Earth Movement Exclusion Held Ambiguous By Nevada Supreme Court

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American Bar Association Insurance Coverage Case Notes

Excerpt from “Earth Movement Exclusion Held Ambiguous By Nevada Supreme Court.”

The Supreme Court of Nevada held that the earth movement exclusion in a homeowner’s insurance policy was ambiguous and was to be construed against the insurer. Powell v. Liberty Mut. Fire Ins. Co., 252 P.3d 668 (Nev. 2011).

In July 2005, a water pipe in the insured’s house exploded, flooding the dirt sub-basement. An expert concluded that “after many years of relative foundation stability, [the house] is currently being affected by the expansion of supporting clay soils. [T]he expansion . . . has been severely aggravated by the intrusion of a significant amount of water a short time ago. . . .” 252 P.3d at 671.

The insured submitted a claim under her all risk homeowner’s policy that was issued by Liberty Mutual. The claim was denied on the grounds that the earth movement exclusion applied. The exclusion states in pertinent part:

We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss. . . . Earth movement, meaning earthquake including land shock waves or tremors before, during or after a volcanic eruption; landslide, mine subsidence; mudflow; earth sinking, rising or shifting.

252 P.3d at 670 (bold in original). The policy also contains a settling clause, which further excludes losses caused by “settling, shrinking, bulging or expansion, including resultant cracking, of payments, patios, foundations, walls, floors, roofs or ceilings.” 252 P.3d at 671.

For the full article, please use the following link:  Earth Movement Exclusion Held Ambiguous By Nevada Supreme Court.

What Insurance Professionals Should Know about Howell v. Hamilton

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By: Scott L. Hengesbach

On August 18, 2011 the California Supreme Court issued its long-awaited decision in the matter of Howell v. Hamilton Meats & Provisions, Inc., 53 Cal.4th 541 (2011). The case establishes a critical limitation on a plaintiff’s right to recover damages for past medical expenses, sets forth new procedures for addressing this issue, and leaves open to debate the admissibility of evidence of the plaintiff’s medical charges exceeding that which was paid by insurance.

Howell essentially holds that a plaintiff’s recovery for past medical expenses is limited to the amount paid by insurance.

The California Supreme Court concluded its analysis in Howell by clearly stating:

“We hold . . . that an injured plaintiff whose medical expenses are paid through private insurance may recover as economic damages no more than the amounts paid by the plaintiff or his or her insurer for the medical services received or still owing at the time of trial.”

In other words, the plaintiff is not entitled to recover as damages the amount that was charged by a health care provider when the provider accepts less than the amount billed for their services, and the plaintiff is not responsible for paying the difference between the amount that was billed by the provider and the amount his or her insurer paid the provider. At the same time, in order to avoid contravening the collateral source rule, the fact that plaintiff’s bills were paid by insurance is not to be made known to a jury.

Since the plaintiff may recover the full amount billed when the plaintiff remains liable for the amount that insurance does not pay the provider, the defense needs to prove that the provider has accepted the amount paid by the insurer as full payment of the charges at issue. This was shown in Howell through affidavits obtained from the plaintiff’s health care providers. The importance of such evidence in future cases cannot be overstated.

Howell eliminates the need to file a post-trial Hanif motion, calling instead for a motion for new trial.

Prior to the decision in Howell, many California courts followed the approach to recovery of past medical expenses outlined in the case of Hanif v. Housing Authority (1988) 200 Cal.App.3d 635. In Hanif the court held that a plaintiff’s recovery of past medical expenses was limited to the amount paid by Medi-Cal. However, because the amount of the charges for medical services was admitted into evidence, Hanif called for the defense to make a post-trial motion to reduce the amount of a jury’s award of past medical expenses to the amount paid. Howell eliminates this procedural approach, instead calling for the defense to move for a new trial in the event that a jury awards the plaintiff more than he or she is entitled to for past medical special damages. In response, the plaintiff has the option of accepting the lesser amount the plaintiff was entitled to recover or, proceeding with a new trial. So long as juries follow an instruction based on Howell that clearly states that they are not to award the plaintiff more than the amount that has been paid for plaintiff’s past medical expenses, which defendants should request going forward, motions for new trial should not be necessary.

Howell does not hold that evidence of the amount billed for past medical expenses is inadmissible.

