Court refuses to order the discovery of insurance policies - class action, aged care and COVID-19 fatalities

Agnello v Heritage Care Pty Ltd; Fotiadis v St Basil's Homes for the Aged in Victoria (No 2) [2023] VSC 653

The Victorian Supreme Court has refused to order the discovery of insurance documents, including insurance policies sought by plaintiffs in a representative proceeding for damages against two aged care facilities (the defendants) concerning the death of residents as a result of contracting COVID-19 whilst in the defendants’ care. The proceedings are one of many claims working their way through the Victorian courts in regard to COVID-19 related injuries and deaths.

The plaintiffs sought to obtain the discovery of insurance policies that may provide indemnity to the defendants on the basis that they were concerned about the capacity of the defendants to pay any amount of a settlement or judgment obtained in the proceedings. They sought to argue determining the level of insurance cover the aged care facilities had would be relevant to their assessment of their prospects of recovering damages from those entitled by way of settlement of judgment.

At the relevant time the insurer was not a party to the proceeding but was granted leave to intervene to be heard on this discovery application. The defendants opposed the production of insurance policies.

Following a ruling of the Judicial Registrar on 4 July 2023 who dismissed the discovery application there was a de novo hearing to a single judge of the Supreme Court.

The plaintiffs submitted that they were seeking insurance and financial documents to facilitate a settlement of the proceeding and to assist them in making decisions in regard to the reasonableness of any settlement. The plaintiffs relied on the relevant Court Rules in regard to permitting a party to obtain discovery of documents from another party (Rule 29) and provisions of the Civil Procedure Act 2010 (Vic), the Act which deals with the overarching obligations of parties in civil litigation including as it concerns disclosure and discovery.

Section 54 of the Act provides that unless the Court otherwise orders discovery of documents in a civil proceeding is to be in accordance with the rules of the Court. The plaintiff sought to invoke provisions of the Act to obtain Orders for the discovery of insurance documents which would not normally be permitted and had not been permitted in the past under the relevant Rule 29. 

The Act provides broad discretion to a Court to order discovery to satisfy the overarching purpose of the Act. The overarching purpose of the Act as stated in s 7 included a purpose to "facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute". The plaintiffs argued that given the broad powers in the Act the Court should exercise its discretion and order the production of the insurance policies which would help in settlement negotiations and to resolve the dispute. Insurance documents the plaintiffs argued would assist them in assessing the ability of the defendants to pay any settlement or judgment and would facilitate the mediation process. It was said that this was overall in the interests of justice, to enhance transparency in the resolution and conduct of the proceeding and mitigate risk to the plaintiffs. It also ensured that the Court's time was not wasted on litigation that turned out to be pointless.

Justice Keogh hearing the matter ruled in favour of the defendants and insurer. He found that discovery of insurance documents would not be permitted. 

His Honour took a traditional view of the purpose of discovery and found that only documents that relate to a question or fact in dispute on the pleadings between the parties must be discovered. He was not prepared to provide an expansive interpretation of the Act and make an order of the kind sought by the plaintiffs. His Honour considered that there was nothing in the text of the Rules or the Act for extending the court’s powers to order discovery of documents that are not related to the facts in issue. He considered that insurance documents are confidential to the defendants and insurer and that parties should not be obliged to disclose this private information unless justice requires. He found that there was generally no right of discovery of financial and insurance documents simply for the purpose of examining a defendant’s means, in order to decide whether to settle or proceed with their case. 

His Honour noted that discovery of insurance policies in the circumstances of this claim was likely to cause an asymmetry in bargaining positions that would prejudice the defendants and likely the insurer. In other words, the plaintiffs would achieve an advantage over the defendants. Accordingly, His Honour found the Act and case management principles did not justify the production of insurance policies in these circumstances.

As to the plaintiffs' submissions that they required the insurance policies to assess any offer to be made at mediation and to advise the Group Members, His Honour noted that a party at a mediation can challenge assertions made by a defendant about a lack of financial means or insurance, made to justify the quantum of an offer and similarly  it is in the interests of the party making an offer to establish the truth of the asserted lack of financial means to encourage acceptance of the offer. It is in the interests of the party making the offer to produce sufficient information to persuade a plaintiff of their capacity or non-capacity to pay a settlement. This is a common approach to negotiations in our experience.   

As to the risk that a defendant may positively mislead a party about its capacity to pay a settlement of judgment, in circumstances where a plaintiff cannot verify such assertions with the benefit of insurance policies, His Honour noted that the overarching obligations of the Act required the parties in civil proceedings to act honestly and not mislead or deceive another party. We know the court has a wide discretion under the Act to penalise a party if such conduct was established. Further, there are relevant professional conduct rules applicable to solicitors and barristers in this regard.

The decision is welcome news for insurers and is consistent with other decisions made in federal and state courts on the issue. However, it should be noted that the insurer was not a party to the proceeding. There was no issue between insurer and insured which may justify an Order for the production of insurance policies.