NO. 4-03-0788

IN THE APPELLATE COURT

OF ILLINOIS

FOURTH DISTRICT

Plaintiff, Jill Manns, filed a negligence action againstdefendant, Theodore Briell, alleging personal injuries arising out ofan automobile accident. During pretrial discovery, plaintiff soughtdocuments and information pertaining to defendant's personal financial affairs. Defendant refused to answer, contending the documentsand information sought were irrelevant and immaterial to any issue inthe lawsuit and are not subject to discovery until a judgment isentered against him exceeding the limits of his liability insurancepolicy. The trial court ordered defendant to produce the documentsand information requested and held defendant's attorney in contemptof court for declining to produce the requested discovery materials. Defendant and his attorney appeal from the court's order requiringdiscovery and from the entry of the contempt citation. We reverse.

I. BACKGROUND

Plaintiff's complaint in this case consists of one count,seeking damages for personal injuries plaintiff allegedly sustainedin an automobile accident involving vehicles driven by plaintiff anddefendant on February 15, 2002. The complaint is based on negligenceand seeks only compensatory damages. Defendant denied liability.

On October 1, 2002, plaintiff propounded interrogatoriesand a request to produce documents. The interrogatories containedmany of the standard interrogatories approved in Illinois for matrimonial cases and requested detailed information on defendant'ssources of income, real estate holdings, business interests, bankaccounts, investments, securities, life insurance policies, retirement accounts, debts, and personal property ownership. The requestto produce documents sought copies of defendant's federal and stateincome-tax returns and all documents indicating his income, realproperty interests, investments, securities, retirement accounts, andpersonal property interests.

Defendant objected to these discovery requests on thebasis the information sought was not relevant or material to anymatter at issue in the lawsuit and would not become discoverableunless plaintiff obtained a judgment against him that exceeded thelimits of his liability insurance policy. On October 10, 2002, heanswered the remaining interrogatories and requests to produce thatdid not seek personal financial information.

On October 23, 2002, plaintiff filed a motion to compelanswers to the remaining interrogatories and production requests. OnDecember 19, 2002, the trial court granted the motion to compel,finding the information sought in the supreme court- approved matrimonial interrogatories and in plaintiff's request to produce wasrelevant to the pending personal injury negligence case.

The trial court ordered defendant to respond within 28days. On January 10, 2003, the trial court entered a case managementorder that set August 30, 2003, as the date by which all writtendiscovery requests were to be answered.

On May 14, 2003, defendant filed a motion for reconsideration of the trial court's order of December 19, 2002, or, alternatively, for a contempt citation and $1 fine for purposes of facilitating appellate review of the discovery order. On June 5, 2003, thetrial court denied defendant's motion to reconsider and took therequest for a contempt order and fine under advisement. On August13, 2003, the trial court granted the request for a contempt orderand fine, finding defense counsel in indirect civil contempt andordering her to pay a $1 fine for purposes of facilitating appellatereview of the court's previous discovery order under Supreme CourtRule 304(b)(5) (155 Ill. 2d R. 304(b)(5)) and certified the issue forappellate review. This appeal followed.
 

II. ANALYSIS

Defendant contends on appeal he may not be compelled todisclose information on his personal financial affairs prior to ajudgment being entered against him in a personal injury case seekingonly compensatory damages. He argues his personal finances are notrelevant to the subject matter in this case; the legislature hasprovided means for discovery only after a final judgment is enteredagainst him; and his right to privacy outweighs the present interestplaintiff has in his personal finances.

Supreme Court Rule 201 establishes the scope of permissible pretrial discovery and states a party may obtain through discovery:

"[A]ny matter relevant to the subject matterinvolved in the pending action, whether it relates to the claim or defense of the partyseeking disclosure or of any other party,including the existence, description, nature,custody, condition, and location of anydocuments or tangible things, and the identityand location of persons having knowledge ofrelevant facts." 166 Ill. 2d R. 201(b)(1).