Where private insurance has paid the plaintiff’s past medical bills and the plaintiff is not liable for the difference between the amount billed and the amount paid, the Howell court unequivocally held that a plaintiff may only recover as damages the amount paid by insurance to the plaintiff’s health care providers. However, even under these circumstances the Howell court did not hold that evidence of the amount billed by plaintiff’s health care providers must be excluded. Rather, the Howell court left this question to be decided on a case-by-case basis until the court has an opportunity to revisit the issue. The court left the issue open because the defendant in Howell did not contest the relevance of plaintiff’s past medical charges.

Can defendants move to exclude all evidence of the amount billed for plaintiff’s past medical care after Howell?

Yes, the defense can move to exclude all evidence of the amount billed for a plaintiff’s past medical care assuming, of course, that the defense can prove that the plaintiff does not remain liable for the difference between the amount billed for the services and the amount paid by insurance. Whether a motion to exclude all evidence of the amount billed for past medical care will be granted depends on whether the trial court in a given case determines that evidence of the amount billed is, or is not, relevant either to plaintiff’s claims for future medical expenses or for pain and suffering. Again, because the defense in Howell did not argue that all evidence of past medical charges was irrelevant, the Howell court expressly stated that it was not deciding whether such evidence was relevant to either plaintiff’s damages for future medical care or, plaintiff’s claim for pain and suffering. Therefore, the onus is on defense counsel to persuade the court in future cases that the amount billed for plaintiff’s past medical care has no relevance to plaintiff’s claims for future medical expenses and plaintiff’s pain and suffering.

Under what circumstances are defendants likely to face greater difficulty excluding all evidence of the amount billed for a plaintiff’s past medical care?

Since it should not be difficult to persuade a court that the amount billed for a plaintiff’s past medical care is no more or less indicative of the extent of the plaintiff’s pain and suffering than is the amount actually paid for such care, defendants likely will face greater difficulty excluding all evidence of the amount billed for past medical care in cases involving claims that the plaintiff will need future medical care. In particular, it can be expected that when a plaintiff’s expert contends that the plaintiff will need the same treatment he or she received in the past, such as physical therapy or a particular type of surgery, like knee replacement, plaintiffs will maintain that the amount billed for such services in the past evidences the likely cost of such services in the future. In response, defendants likely will contend that an expert for the plaintiff can opine as to the anticipated cost of such future services without relying on evidence of what the plaintiff was charged for the services in the past. However, if the defense contests the opinion of plaintiff’s expert as to the anticipated cost of the future treatment, and the amount the plaintiff was previously billed dovetails with the opinion of the plaintiff’s expert, the defense may be hard-pressed to exclude the plaintiff’s previous charges from the evidence.

The deadline to grant a rehearing or modification has been extended to November 16, 2011.

Buying a Business? Don’t Get Bitten by the Hidden Risk of Successor Liability

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By: Steven C. Spronz

GACC Legal & Tax Newsletter

Thinking of buying a company or all the assets of a business? Done your due diligence? Convinced that the company or the assets are free of liabilities, liens and claims? Think that, because you are buying assets and not the shares of the company, you are not responsible for injuries and damage from business conducted by the seller prior the sale? Well, think again.

Successor Liability
In an effort to prevent reasonable claims from going uncompensated, courts have developed a number of theories under which “successor liability” will be imposed on the purchaser of a company or its assets. These theories result in liability for damages from events that occurred before the acquisition and that the purchaser had nothing to do with, even if the purchaser acquires only assets.

When the sale of a business formed as an entity (a corporation, for example) simply continues its business, as is the case in a merger of two entities, or the sale of all shares or a controlling interest in the purchased entity, the sale is effectively invisible to third parties. In that case, courts generally hold that the post-acquisition business is the same as the pre-sale business; therefore, the new owners of the post-acquisition business are liable for injuries sustained and damage done prior to the sale even if the claim is made after the sale.

Courts generally reach the same conclusion where the business, even if not formed as a corporate or similar entity, is exactly the same before and after the sale, though under new ownership. Additionally, a minority of states recognize a “product-line exception” to the old rule that where a purchaser buys only assets, the purchaser is not liable for injuries and damage from business conducted pre-sale. This exception imposes strict product liability on the buyer when the seller manufactured products sold to the public and the buyer continues manufacturing those products.

