Selective Way Ins. Co. v. Schulle, Western District of Virginia

by Sands Anderson PC

The Western District of Virginia reaffirmed the standard for production of information during discovery, as well as the importance of fair mediation, in its recent decision of Selective Way Insurance Co. v. Schulle.  Selective Way filed a declaratory judgment action seeking a determination of its obligation to defend or indemnify its insured, Lake of the Woods Volunteer Fire and Rescue Company, Inc., in a wrongful death action that had been brought by the decedent’s representative.  The underlying wrongful death action resulted from a boating accident where the decedent was struck by a pontoon boat propeller. The pontoon boat was being operated by Mr. Schulle, a volunteer providing boat rides in exchange for donations to the Lake of the Woods Volunteer Fire and Rescue Company, Inc. The wrongful death action named several other parties as defendants, and settlement agreements had been reached between the decedent’s representative and various co-defendants.

Selective Way filed a Motion to Compel those confidential settlement agreements between the personal representative and other defendants in the wrongful death action, which was requested in advance of mediation.  Judge Glen Conrad declined to require a heightened showing of relevance for such confidential settlement information to be disclosed and instead determined that Rule 26(b)(1)’s “liberal standard of relevance” would govern the inquiry.  The confidential settlements therefore did not need to be admissible at trial, so long as it bore relevance to a party’s claim or defense. 

 Judge Conrad granted Selective Way’s Motion to Compel, holding that the settlement information of joint tortfeasors is relevant to the non-settling defendants on several fronts.  First, Selective Way would be entitled to know the amount of the setoff it would receive pursuant to Va. Code § 8.01-35.1.  Va. Code § 8.01-35.1 provides in part:

“When a release or a covenant not to sue is given in good faith to one of two or more persons liable for the same injury to a person or property, or the same wrongful death:

 1. It shall not discharge any other person from liability for the injury, property damage or wrongful death unless its terms so provide; but any amount recovered against the other person or any one of them shall be reduced by any amount stipulated by the covenant or the release, or in the amount of the consideration paid for it, whichever is the greater.”

Thus, Selective Way should be permitted to know the amount the personal representative had recovered in order to assess its continued exposure.  Moreover, the language of the release itself, and not just the amount of the settlements, is relevant to establish whether Selective Way or its insured was discharged from liability. 

The Court also relied on the upcoming mediation to support its position that the settlement information should be produced, to allow the remaining parties to “evaluate their risks in continuing with the litigation,” which may foster settlement of the claims with the remaining parties. 2014 U.S. Dist. LEXIS, at *6 (citation omitted).

This decision affirms the distinction between “relevance” and “admissibility” during the course of discovery.  Relevant information is much broader than that which will be admitted at trial.  The information sought to be disclosed may be relevant not only to the claims or defenses, but in a party’s evaluation of the potential for settlement.  The court’s consideration of the parties’ upcoming mediation also underscores a desire that settlement negotiations be meaningful. The parties should have the information they need in order to evaluate those claims fully and fairly.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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