The Illinois Supreme Court has interpreted Rule 201(b)(1)to be

"founded on the basic premise that theobjective of discovery is the 'expeditious andfinal determination of controversies inaccordance with the substantive rights of theparties.' [Monier v. Chamberlain, 35 Ill. 2d351, 357, 221 N.E.2d 410, 415 (1966)]. Thus,discovery should only be utilized to'illuminate the actual issues in the case.' [Sarver v. Barrett Ace Hardware, 63 Ill. 2d454, 460, 349 N.E.2d 28, 30, (1976)]." Owen v.Mann, 105 Ill. 2d 525, 530, 475 N.E.2d 886, 890(1985).

A trial court is given great latitude in determining thescope of discovery, and discovery orders will not be disturbed absentan abuse of discretion. In re Marriage of Daniels, 240 Ill. App. 3d314, 324, 607 N.E.2d 1255, 1261 (1992).

Rule 201 allows pretrial discovery of two types ofinformation: that which is admissible at trial and that which leadsto what is admissible at trial. Chamberlain, 35 Ill. 2d at 357, 221N.E.2d at 415; City of Bloomington v. Quinn, 114 Ill. App. 2d 145,147, 252 N.E.2d 10, 11 (1969).

A trial court does not have discretion to order discoveryof information that does not meet the threshold requirement ofrelevance to matters actually at issue in the case. For purposes ofdiscovery, relevance includes not only that which is admissible attrial, but also that which leads to admissible evidence. TTX Co. v.Whitley, 295 Ill. App. 3d 548, 557, 692 N.E.2d 790, 797 (1998). Discovery should be denied where insufficient evidence suggests therequested discovery is relevant. TTX Co., 295 Ill. App. 3d at 557,692 N.E.2d at 797. The information sought by plaintiff in this casewas clearly not admissible at trial as the wealth and financialstanding of the parties are irrelevant and prejudicial in personalinjury actions, where the only damages recoverable or sought arecompensatory in nature. Lorenz v. Siano, 248 Ill. App. 3d 946, 953,618 N.E.2d 666, 671 (1993).

Only two matters are at issue in the pending litigation:liability for the collision and the amount of damages, if any,suffered by plaintiff as a result of defendant's negligence. Defendant's financial information is not relevant to either issue. Plaintiff does not contend the information she seeks is relevant oradmissible as to either liability or damages nor does she argue thediscovery of such information will lead to other information that isrelevant and admissible at trial on those issues. Instead, plaintiffinformed the trial court and now reiterates on appeal the informationshe seeks is to assist her in formulating a settlement demand.

Plaintiff cites to no case that holds "relevance" forpurposes of pretrial discovery includes information that mightindicate whether a defendant has the financial ability to pay ajudgment or settlement. Instead, she argues the purpose of discoveryis to enable attorneys to better prepare and evaluate their cases(see People ex rel. Terry v. Fisher, 12 Ill. 2d 231, 239-40, 145N.E.2d 588, 593 (1957); Biehler v. White Metal Rolling & StampingCorp., 30 Ill. App. 3d 435, 441-42, 333 N.E.2d 716, 721 (1975)) or isintended not only as a mechanism for ascertaining the truth but alsofor the promotion of either a fair settlement or fair trial. SeeOstendorf v. International Harvester Co., 89 Ill. 2d 273, 282, 433N.E.2d 253, 257 (1982).

Plaintiff argues defendant's financial resources arerelevant to how she prepares and evaluates the value of her case,especially for potential settlement. She contends as of May 2003 shehad suffered injuries that caused her to incur in excess of$32,801.64 in medical bills and over $20,000 in lost wages. Medicaltreatment and therapy remain ongoing. Plaintiff argues the value ofher claim will probably exceed the $100,000 limits of defendant'sliability insurance coverage. She contends whether or not defendanthas other sources of income or financial resources available impactsher ability to evaluate her case for settlement. Plaintiff's concernis that she could endure a costly, time-consuming trial to obtain anexcess judgment she could not collect. Therefore, she would like toknow ahead of time whether it is worth her while to prepare for trialor demand the policy limits and settle for that amount.

