Reinsurance Focus

Two courts recently addressed discovery issues relating to reinsurance.

• In Spirco Environmental, Inc. v. American Int’l. Specialty Lines Ins. Co., Case No. 4-1437 (USDC E.D. Mo. Aug. 30, 2006), a coverage action, the Court denied a motion to compel discovery of information about reserve funds and reinsurance, on the basis that they were subject to work product protection and of limited relevance.
• Sotelo v. Old Republic, Case No. 05-02238 (USDC N.D. Cal. Sept. 13, 2006), involved a claim on a life insurance policy for breach of contract and bad faith. The Court denied a motion to quash a subpoena issued to a reinsurer of the risk, finding that the requested information was discoverable and not privileged.

In a non-insurance matter, the Supreme Judicial Court of Massachusetts has held that a panel of arbitrators convened under the rules of the American Arbitration Association had authority to impose monetary sanctions for discovery abuse, finding that they had the inherent authority to impose monetary sanctions and enter other orders relating to noncompliance with appropriate discovery orders, in order to facilitate their adjudication of claims effectively, in the manner contemplated by the arbitration process. Superadio Limited Partnership v. Winstar Radio Productions, LLC, 446 Mass. 330, 844 N.E.2d 246 (Mass. 2006).

The United States Court of Appeals for the Second Circuit, in a non-reinsurance matter, has held that the Federal Arbitration Act does not authorize nationwide service of process of third-party subpoenas. This opinion is of particular interest since it exposes a jurisdictional gap: the FAA provides that subpoenas issued by arbitrators may be enforced by the District Court in which the arbitration panel sits (the Southern District of New York in this matter), yet that Court did not have jurisdiction over the recipient of the subpoena, which was located in Texas, due to the failure of Congress to provide for nationwide jurisdiction. The Court indicated that this was a problem for Congress to address, and that parties should consider the likely sources of third-party evidence when deciding where to arbitrate disputes. Dynegy Midstream Services, LP v. Trammochem, Case No. 05-3544 (2d Cir. June 13, 2006).