Insurance Policies
If, after digesting the successor liability problem, you sit back content in the thought that the insurance policies covering the pre-sale business will cover events occurring before and after the acquisition, think again.

Under current law, in the case of sales of shares and any type of merger, the seller’s insurance policies are generally deemed transferred to the new owner. However, in the case of sales of assets, there is a split of authority in the courts. In the majority of states, the courts have held that where the purchaser has successor liability for claims from the seller’s business, the purchaser is entitled to use the seller’s liability insurance coverage under “occurrence” policies for pre-acquisition claims even if there are anti-assignment provisions in the seller’s insurance policies. California is representative of a minority of jurisdictions holding that when a purchaser of assets has voluntarily assumed the seller’s liabilities under a written contract an anti-assignment provision contained in the seller’s liability insurance policy will be enforced. Under this holding, the purchaser of the seller’s assets will not be able to access the seller’s liability insurance for protection against the burden of successor liability without the insurer’s express consent.

Quick Tips

  • Investigate what liabilities might come with the company or assets you are purchasing, and address those actual and potential liabilities head on.
  • Negotiate a risk allocation between seller and buyer for post-acquisition claims relating to business conducted by the seller prior to the sale.
  • Check the insurance policies, if any, that cover the seller’s business conducted prior to the sale.
  • Discuss continuing coverage with the seller’s insurance carriers to determine whether or not they will provide coverage for post-acquisition claims from the pre-sale business.

Although none of this can guarantee a risk-free acquisition on the question of successor liability, it can go a long way toward reducing surprise and disappointment once the deal is closed.

In New Attorneys We Trust: How to Make In-House Counsel Happy

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Los Angeles Lawyer

In today’s economic paradigm, businesses not only are more closely scrutinizing their expenditures but are also particularly conscious of their legal fees. Nevertheless, this can work to your advantage as a new outside attorney. Since you bill at a lower rate than the partners in your firm, you may be the one who performs the bulk of the work. But fees are not the sole issue in keeping in-house counsel happy. The most important factor is establishing trust.

DO YOUR HOMEWORK. The phrase “Do your homework!” may foster memories of your parents’ nagging, but knowing your client is vital to providing the best representation and will, in turn, keep in-house counsel pleased about retaining your services. Countless books and literature address the importance of understanding your client’s business, and with the advent of the Internet and other sources of social media, researching the type of business your client conducts does not pose an exceptionally difficult task. Your research will impress in-house counsel, and if your study happens to reveal a few gaps in your comprehension, then a discussion with in-house counsel will help build their confidence in your ability to properly handle the case.

DEVELOP A RELATIONSHIP. Where possible, always make personal contact. Typically, your supervisor will inform in-house counsel that you are working on the matter with them. However, before contacting in-house counsel, make sure that your supervisor has given you the authority to do so. Then set up a face-to-face meeting, preferably at their office. Do not wait for the senior partner to make the formal introduction.

Because everyone’s time is valuable, the meeting can be short and concise depending on the circumstances. Conducting business in person allows you to work together closely and enables in-house counsel to get to know and trust you.

PREPARE BEFORE YOU DIAL. Speaking to in-house counsel as a new attorney can be nerve-racking. However, being prepared before you place your phone call will go a long way in calming your nerves. Unless it is an emergency, resist the impulse to immediately return calls. First make sure you have your supervisor’s authority to contact counsel. Don’t wait hours or days before dialing, but do research the issue quickly and construct an outline of your points and any additional questions you may have. By being prepared before you dial, your return call will go much more smoothly.

INVOLVE IN-HOUSE COUNSEL. Whether you are a litigation attorney or a transactional attorney, you can involve in-house counsel with your case in a number of different ways. Who will know your client’s business better than in-house counsel?

In litigation cases, in-house counsel can help you figure out what types of questions should demand your focus during depositions, or whose depositions you or your partner should take. When you are responding to discovery, first draft a response containing all the information you have, and then ask in-house counsel to fill in any gaps. Once you are done, set up a meeting with in-house counsel to review the drafts together in person or telephonically.

Invite in-house counsel to attend depositions or mediations; if a specific issue arises of which you may not be aware–such as prior lawsuits in which the company took a specific defense (especially important when dealing with a national company)–in-house counsel can help make sure you do not deviate from prior positions.