While the courts in Biehler and Ostendorf stated thepurpose of discovery is to enable an attorney to better prepare andevaluate his case, they were referring to an attorney's ability toprepare and evaluate the strengths and weaknesses of his case interms of liability, not to the future collectability of a judgment. In Biehler, the defendant failed to comply with discovery orders thatprevented the plaintiffs from learning about prior accidentsinvolving stepladders manufactured by the defendant similar to theladder that caused the plaintiffs' injuries. Biehler, 30 Ill. App.3d at 441, 333 N.E.2d at 721. The court found the defendant'sfailure to comply with discovery orders prevented the plaintiffs fromestablishing an element of liability that the defendant knew orshould have known of the defective design or manufacture. Biehler,30 Ill. App. 3d at 441, 333 N.E.2d at 721. The disputed discoveryhad no relation to the defendant's ability to pay a judgment orsettlement.

In Ostendorf, the issue before the court was the proprietyof the trial court's dismissal of a petition to vacate judgment. Thepetition asserted the respondent fraudulently concealed evidence thatwould have enabled the petitioner to prove the existence of a designdefect and would have prevented entry of judgment for the respondent. Ostendorf, 89 Ill. 2d at 278, 433 N.E.2d at 255. The court had nooccasion to consider whether a defendant's personal financialinformation is "relevant" in a personal injury case seeking onlycompensatory damages.

Finally, plaintiff relies on our supreme court's decisionin Fisher to bolster her argument. In Fisher, the supreme court wasasked to determine if the existence and amount of the defendant'sliability insurance were discoverable. Fisher, 12 Ill. 2d at 231-32,145 N.E.2d at 589. The court noted limiting discovery to thespecific confines of the pleadings would be "divorced from therealities of litigation" and found insurance coverage was "relevant,if not indispensable" to allowing a plaintiff to be fully apprised ofhis adversary. Fisher, 12 Ill. 2d at 236-37, 239, 145 N.E.2d at 592,593. In reaching its decision, the court noted it was obligated togive the discovery rules an interpretation consistent with theiravowed purpose. "They were adopted as procedural tools to effectuatethe prompt and just disposition of litigation[] by educating theparties in advance of trial as to the real value of their claims anddefenses." Fisher, 12 Ill. 2d at 236, 145 N.E.2d at 592.

In Fisher, the court was presented with the argument thatif the disclosure of the existence and amount of liability insurancein discovery were required, a defendant could also be required todisclose his financial resources. But the court disagreed,concluding this argument was answered by Illinois statutoryprovisions that confer an interest in liability policies on everymember of the public negligently injured and by the uniquecharacteristics of such a policy:

"Section 388 of the Insurance Code (Ill.Rev. Stat. 1955, chap. 73, par. 1000[ (now 215ILCS 5/388 (West 2002))] requires certainstandard provisions to be included in liabilitypolicies affording injured persons a right ofaction against the insurer if execution againstthe insured is returned unsatisfied; section58(k) of the Motor Vehicle Act (Ill. Rev. Stat.1955, chap. 95 1/2, par. 58k,) provides certainminimum liability insurance coverage for motorvehicles; and section 16 of the Truck Act (Ill.Rev. Stat. 1953, chap. 95 1/2, par. 253,)requires motor carriers to have specifiedliability insurance policies before permits maybe issued. Moreover, we have construed section388 of the Insurance Code to be declarative ofthe public policy of this State to protectpersons injured by the negligent operation ofmotor vehicles, and as conferring rights whichcannot be defeated after the accident by theconcerted action of the insured and theinsurer. [Citation.] It is clear that thelegislature, by virtue of the foregoingenactment, has placed liability insurance in acategory distinct from the insured's otherassets so far as persons injured by thenegligent operation of his motor vehicle areconcerned.

Thus, under our statutes *** liabilityinsurance is not merely a private matter forthe sole knowledge of the carrier and theinsured, but is also for the benefit of personsinjured by the negligent operation of insured'smotor vehicle. *** [S]uch statutoryrequirements render insurance policies relevantto the litigation against the insureddefendant, in that they apprise injuredplaintiffs of rights in the matter oflitigation of which they might not otherwiseavail themselves. ***

Unlike other assets, a liability insurance policy exists for the single purpose of satisfying the liability that it covers. It has no other function and no other value." Fisher, 12 Ill. 2d at 237-38, 145 N.E.2d at 592-93.

