Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_05-cv-02238/USCOURTS-cand-5_05-cv-02238-3/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Petition for Removal

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United States District Court

For the Northern District of California

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*E-FILED 9/13/06*

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

SUSANNA SOTELO, 

Plaintiff,

 v.

OLD REPUBLIC LIFE INSURANCE, ET AL.,

Defendants. /

NO. C -05-02238 RS

ORDER DENYING MOTION TO

QUASH SUBPOENA

I. INTRODUCTION

In this breach of contract and bad faith claim against Old Republic Life Insurance, plaintiff

Susanna Sotelo has subpoenaed documents from Swiss Re Life and Health America, Inc. (“Swiss

Re”), a third party that provided re-insurance to Old Republic in connection with the insurance

policy at issue. Old Republic moves to quash the subpoena on both procedural and substantive

grounds.

The motion was fully briefed and was heard on September 13, 2006. Based on all the papers

filed to date and the arguments of counsel, the motion will be denied. 

 II. BACKGROUND

Sotelo and her husband, Salvador Sotelo, applied for life insurance policies in May of 2003. 

After both underwent medical examinations, they were issued policies on June 24, 2003. Salvador’s

policy was “reissued” on July 18, 2003, allegedly to correct an error in the calculation of the

premium. Apparently at the same time as the policy was reissued, Old Republic reinsured a portion

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For the Northern District of California

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 “[R]einsurance is an insurer’s effort to secure indemnification from another insurer against

loss of or liability because of a risk assumed by the initial insurer under a contract between it and a

third person. Reinsurance has been said to be the means by which an insurer can spread the loss

incurred from an insured risk.” Rhone-Poulenc Rorer, Inc. v. Home Indemnity Co., 139 F.R.D. 609,

611 (E.D. Penn. 1991).

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 Also, although Old Republic lists “undue burden” as one of its bases for objection, it does

not address it separately.

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of the death benefits with Swiss Re.1

On June 26, 2003, two days after his policy first issued, Salvador sought medical treatment

for diarrhea he had been experiencing. His physician prescribed an over the counter treatment and

sent him home. Salvador’s symptoms persisted. On July 14, 2003, four days before his policy was 

“reissued,” he was diagnosed as possibly having Crohn’s disease, a diagnosis subsequently

confirmed in November of 2003 during a colectomy. Although Crohn’s disease is normally

controllable through diet and medication, Salvador developed additional problems during

hospitalization, and died in December of 2003.

Old Republic initially concluded that Salvador had not been guilty of concealment or

material misrepresentation of his health condition, and approved payment of benefits under his

policy. Old Republic, however, subsequently denied the claim, contending that the effective date of

the policy was the July 18, 2003 date, and that Salvador concealed adverse changes in his health

discovered prior to that time. This action followed.

III. DISCUSSION

Pursuant to Rule 45 (c) (3) (A), a court may quash or modify a subpoena that “requires

disclosure of privileged or other protected matter and no exception or waiver applies” or that

“subjects a person to undue burden.” Here, Old Republic enumerates five objections to the

subpoena, although some of them overlap.2

1. Control of the Documents

Sotelo initially served the subpoena on Swiss Re’s registered agent for service of process, CT

Corp., in Los Angeles. As Sotelo’s opposition recognizes, that subpoena was defective because CT

Corp. is outside this district and more than 100 miles from the place of trial or production. See Fed.

R. Civ. Proc. 45 (b) (2). Sotelo, however, also served the subpoena directly on the offices of Swiss

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 Sotelo’s opposition suggests that the San Francisco office is operated by Swiss

Reinsurance American Corporation, an “affiliate” of Swiss Re. Old Republic’s papers, however,

concede that the San Francisco office is an office of Swiss Re.

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Re in San Francisco.3

 Old Republic nevertheless argues that the subpoena should be quashed

because the responsive documents are located in its New York headquarters and therefore are not in

the “control” of CT Corp. or its San Francisco office. Old Republic relies on an Eleventh Circuit

case in which a Florida plaintiff sought to obtain documents from the U.S. Olympic Committee (a

non-party based in Colorado) by serving its statutory agent for service of process in Florida (also CT

Corp.). See Ariel v. Jones, 693 F.2d 1058 (11th Cir. 1982). The Ariel court held that the Florida

district court did not abuse its discretion by quashing the subpoena, given that, among other things,

the Olympic Committee had “minimal contacts” with Florida and maintained an agent for service of

process there only because it was required by statute to have an agent in every state. 693 F.2d at

1060-61.

If the present motion arose only from the subpoena initially served on CT Corp. in Los

Angeles, Ariel might be more instructive. Now, however, Sotelo has agreed to withdraw that

subpoena, and the question is not whether the documents can be said to be in “control” of CT Corp.,

but whether they are within the “control” of Swiss Re’s San Francisco office. There appears to be

no dispute that Swiss Re has a substantial presence in this district and that it has conducted business

here for decades under license from the California Department of Insurance. There is no reason not

to treat the meaning of “control” in this context as it is treated in any ordinary case. A corporate

entity with multiple offices generally must produce all responsive documents regardless of where

the documents are physically located. To treat each office as if it had control only of the documents

at that location would be unworkable. Accordingly, the fact that the documents may be located

elsewhere is not a sufficient basis to quash the subpoena served on Swiss Re’s San Francisco office.