If you are working on a dispositive motion such as a summary judgment, forward it to in-house counsel in advance of your deadline to allow for their input. In transactional matters, find out what other types of agreements your client has engaged in and what terms are most essential.

PROVIDE DETAILED DESCRIPTIONS WHEN YOU BILL. More often than not, in-house counsel will review the legal bills from outside counsel. Unfortunately, for most new attorneys, adequately describing billable tasks can be difficult. After all, most law schools do not provide a class on billing. The most important rule to remember is to use the five Ws–who, what, when, where, and why. For example, if you bill for review of medical records, state the reason why you conducted the review (such as “in preparation of damages section of mediation brief”).

Follow these key recommendations, and you’ll be on your way to keeping in-house counsel happy. Although your primary obligation is always to your firm, you’ll make valuable connections that you may need in the future.

Blue Shield to Cover Treatment for Anorexia

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By: Lisa D. Angelo

Daily Journal

On Aug. 26, the 9th U.S. Circuit Court of Appeals held in Harlick v. Blue Shield of California, 2011 DJDAR 13132 that health care plans falling within the scope of California’s Mental Health Parity Act must provide all medically necessary treatment to insureds that suffer from any one of nine specified “severe mental illnesses.” The nine specific severe mental illnesses are listed in subsection (d) of the Act including: schizophrenia, schizoaffective disorder, bipolar disorder (manic-depressive illness), major depressive disorders, panic disorder, obsessive-compulsive disorder, pervasive developmental disorder or autism, anorexia nervosa, and bulimia nervosa.

Jeanene Harlick suffered from anorexia nervosa for more than 20 years. In 2006, Harlick’s personal doctors determined that her condition was so severe that the outpatient treatment covered under her insurance plan was no longer sufficient. Instead, residential treatment at an out-of-state facility that specialized in eating disorders would be the best and most effective treatment for her. As a result, she was enrolled at Castlewood Treatment Center, a residential treatment facility located in Missouri. At the time of her admission, Harlick was 65 percent of her ideal body weight and had to have a feeding tube inserted during her first month at the facility.

Harlick was enrolled in her employer’s health insurance plan through Blue Shield of California. She did not obtain pre-authorization from Blue Shield, as required under its policy, before she entered the out-of-state residential facility. More importantly, however, the facility – which employed only psychologists and did not have medical doctors or nurses on staff – was unqualified as a skilled nursing facility (the only type of facility covered under the policy).

Blue Shield ultimately refused to pay for all but 11 days of Harlick’s nine-month stay at the facility. As to the 11 days it did pay for, Blue Shield determined that the payment was made due to an internal coding error. In fact, the company never intended to pay for any part of Harlick’s stay at the unauthorized facility, determining that it was specifically excluded under her policy.

In a two-part opinion, the 9th Circuit held that a plain reading of Blue Shield’s policy easily demonstrated that residential care facilities, such as Castlewood, were not covered under Harlick’s policy. However, by way of the Mental Health Parity Act, Blue Shield could not exclude the facility from coverage as a matter of law if the treatment provided was medically necessary. The court concluded that Harlick’s residential care was medically necessary because Blue Shield never disputed that Harlick’s treatment at the facility was not medically necessary. Rather, it simply argued that Harlick’s policy expressly prohibited coverage of any treatment at a residential care facility.

Moreover, pursuant to the Act’s legislative history, one of the primary reasons for its enactment was that “most private health insurance policies provided coverage for mental illnesses at levels far below coverage for other physical illnesses” and that the “lack of coverage resulted in inadequate treatment of mental illnesses causing relapse and untold suffering for people with treatable mental illnesses as well as increases in homelessness, increases in crime and significant demands on the state budget.”

While the Harlick opinion is considered to be a major victory for persons who suffer from eating disorders, its scope reaches far beyond anorexia nervosa. What is more, the court observed that sub-section (b) contains the language: “including, but not limited to,” which makes it clear that the list of nine mental illnesses was intended to be illustrative and not exhaustive.

The court’s ruling that the Mental Health Parity Act requires an insurer to provide all medically necessary treatment for eating disorders including residential treatment, even if its insurance policy specifically excludes such treatment, is undoubtedly a landmark ruling for insureds. When taken together with other recently enacted health care reforms, it is clear that in this 21st century, health care insurance companies have yet again taken another sharp blow.

