Unreported / Non-Citable
Background
Belong, Inc. (Belong) sued Nationwide Mutual Insurance Company, Scottsdale Insurance Company, and other insurers for coverage and bad faith arising from the underlying action Gupta v. Belong, Home Inc., No. 3:24-cv-07239-JSC, which alleged false advertising, unfair competition, and violations of the Consumer Legal Remedies Act. Belong and Scottsdale filed a joint discovery letter (Dkt. 117) presenting disputes over four document requests. The parties had narrowed the scope of each request through meet-and-confer efforts, but remained at odds on privilege, relevance, proportionality, and burden.
The first dispute concerned Document Request 9, seeking communications between defense counsel regarding 2025 settlement efforts. Scottsdale asserted attorney-client privilege, work product, common interest, and joint defense doctrines. The court noted Belong faced nearly identical disputes with other defendant insurers and significant document overlap. The second dispute involved Document Request 11, narrowed to post-January 1, 2023 information about employees who evaluated Belong's claim, including training documents and performance evaluations. Scottsdale objected on overbreadth and personal privacy grounds. The third dispute involved Document Request 12, narrowed to specified claims metrics figures (cycle time, net promoter scores, loss adjustment expenses, claim leakage, settlement data) from 2020 onward. Belong argued metrics could reveal performance pressures influencing claim evaluation; Scottsdale countered adjusters are not compensated based on claim acceptance or rejection rates and asserted confidentiality under California Insurance Code § 791.13. The fourth dispute involved Document Request 15, narrowed to claim files and coverage decision letters for other insureds' tenders involving false advertising, unfair competition, or CLRA allegations from 2023 onward. Belong relied on Colonial Life & Accident Ins. Co. v. Superior Court, 31 Cal. 3d 785 (1982); Scottsdale opposed on relevance, § 791.13, and burden grounds, representing its claim files are not organized to easily identify such claims.
The Court’s Holding
The court denied without prejudice Belong's request to compel production of inter-defense-counsel settlement communications (Request 9). Because Belong faced nearly identical disputes with other insurer defendants and significant document overlap, the court ordered all parties to meet and confer globally to resolve the issue across all insurers. If unresolved, the parties must submit a coordinated briefing schedule to avoid duplicative arguments. The court denied Belong's request to compel production of employee personnel and training records (Request 11), finding the request overbroad and disproportionate. Citing Cyr v. Reliance Std. Life Ins. Co. and Cecena v. Allstate Ins. Co., the court held the request was not limited to training related to the issues in the case and could encompass disciplinary actions and sensitive personnel information unrelated to Belong's allegations or Scottsdale's coverage position, which redaction alone would not sufficiently protect.
The court denied Belong's request to compel production of claims metrics data (Request 12), finding metrics relating to other claims and policies not relevant to Belong's coverage entitlement or bad faith claim, particularly given Scottsdale's representation that adjusters are not compensated based on claim acceptance or rejection rates. The court further found the request overbroad and disproportionate, but noted Belong remains entitled to discovery to test Scottsdale's representation. The court denied Belong's request to compel production of other insureds' claim files (Request 15). While acknowledging relevance under Colonial Life and its extension to common law bad faith claims in J & M Assocs., Inc. v. Nat'l Union Fire Ins. Co., the court found the burden disproportionate. Scottsdale's claim files are not organized to identify responsive claims, requiring manual review of all claims filed over three years, compounded by California Insurance Code § 791.13's requirement to obtain written authorization from each insured before disclosure—a process Colonial Life itself required. The burden was excessive and disproportionate to the needs of the case.
Key Takeaways
- Courts will consolidate overlapping discovery disputes across multiple defendants to avoid duplicative briefing and promote global resolution.
- Discovery of insurer personnel files requires a showing of compelling need and narrow tailoring to training or policies directly related to the claims handling at issue; broad requests for performance evaluations and disciplinary records will be denied.
- Aggregate claims metrics (cycle time, loss adjustment expenses, settlement data) are not automatically relevant to a bad faith claim where the insurer represents adjusters are not incentivized by claim outcomes, though the plaintiff may test that representation.
- Colonial Life discovery of other insureds' claim files remains available in bad faith cases but is subject to proportionality limits; manual search of thousands of files combined with statutory consent requirements under California Insurance Code § 791.13 can render such requests disproportionate.
- Each denial was without prejudice, preserving the plaintiff's ability to meet and confer on narrower, more targeted requests.
Why It Matters
This order provides a comprehensive application of proportionality principles under Rule 26(b)(1) to common insurance bad faith discovery disputes. It clarifies that Colonial Life's relevance holding for 'other claims' discovery does not mandate production when the burden of identifying responsive files—especially without a centralized database—and complying with California Insurance Code § 791.13's consent requirements is excessive. The decision reinforces that insurer representations about adjuster compensation structures can defeat relevance arguments for aggregate metrics, while preserving the plaintiff's right to verify those representations. The court's directive for global meet-and-confer on inter-defense-counsel communications reflects a practical case management approach to common interest privilege disputes in multi-insurer coverage litigation. Practitioners should note the court's willingness to deny broad requests outright rather than craft narrower alternatives, placing the burden on the requesting party to re-engage with tailored proposals.