On August 23, 2017, the Second Appellate District of the California Court of Appeal reaffirmed the principle that even in the midst of coverage litigation filed by the insured, insurance companies must still “do no harm” to their insured’s interests. In Riddell, Inc. v. Superior Court, 2017 WL 3614305 (Cal. App. 2017), the court held that a liability insurance company should not be allowed to pursue discovery against its insured in a coverage lawsuit, even one filed by the insured, if that discovery might prejudice the insured in ongoing, underlying third-party litigation. Insurance companies cannot put their litigation interests ahead of their insured’s interests in defending against underlying litigation.
The case involves a dispute over coverage for underlying lawsuits against Riddell, alleging that former professional football players “suffered long-term neurological damage from repeated head injuries as a result of wearing Riddell helmets while playing football.” Id. at *2. The underlying lawsuits for the most part have been consolidated in a federal MDL proceeding, and all discovery in the MDL proceeding has been stayed while certain issues are being resolved. Riddell filed suit against its insurers, claiming they owe it defense and indemnity coverage for the underlying actions. Id.