It remains unclear what impact the decision will have on California’s 3.4 million policyholders. In the interim, Blue Shield has announced it will file an appeal with the U.S. Supreme Court. Considering that the 9th Circuit is one of the most frequently reversed circuits, it will be interesting to see if the high court grants certiorari.

Moving from the Minors to the Majors

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By: Jean A. Dalmore

For the Defense

Excerpt from, “Moving from the Minors to the Majors”…

Structures are awe-inspiring, magnificent things. They are designed and constructed from a variety of materials to accommodate their intended use and anticipated loads. How materials react when a structure is damaged play a Structures tend to endure events that seemingly should result in catastrophic failures because of safety factors and redundancies in their design and construction.

These safety factors are built into the building codes that establish the minimum design loads for a structure and into the allowable capacities of the materials used in their construction. When a catastrophic failure does occur, a forensic engineering expert must look beyond the obvious and determine why the failure occurred.

When a catastrophic failure occurs, typically someone with very little expertise has identified an “obvious” cause, a trigger, before a qualified, forensic engineering expert steps in. In identifying and documenting what made a structure susceptible to damage, a forensic engineering expert can move an evaluation “from the Minors to the Majors.”

 

Supreme Court to Decide Dispute Between Sellers and Brokers

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By: Steven C. Spronz

Daily Journal

On Aug. 17, a “double scoop” decision by the 1st District Court of Appeal expanded the discussion regarding statutes of limitation in California and the permitted use of parol evidence in a particular type of claim by a seller of real estate against the seller’s broker.

In the case of Thomson v. Canyon, 2011 DJDAR 12447 (1st Dist. Aug. 17, 2011) Regina Thomson agreed to sell her home in return for the buyer’s oral promise to pay off her debts secured by the home, and to reconvey the property back to Thomson for a refund of the purchase price, plus a service fee. Thomson retained Lewis Canyon, a broker, to memorialize and close the transaction.

The written contract executed by Thomson and the buyer, however, did not contain the oral promise to reconvey the property. Some time after the sale closed, the buyer sold the property to a third-party instead. Thomson sued Canyon after unsuccessfully suing the buyer for breach of the oral promise. Thomson claimed that Canyon breached his fiduciary duty to her by failing to include the buyer’s oral promise in the written contract. Canyon argued that Thomson’s claim for breach of fiduciary duty was time-barred by the statute of limitations, and to the extent that the claim was not time-barred, evidence of the oral agreement was inadmissible.

The court found that there is no specific statute of limitation on claims for breach of fiduciary duty by a broker to a seller, and therefore California’s default limitations period of four years applied.

In finding that the statute of limitations had not yet run on Thomson’s claim against Canyon, the court held the limitations period began on the date that Thomson suffered damage as a result of Canyon’s alleged breach of fiduciary duty – not the closing date of the property sale. According to the court, since the damage did not occur until the buyer sold the property to the third-party, the closing date of the sale from Thomson to the buyer was not relevant.

The court next considered whether Canyon’s agreement to include the buyer’s oral promise in the contract was properly admissible as evidence of Thomson’s claim against Canyon. On this issue of parol evidence – oral and written evidence, which is not included in the written contract signed by the parties – the court acknowledged that there is no settled rule on whether a stranger to the written sale contract (in this case, Canyon) is entitled to prevent the admission of parol evidence in connection with a dispute arising out of the contract. The court ruled that since the parol evidence was not being offered to reconstruct the contractual obligations of the Thomson and the buyer (the parties to the real estate sale contract), evidence of Canyon’s promise to include the buyer’s promise in the contract was admissible.

Today the state Supreme Court granted review of this case. Stay tuned.

Navigating Discovery Abroad: Obtaining Witnesses and Materials Located Outside of the US

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By: Friedrich W. Seitz

Daily Journal

Today, there is an ever-present need to obtain discovery from people or organizations who are involved in disputes within the United States, but located in foreign jurisdictions. Lawsuits frequently arise where the need to obtain evidence from sources located abroad is critical to a case. When discovery is being sought from a person or organization who is a party to the action and located abroad, and thus subject to the court’s jurisdiction, the process is comparable to obtaining discovery from a party located within the United States. State and federal discovery rules apply and will govern requests, production of documents, and the taking of depositions. Generally, Federal Rule of Civil Procedure 26 details general discovery rules to be followed, Federal Rule of Civil Procedure 30 describes the procedure for taking depositions, and Federal Rule of Civil Procedure 34 governs production.

