New California Law Affecting Insurance Companies
New California Law Affecting Insurance Companies Which Have Exclusive Agreements With Court Reporters or Guidelines Requiring Use of a Particular Court Reporting Service
Effective January 1, 2016, when a notice of deposition is served in a lawsuit pending in California state court, the noticing party must disclose (1) the existence of any agreement between the noticing party or third party financing the litigation with a specific court reporter or court reporting service for any service beyond the noticed deposition, or (2) the existence of any requirement imposed by the party or third party financing the litigation that the attorney use a particular court reporter or court reporting service.
Specifically, Assembly Bill 1197 amended California Code of Civil Procedure section 2025.220 to require the following:
a) A party desiring to take the oral deposition of any person shall give notice in writing.
The deposition notice shall state all of the following:
(8)(A) A statement disclosing the existence of a contract, if any is known to the
noticing party, between the noticing party or a third party who is financing all or part of the action and either of the following for any service beyond the noticed deposition:
(i) The deposition officer.
(ii) The entity providing the services of the deposition officer.
(B) A statement disclosing that the party noticing the deposition, or a third
party financing all or part of the action, directed his or her attorney to use a particular officer or entity to provide services for the deposition, if applicable.
The new requirements seek to address issues of actual or perceived impartiality of court reporters, who are judicial officers for purposes of depositions.
The first requirement is intended to address situations where a court reporting agency has potentially curried favor with a law firm by providing “gifts,” such as sports or concert events tickets, to the lawyers or support staff who utilize that court reporting service on a routine basis. By requiring disclosure of such arrangements, the intended effect is to eliminate and prevent “kickback” arrangements so that court reporters are selected based on their rates and services, rather than on the nature of the gifts they may bestow on the lawyers or law firms which routinely use their services.
The second requirement is intended to address the rise in the use of exclusive or preferential contracts between corporate providers of deposition services and companies, such as insurance companies, which are frequent parties to litigation. The concern is that the deposition officer may be “co-opted” or may be financially incentivized to favor the party either because the court reporter or his or her employer has an exclusive or preferential service contract with a party or an insurance company financing the party. The disclosure requirement thus seeks to increase the faith and confidence in the impartiality of the deposition reporting process.
The imposition of the new disclosure requirements is also intended to ensure fairness and prevent cost-shifting. Where there are financial arrangements for reduced pricing of transcripts or extra copies of transcripts in exchange for an agreement to use that court reporter or reporting agency exclusively, the cost is shifted to those parties without such arrangements. While such arrangements are not prohibited, the new requirements are intended to bring transparency to and thereby disincentivize the practice.
This new disclosure requirement directly affects insurance companies having exclusive arrangements with a court reporter or court reporting service or guidelines that require defense counsel or coverage counsel to use the services of a specific court reporting agency. This disclosure “shall” be made in the deposition notice.
Insurance companies should be aware that the disclosure of the agreements with a court reporting service provider or requirements to use a particular service provider will be required going forward and the agreement or practice may put at issue the impartiality of the “deposition officer.” If the impartiality of the court reporter or the reporting agency is challenged either before or after a deposition, and the deposition nonetheless proceeds as noticed, the accuracy or fairness of the transcript may be called into question, particularly if a dispute arises over whether the transcript accurately reflects what was said or happened at the deposition.
While the ramifications of any objection to the use of the court reporter after the requisite disclosures are made are as yet unclear, one potential result is the exclusion of the deposition testimony at the time of trial or some type of limiting instruction suggesting that the deposition testimony may be treated with suspicion. Needless to say, the potential impact of the party’s litigation success, particular in the case of an insurance company providing a defense to an insured, is a good reason for an insurance company to reevaluate the benefits versus the potential costs of continuing with an exclusive or preferential court reporting arrangement.
About the Author
Cheryl Orr is a partner with Musick, Peeler & Garrett in its Los Angeles office. Her full bio and contact information can be found at: http://musickpeeler.com/professionals/bio.cfm?id=72
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