, LMIC. Counsel was appointed to represent him, although LMIC issued a reservation of rights letter with respect to the fraud and punitive damage claims. Lipton requested appointment of separate Cumis counsel. ( San Diego Federal Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal. App. 3d 358 [208 Cal. Rptr. 494, 50 A.L.R.
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