State and federal rules allow a court to order persons located outside of the United States to produce documents and attend depositions in the United States so long as that person is subject to the personal jurisdiction of the court. Additionally, a party can obtain discovery from certain nonparties located abroad. Federal Rule of Civil Procedure 45 allows a party to subpoena documents from a nonparty witness and potentially subpoena a witness for deposition if that nonparty is located within the territorial jurisdiction of the court or has a place of business in the United States.

Alternatively, when seeking to obtain evidence from a person or organization located abroad that is not subject to the court’s jurisdiction, the process begins with a determination as to whether the other country has consented to be bound by the Hague Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil and Commercial Matters. The Convention was created to help parties obtain evidence in both civil and common law legal systems, and most signatories to the Convention allow some form of discovery when dealing with cross-border disputes. A country must be a party to the Convention in order to be bound by the Convention, as opposed to just a member of the Hague Conference.

If the discovery originates in a country that is not a party to the Convention, “letters rogatory” will typically be used to obtain evidence instead of the Convention. These letters are one of the oldest discovery procedures used to conduct discovery abroad. It involves applying to the U.S. court where the action is pending and requesting that that court send a formal request for assistance directly to the foreign court. They can also be requested through diplomatic channels. Once the foreign court or authority receives the request, it issues the letters rogatory under seal and conducts the discovery pursuant to the specific request of the petitioning party. The foreign court, however, is under no legal obligation to issue this and, thus, should only be used where discovery under the Convention cannot be obtained.

When the evidence sought is located in a country that is a party to the Convention, a legal obligation does exist. These countries are considered contracting states. The Convention provides a mechanism to obtain evidence located in these states in both civil or commercial matters. Proceeding under the Convention is the most frequently used procedure, as it is less time consuming, less costly, and requires less involvement of government and court officials.

Most contracting states consider the Convention to be the exclusive mechanism to obtain evidence in other member states. The United States, however, is one of the minority countries that views the Convention as a permissive, alternative means to obtain evidence, rather than as an exclusive, mandatory procedure. In [Societe Nationale Industrielle Aerospatiale v. United States District Court for the Southern District of Iowa], 482 U.S. 522 (1987) the U.S. Supreme Court found that the parties have the option of using the Convention to obtain discovery that is located abroad, but that foreign discovery can also be taken using typical U.S. discovery procedures and the Federal Rules of Civil Procedure.

When evidence is to be obtained under the Convention, it involves the submission of a formal “letter of request,” which can then be sent to a judicial authority or, more informally, sent to diplomatic officers, consular agents, and commissions who then gather evidence. Each process is discussed in chapter one and chapter two of the Convention, respectively.

A letter of request may be submitted in the state or federal court where the action is pending. This domestic court then directs the letter to the designated central authority in the foreign contracting state where the documents or witnesses are located. If the letter is approved, the central authority will send it to the appropriate judicial authority, who will then assist in obtaining answers to interrogatories, production of documents, and other discovery requests. The letter can also be directed to a diplomatic officer, consular agent, or commissioner, but only if there have been no objections filed to chapter two of the Convention. This more informal process of obtaining evidence through diplomatic officers, consular agents, or commissioners is subject to the published reservations and declaration of the contracting state.

The letter of request should be written in the language of the contracting state to whom the request is being made, but that state should also accept it in English or French. However, the receiving state may still object and request that another language be used. The letter must clearly and concisely identify various items in accordance with chapter one, including: the nature of the proceedings, the names and addresses of the person(s) to be examined, the questions to be put to that person, the documents or other material to be inspected, the form of oath to be used, how the testimony is to be recorded, and a specific request to ask questions of the person(s) if so desired.

Be aware tthat when drafting letters of request, certain countries can request the right not to execute the letter for the purpose of obtaining pretrial discovery. In general, a letter will be executed as requested, but Article 23 of the Convention allows contracting states to declare that they will not execute it ” for the purpose of obtaining pretrial discovery of documents as known in the Common Law countries.” Almost every signatory to the Convention, with the exception of Barbados, Israel, the United States, the Czech Republic, and the Slovak Republic, has indicated that it will not execute these letters for acquiring pretrial discovery. One way to avoid this potential issue is to draft the letter without using the term pretrial discovery, and to emphasize the fact that the evidence will be used for trial purposes instead.

