Most policies provide language requiring that examinations under oath are to be conducted separately, while not in the presence of any other insured. But what about when claims are litigated that were denied based on fraud related defenses—are the plaintiffs sequestered from one another during depositions? This is a good question and a VERY important practice pointer.
Depositions are regulated by the rules of court, not the insurance contract. The common practice in most types of cases is that parties are permitted to attend the depositions of other parties and nonparties. I suspect most attorneys are following this practice with respect to litigated claims which had been denied based on fraud.
However, when I was a younger version of me, I challenged this commonly accepted practice making some very favorable case law for insurers in Hanna v. Graphic Arts Mut. Ins. Co., 824 N.Y.S.2d 754 (Oneida Co. S. Ct. 2006). In that case one of the affirmative defenses was material misrepresentation in the presentment of the claim, that the plaintiffs had conspired to falsely inflate their damages.
I argued that the plaintiffs’ depositions (husband and wife) were to be conducted separately, not in the presence of the other, and that they should be prevented from communicating until both had testified. The plaintiffs countered that due process and the rules of discovery permit a party to be present at all phases of a legal proceeding – this is the way it has always been done.
The court noted that the plaintiffs are uniquely possessed with the underlying facts and their depositions are of supreme importance to the insurer’s defense to their claim. Granting my motion, the court said that the “Defendant is entitled to some leeway, and the relief it requests is reasonably related to a fair defense of the case. It is difficult to see how the Plaintiffs would suffer any real prejudice from the relief requested”.
The Court was guided by another decision, Matter of Estate of Czachor 137 A.D.2d 915 (3rd Dept. 1988)(a claim for personal services against an estate in a probate proceeding), which held that under appropriate circumstances, a court may exclude a party from a pretrial deposition. As the plaintiff’s interests were recognized to be virtually identical and each was represented by the same attorney, with these circumstances said to be prevailing, it was said that to allow each plaintiff to testify in the presence of the other would clearly work an unfair advantage in their favor. The Czachor court held that, “While trial courts are vested with broad discretion in supervising disclosure, in the interest of preserving respondent's right to the spontaneous, uncolored testimony of each petitioner, we find that separate depositions are in order”.
Accordingly, the Plaintiffs in Hanna were deposed separately and their attorney was directed not report the substance of the testimony of the first witness to the second to be deposed.
As such, if coverage for a claim is denied based on fraud related defenses and is subsequently litigated, be certain to direct your legal counsel that the plaintiffs are to be deposed separately, while not in the presence of any other plaintiff. It is an important opportunity to, among other things, test the consistency of their respective testimony.
If you would like a copy of either of these cases please email me at [email protected] and I will forward them to you. Have an issue? We will resolve it for you. Call me on my cell (716) 220-1478.