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DISCOVERY OF OTHER BAD FAITH LAWSUITS AND PAST LITIGATION
By Mike Abourezk and Marialee Neighbours
Typically, insurance companies oppose discovery of other lawsuits or other litigation. Nonetheless, courts have ordered insurers to produce information about other lawsuits and past litigation. For instance in Markham v. Nat'l States Ins. Co., the plaintiff alleged claims of insurance bad faith, false representation and deceit. 2004 WL 3019308 (W.D. Okla.) Markham involved an intentional, established and abusive recission practice by an insurer that operated to deprive elderly insureds of their policy benefits.
In that case, a district court considered post-judgment sanctions against the insurer for failure to comply with a court order to produce litigation information. The insurer did not produce a list of lawsuits until the first day of trial. Then the list showed that the insurer had been sued 39 times in cases that paralleled Markham. As part of its deliberations regarding sanctions, the district court ordered the insurer to produce complete copies of all litigation documents to plaintiff's counsel.
Markham is instructive because of its detailed analysis regarding discovery of lawsuit information. In Markham, the magistrate judge quoted from a letter written by plaintiff's counsel to the insurer. The letter said that it was inconceivable that the insurer would not know about other lawsuits against it:
Additionally, there are a number of ways for the defendant to identify past cases. It is required to address its cases in connection with annual accounting and annual statements. It would have specific ledger accounts that identified where it had hired outside counsel to represent counsel in cases. Defendant cannot comply with its regulatory requirements and still be completely unable to identify the cases that had been filed against it.
Id. at *7.
Agreeing with plaintiff's counsel, the magistrate judge concluded:
I went too many years preparing annual letters to accountants listing all pending lawsuits to be able to swallow the idea that the producing a list of lawsuits or otherwise identifying lawsuits pending against the plaintiff within the five years before this request was served, is something that just was not doable. . .. That defies credulity.
Id. at *9 (emphasis added).
Compliance Not Burdensome
Markham also illustrates how insurers often fail to make good faith responses to plaintiff's requests for lawsuit information. Generally, an insurer will allege that it is burdensome to provide lawsuit information. For instance, in Markham, an employee of the insurer said that it never occurred to him to contact the insurer's general counsel to get lawsuit related materials in order to comply with discovery requests about other litigation. Like the insurer in Markham, most insurance companies have a general counsel or law department that closely tracks lawsuits brought against the insurer. Thus, compliance with requests for lawsuit information does not involve a substantial burden.
In another case relating to discovery of past litigation, Exparte Nat'l Ins. Co. Inc., a life insurance policy beneficiary brought an action against a life insurer for fraud, breach of contract, negligence, wanton or reckless acts in connection with the sale of a life insurance policy. 773 So.2d 461 (Ala. 2000). In that case, the Alabama Supreme Court upheld a trial court's ruling permitting discovery of the names and addresses of policy holders and lawsuits against the insurer. According to the court, plaintiffs who allege fraud and punitive damages are permitted broad discovery.
The Court noted that BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996), increased the plaintiff's burden to show similar acts of misconduct by the defendant in order to recover punitive damages. In Exparte Nat'l Ins. Co, the court found that:
the discovery of past fraud actions, subject to the five year limitation, may lead to the discovery of admissible evidence tending to suggest a pattern or practice of intentional wrongful conduct on the part of National Security's agents. As we have stated, "some earlier fraud actions need not relate to the specific focus of the fraud [the plaintiff] alleges. . . for the discovery regarding earlier actions to be relevant to the [plaintiff's] action."
Id. at 466, citing Exparte Rowland, 669 So.2d 125, 127 (Ala. 1995).
In yet another case, Owens-Corning Fiberglass Corp. v. Allstate Ins. Co., 660 N.E. 2d 765 (Ohio Com. Pl. 1993), an insured filed a motion to compel discovery in a coverage dispute over underlying asbestos products' liability claims. In that case, the insured requested materials from any lawsuits or arbitration concerning asbestos coverage. The court held that the requested information was relevant to the defendants' intentions as to asbestos coverage and that "it will shed light on how the defendants have approached other asbestos issues." Id. at 767 (emphasis added).
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