The court held, on the basis of this analysis, theexistence and amount of defendant's insurance are subject to pretrialdiscovery because they are deemed to be related to the merits of thematters in litigation as they (1) apprise the plaintiff of rights,otherwise unknown, arising from the automobile accident; (2) comportwith the public policy of the State of Illinois to protect personsinjured by the negligent operation of motor vehicles; and (3) allowfor a realistic appraisal of cases and a sounder basis forsettlement. Fisher, 12 Ill. 2d at 239, 145 N.E.2d at 593.

Plaintiff contends the same reasoning employed in Fisheron pretrial discovery of a defendant's liability insurance coverageshould be employed in this case on the defendant's financial status. She argues limiting discovery to the specific confines of thepleadings would be divorcing it from the realities of litigation asthe Fisher court noted, finding insurance coverage was "relevant, ifnot indispensable" to allowing a plaintiff to be fully apprised ofhis adversary. Fisher, 12 Ill. 2d at 236-37, 239, 145 N.E.2d at 592,593. Plaintiff argues, likewise, defendant's financial resources arerelevant to how she prepares and evaluates the value of her case,especially for potential settlement. As the court in Fisherrecognized with regard to the existence and extent of insurancecoverage, knowledge of a defendant's financial assets is important toa party to determine whether a judgment will be worthless if itexceeds insurance policy limits. Such knowledge would beindispensable in realistically appraising a case for either trial orsettlement.

While we agree such knowledge would be very helpful to aplaintiff, we do not agree she has a right to discover it prior totrial. There are important differences between a liability insurancepolicy and a defendant's personal financial assets that do notjustify extending the holding in Fisher to pretrial discovery of adefendant's financial affairs. The difference between a defendant'sfinancial assets and a liability insurance policy was explained inFisher, where the court noted that liability insurance exists solelyfor the purpose of protecting a party injured by the negligence ofthe policyholder. Fisher, 12 Ill. 2d at 238, 145 N.E.2d at 593. Certain rights are created by liability insurance policies, bolsteredby the laws of this state requiring drivers to have such policies,which inure to the benefit of injured parties. That is the reasonthose policies are relevant to litigation involving the negligentoperation of motor vehicles. As for a defendant's financial assets,a plaintiff only has rights in those after a judgment is entered. Then a plaintiff, because she is a judgment creditor, clearly has anenforceable right in a defendant's assets and may proceed insupplementary proceedings to discover that defendant judgmentdebtor's assets. See 735 ILCS 5/2-1402 (West 2002); 134 Ill. 2d R.277(d).

As we have seen, the relevancy requirements of Rule 201are that information that may be discovered prior to trial beadmissible in evidence or lead to admissible evidence. The court inFisher recognized an exception to that requirement that does notapply here. It is the established public policy in this state topermit pretrial discovery on a defendant's liability insurancepolicy, but no comparable public policy favors discovery of adefendant's financial assets before a judgment has been enteredagainst him where only compensatory damages are sought. (Asdefendant concedes, when punitive damage claims are properly inissue, evidence of a defendant's net worth becomes relevant andadmissible. Fopay v. Noveroske, 31 Ill. App. 3d 182, 200, 334 N.E.2d79, 93 (1975).) It is a normal hazard of all tort litigation that adefendant may not own any assets when he becomes a judgment debtor. To require the pretrial disclosure of a defendant's assets, even asan aid to settlement, would be a serious invasion of privacy. Because no public policy requires disclosure of those assets, adefendant's right to privacy in his financial affairs is paramount.

We find the trial court's order requiring defendant tocomply with plaintiff's interrogatories and request to produce so faras they relate to his financial affairs was an abuse of discretion. We are mindful of the utility pretrial disclosure of a defendant'sfinancial assets would have in settlement negotiations with theresulting effect of freeing up court time and space, but the properforum for addressing this issue would be in the supreme court rules.

III. CONCLUSION

As we are reversing the trial court's discovery order inthis case, we also reverse the contempt citation and fine assessedagainst defendant's trial counsel. See In re Marriage of Bonneau,294 Ill. App. 3d 720, 723, 691 N.E.2d 123, 127 (1998).

For the foregoing reasons, we reverse the trial court'sjudgment.

Reversed.

STEIGMANN, J., concurs.

MYERSCOUGH, J., dissents.

