Low, Ball & Lynch’s

WEEKLY LAW RESUME

October 21, 2004 Issue   By: Raymond Coates

Bad Faith - Discovery - Other Claim Files

Permanent General Assurance Corp. v. Superior Court

Court of Appeal, Fourth District

(October 12, 2026)

One avenue of discovery in bad faith actions is an attempt by claimants to obtain claim files pertaining to other insureds.  This case reexamines that issue in light of recent decisions.

Maria Luisa Hernandez filed an action for breach of insurance contract, breach of implied covenant of good faith and fair dealing, and intentional and negligent infliction of emotional distress arising out of the alleged wrongful denial of her claim for theft of her vehicle by Permanent General Assurance Corporation.  During discovery, she propounded a request for production of documents on Permanent General seeking all claim files for all insureds who had submitted a claim for vehicle theft since January 1, 1998.  Permanent General objected to this request.  Hernandez filed a motion to compel.  She alleged that Permanent General had a practice of racially discriminatory claims handling practices.  The files were sought to show that practice.  The trial court granted the motion to compel.  The court ruled that no authorizations had to be obtained from the insureds whose files were produced because an authorization had been obtained in prior litigation involving a different insured.

Permanent General filed a petition for writ of mandate.  The Court of Appeal granted the petition in part.  Permanent General asserted that in the wake of State Farm Mutual Auto Ins. Co. v. Campbell (2003) 538 U.S. 408, the landmark decision involving punitive damages, evidence of a pattern or practice could not be used to support such an award.  It further contended that pursuant to Insurance Code section 791.13, information concerning other insureds was privileged.  Finally, it contended the authorization in the prior case could not be used in this case.

The Court of Appeal agreed that authorization for release of claims information from each insured was required under Insurance Code section 791.13.  The authorization obtained in the prior action related solely to that action and provided no authorization in this case.

Hernandez argued that discovery was justified under Colonial Life & Acc. Ins. Co. v. Superior Court (1982) 31 Cal.3d 785.  In Colonial Life, discovery of other insurance files was allowed in a bad faith action for settlement practices in violation of Insurance Code section 790.03.  The Court stated such causes of action have been eliminated in California, and thus, the evidence could not be justified by reference to Colonial Life, nor could it be allowed on the basis that plaintiff might amend her complaint to allege unfair settlement practices in violation of Business & Professions Code section 17200.  It has been specifically held that that code section cannot be used to plead around the bar of causes of action based on Insurance Code section 790.03.

As to proving reprehensibility as a basis for punitive damages, the Court stated that after Campbell, a defendant can be punished only for the harm done to the plaintiff.  Pattern and practice evidence is irrelevant to and inadmissible for purposes of assessing punitive damages.

However, the Court concluded the evidence was relevant to the bad faith cause of action predicated on a pattern and practice of discriminatory claim handling based on ethnic, racial or low-income background.  For that reason alone, such discovery could be allowed.

The Court granted the petition in part directing the trial court to conduct a hearing to determine an appropriate procedure for Hernandez to obtain authorization from California insureds for release of their claim files pertaining to vehicle theft claims.  The Court held the prior authorization obtained in another case could not be used in this case.

COMMENT

This case contains several important comments concerning discovery of other claim files.  It specifically states that such discovery cannot be justified under Colonial Life nor under Campbell's standards applicable to punitive damages cases. 

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