2. Relevance

Although Rule 45 does not expressly refer to lack of “relevance” as a basis to quash or

modify a subpoena, requiring a party to produce wholly irrelevant documents would be an “undue

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 Under Rule 26 (b) (1) of the Federal Rules of Civil Procedure “relevant” discovery is

defined to include discovery “reasonably calculated to lead to the discovery of admissible evidence.” 

It is unclear why Old Republic treats the two phrases it uses separately.

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burden.” Here, Old Republic argues in separate sections of its briefs that the materials sought are

both “not relevant” and “ not reasonably calculated to lead to the discovery of admissible

evidence.”4

 Old Republic cites cases in which courts found that matters relating to reinsurance had

too little potential relevance to be discoverable in litigation regarding the underlying insurance

policies. See Rhone-Poulenc, supra, 139 F.R.D. 609; Potomac Electric Power Co. v. California

Union Ins. Co., 136 F.R.D. 1 (D.D.C. 1990). Rhone-Poulenc and Potomac Electric, however, both

involved coverage disputes where the central issue was the meaning of the policies’ terms and

exclusions. In that context, the Rhone-Poulenc court explained: “the contract of insurance embodies

the exclusive mutual agreement of the parties . . . Therefore, discovery concerning reinsurance

agreements to which the plaintiffs were not parties would . . . not assist in the determining of the

mutual intent of the parties.” 139 F.3d at 611 (internal citation omitted). Accordingly, the court

found that discovery regarding reinsurance matters should not be permitted until and unless “there

has been a finding by the District Court of ambiguity.” Id. at 612.

Rhone-Poulenc expressly distinguished National Union Fire Insurance v. Continental

Illinois Corp., 116 F.R.D. 78 (N.D.Ill., 1987), which held that communications between an insurer

and its reinsurers were discoverable in an action by the insurer to rescind the underlying policy

based on alleged material misrepresentations made by the insured. The National Union court

recognized that the communications between the insurer and the reinsurers were relevant within the

meaning of Rule 26 given the nature of the claims in the case. See 116 F.R.D. at 82-83.

The present case is much more similar to National Union than to either Rhone-Poulenc or

Potomac Electric. This is not a coverage dispute that turns on interpretation of the policy and the

parties’ mutual intent; rather the issues here relate to why Old Republic concluded that there was a

basis to rescind the policy and whether that conclusion was justified. Existing discovery has

revealed that there were at least some communications and documents exchanged between Old

Republic and Swiss Re regarding that topic. The materials requested in the subpoena are relevant

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 Old Republic also appears to contend that the subpoena is overbroad simply because it is

not limited in time. Since there is no reason to think that Swiss Re had dealings involving the

Sotelos other than the transaction at issue, this contention lacks merit.

ORDER DENYING MOTION TO QUASH SUBPOENA 

C -05-02238 RS 

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and are discoverable, if not privileged or otherwise protected.

3. Privilege

Old Republic contends that the subpoena should be quashed because its language is so broad

that responsive documents “may well include privileged information.” Although the subpoena

appears primarily directed at materials exchanged between Old Republic and Swiss Re, which would

not immediately appear to be privileged, it is conceivable that Swiss Re possesses some responsive

documents as to which it may legitimately assert a privilege. The remedy, however, is not to quash

the subpoena, particularly where no showing has been made that privileged materials exist. Rather,

Swiss Re must produce all non-privileged responsive documents and a privilege log with respect to

any documents it withholds under a claim of privilege. See Fed. R. Civ. Proc. 45 (d) (2).5

IV. CONCLUSION

The motion to quash is denied. Within 20 days of the date of this order, Swiss Re shall

produce all responsive non-privileged documents, and a privilege log identifying any documents

withheld under a claim of privilege or other protection.

IT IS SO ORDERED.

Dated: September 13, 2006 RICHARD SEEBORG

United States Magistrate Judge

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C -05-02238 RS 

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THIS IS TO CERTIFY THAT NOTICE OF THIS ORDER HAS BEEN GIVEN TO:

Kelly K. Brar kbrar@lordbissell.com, asuetsugu@lordbissell.com

Jeffrey Stephen Kravitz jkravitz@silverfreedman.com

Susan D. Pelmulder spelmulder@hotmail.com

Gary S. Rose , Esq gsroselaw@hotmail.com

Counsel are responsible for distributing copies of this document to co-counsel who have not

registered for e-filing under the Court's CM/ECF program. 

Dated: 9/13/06 Chambers of Judge Richard Seeborg

By: /s/ BAK 

Case 5:05-cv-02238-RS Document 36 Filed 09/13/06 Page 6 of 6