I respectfully dissent. Supreme Court Rule 201 permitsbroad discovery of "any matter relevant to the subject matter ***whether it relates to the claim or defense of *** any *** party,including the existence *** of any *** things." 166 Ill. 2d R.201(b)(1). Certainly the ability to pay damages is relevant toliability, whether in the form of insurance or assets. The supremecourt has interpreted the rule's purpose as "'expeditious and finaldetermination of controversies'" (Owen, 105 Ill. 2d at 530, 475N.E.2d at 890, quoting Chamberlain, 35 Ill. 2d at 357, 221 N.E.2d at415) and has given the trial court great latitude in determining thescope of discovery (Daniels, 240 Ill. App. 3d at 324, 607 N.E.2d at1261). Moreover, the supreme court has rejected as authority thosecases limiting pretrial discovery to matters admissible in evidence.

"In light of this approach, we must rejectat once as authority those cases limitingpretrial discovery to matters admissible inevidence [citation] as being contrary to boththe terms and intent of the [r]ule. We do notimply that answers to interrogatories can bebrought to the attention of the jury." Fisher,12 Ill. 2d at 237, 145 N.E.2d at 592.

Based upon the facts of this case, the trial court did notabuse its discretion by requiring defendant to disclose his financialinformation. The trial court should nonetheless either issue aprotective-conduct order limiting dissemination of the financialinformation or conduct an in camera inspection and permit onlylimited disclosure of the information to plaintiff. The partiesconcede plaintiff suffered actual damages of at least $50,000 anddefendant has policy limits of $100,000. Given these facts,disclosure of defendant's financial condition may expedite settlementas well as prevent plaintiff's attorney from committing malpracticeand the insurance company from incurring a bad-faith refusal tosettle in the event of an excess verdict claim.

"Such knowledge, furthermore, would also leadto more purposeful discussions of settlement,and thereby effectuate the dispatch of courtbusiness. This aspect is most significant interms of effective judicial administration incoping with today's congested dockets which arelargely attributable to the increasing volumeof personal[-]injury litigation." Fisher, 12Ill. 2d at 239, 145 N.E.2d at 593.

Moreover, the majority concedes the value of discovering adefendant's financial condition. The majority, however,distinguishes financial information from insurance limits on theground that insurance exists solely to protect a defendant fromliability to injured parties by statute. This is a distinctionwithout merit. The majority ignores the public policy set forth inthe Illinois Safety and Family Financial Responsibility Law (625 ILCS5/7-101 through 7-708 (West 2002)), which requires drivers to possessinsurance or financial assets sufficient to cover damages in case ofan accident on our roads. Clearly, sufficient financial assets topay for damages to injured parties are required in Illinois absentinsurance.

"The Administrator as soon as practicableafter the receipt of the report, required to befiled under [s]ections 11-406 and 11-410, of amotor vehicle accident occurring within this[s]tate and that has resulted in bodily injuryor death of any person or that damage to theproperty of any one person in excess of $500was sustained, shall determine:

1. Whether [s]ection 7-202 ofthis Code requires the deposit ofsecurity by or on behalf of anyperson who was the operator or ownerof any motor vehicle in any mannerinvolved in the accident and;

2. What amount of securityshall be sufficient to satisfy anypotential judgment or judgments formoney damages resulting from theaccident as may be recovered againstthe operator or owner, which amountshall in no event be less than $500." 625 ILCS 5/7-201 (West 2002).

However, in Fisher, the supreme court makes a curiousdistinction between the discoverability of assets and an insurancepolicy, commenting that there are roads of discovery of a defendant'sassets but not the existence of an insurance policy.

"Ordinarily a plaintiff has many sources ofinquiry by means of which he can appraise thelikelihood that the judgment he seeks will beenforceable. In the case of an insurancepolicy, however, all the customary channels arecut off." Fisher, 12 Ill. 2d at 238-39, 145N.E.2d at 593.

I see no distinction between the discoverability of an insurancepolicy and a bank account, retirement account, or investments instocks and bonds. Insurance companies, banks, and investmentcompanies are all bound by privacy laws from disclosing a party'sassets without a release. Under the facts of this case, plaintiffsare entitled to discovery of the defendant's financial condition, andthe trial court did not abuse its discretion in so orderingdiscovery. For these reasons, I would affirm the trial court.