Once a letter of request has been approved and executed, the authority to whom the request was made is expected to apply the same “measures of compulsion” as it would if the same request was made by a domestic party or authority in internal proceedings. Discovery will be sought to the extent that internal law allows and thus the foreign party requesting the evidence is treated the same as a domestic party.

While the Convention is not considered a mandatory means of obtaining foreign discovery in the United States, it is clear that it is a useful and efficient means to do so. It is important to be aware of the scope of the Convention, as well as the different reservations and designations of each contracting state so as to be better prepared when seeking evidence from a particular contracting state. The Hague Conference is a useful resource and provides relevant and insightful information, such as the list of contracting states, full text of the Convention, and various handbooks and examples of documents, such as letters of request. The Convention was designed as a means to facilitate cross-border discovery and should be utilized to the extent possible when seeking discovery abroad.

Recoverable Medical Specials Limited to Amounts Paid

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The California Supreme Court has limited a defendant’s liability for damages for “medical specials” to the amounts actually paid for the medical services, not the billed amount.

“We hold . . . that an injured plaintiff whose medical expenses are paid through private insurance may recover as economic damages no more than the amounts paid by the plaintiff or his or her insurer for the medical services received or still owing at the time of trial.”
The court rejected plaintiff’s arguments that defendants are liable for the full “billed” amount, regardless of any discount the insurer may negotiate. “We hold no such recovery is allowed, for the simple reason that the injured plaintiff did not suffer any economic loss in that amount.”
The court’s ruling prevents plaintiffs from recovering in damages more than the actual harm incurred.

A Non-Resident Witness Cannot be Compelled to California for Deposition

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By: Gina E. Och

On July 28, 2011, the appellate court issued an opinion of great interest to foreign and out-of-state parties and witnesses. In an unanimous decision in Toyota Motor Corp. v. Superior Court (Stewart), 2011 DAR 11254, Second District, the court held that a trial court cannot order a non-resident to appear at a California deposition. The court further added—similarly, a trial court cannot order a party to produce for a California deposition a non-resident witness (e.g., an employee, officer or director of a corporation). Accordingly, under Code of Civil Procedure § 1989, a California trial court has no authority to compel non-resident witnesses to come to California to attend depositions.

In Toyota Motor Corp., the Toyota defendants sought a writ of mandate directing the trial court to vacate its order granting a motion to compel Toyota to produce five of its employees, who are Japanese residents, for deposition in California. In granting the petition and mandating a different order, the appellate court rejected the argument that, under Code of Civil Procedure § 2025.260, the trial court had authority to compel said witnesses to travel to California for deposition. While § 2025.260 allows a trial court to permit a deposition of a party or officer, director, managing agent, or employee of a party at a place “that is more distant than that permitted under Section 2025.250 [75 miles from the deponent’s resident or within the county where the action is pending and within 150 miles of the deponent’s residence],” § 2025.260 does not provide for those depositions to be held at a place more distant than that permitted by § 1989. In other words, § 2025.260 permits depositions more than 75 (or 150) miles from a deponent’s residence, but § 1989 restricts a deponent from being required to attend a California deposition if the deponent is not a California resident.

The court came to its conclusion by interpreting the plain language of Code of Civil Procedure § 1989, as well as discussing the legislative history of Code of Civil Procedure §§ 1989 and 2025.260. Furthermore, the court rejected the analysis and contrary conclusion reached in Glass v. Superior Court, 204 Cal.App.3d 1048 (1988).

Presiding Justice Klein wrote a separate concurring opinion to express her opinion that this statutory scheme is inadequate in light of the current globalization; thus, she urged the Legislature to address this issue promptly. Justice Klein noted that many foreign countries have different discovery rules that place a further hindrance and expense on the fact-finding process.

Ultimately, this decision is a win for out-of-state witnesses. However, as noted by Presiding Justice Klein, the current statutory scheme potentially places California litigants and even California businesses at a disadvantage because while many foreign corporations freely do business here, they are not necessarily subject to the same extensive discovery.