Reinsurance Focus

The judgment was entered in a class action by plaintiffs who lost their tuition payments for computer training programs at schools that abruptly closed in 2009. In attempting to collect on the judgment, plaintiffs served subpoenas on the schools’ insurers. Overruling objections to the relevance of the documents sought by the subpoenas, the magistrate compelled substantial discovery, including reinsurance policies and information, subject to a procedure where the insurer must verify “the accuracy and completeness of all the searches performed” by way of an affidavit and a subsequent deposition. The district court judge affirmed the decision of the magistrate, and rejected argument that the court lacked jurisdiction over garnishment proceedings. Smith v. Computertraining.com, Inc., Case No. 2:10-cv-11490 (USDC E.D. Mich. Sept. 26, 2014 & Dec. 29, 2014).

This post written by Michael Wolgin.

See our disclaimer.

A federal district court has ordered Westchester Insurance to produce all files and documents in its possession evidencing any reinsurance agreements or related reinsurance communications that pertain to the insured’s policy or to the claim at issue in the litigation. The court ordered the production after the plaintiff insured moved to compel Westchester to produce reinsurance information and several other items of discovery. The court reasoned that where, as here, the insured brings a bad faith action against its insurer, reinsurance documents are relevant and discoverable. Leevac Shipbuilders LLC v. Westchester Surplus Lines Insurance Co., Case No. 2:14-cv-00399 (USDC W.D. La. Jan. 15, 2015).

This post written by Renee Schimkat.

See our disclaimer.

This case was brought by the cedent, Michigan Millers Mutual Insurance Co., seeking indemnity and expense payments arising from various underlying lawsuits, under a Casualty Excess Reinsurance Agreement. A discovery dispute arose when Michigan Millers failed to comply with its repeated promises to produce a substantial amount of electronically stored material. In an order awarding attorney’s fees to the defendant, reinsurer Westport Insurance Corp., the court found that Michigan Millers delayed for months, and then, “compliance was obtained only after Westport filed its motion to compel” on the eve of the scheduled hearing. Michigan Millers Mutual Insurance Co. v. Westport Insurance Corp., Case No. 1:14-cv-00151 (USDC W.D. Mich. Nov. 7, 2014).

This post written by Michael Wolgin.

See our disclaimer.

Federal Rule of Civil Procedure 26(a)(1)(A)(iv) requires the disclosure of certain insurance agreements as part of the obligations of a party to make required initial disclosures. Under what circumstances might that provision require the disclosure of reinsurance agreements? John Camp discusses that issue in a Special Focus feature.

This post written by Rollie Goss.

See our disclaimer.

A federal judge in New Jersey recently granted an ex parte application for issuance of subpoenas for use in a London arbitration. The court’s basis for the ruling was 28 U.S.C.A. § 1782, the federal statute titled “Assistance to Foreign and International Tribunals and to Litigants Before Such Tribunals.” Without discussion, the court concluded that a proceeding before the London Maritime Arbitrators Association constitutes a “foreign tribunal” for the statute’s purposes. The court found that all of the statutory factors had been met and that the discretionary factors weighed in favor of issuing the subpoenas. In re Application of Owl Shipping, LLC & Oriole Shipping, LLC, No. 14-5655, 2014 WL 5320192 (D.N.J. filed Oct. 17, 2014).

This post written by Catherine Acree.

See our disclaimer.

An Iowa federal district court addressed the alleged privileged relationship between an insurer and its reinsurer in the context of two discovery requests involving communications between Progressive Casualty Insurance Company and its reinsurers. Progressive disputed coverage under a directors and officers policy issued to its insured, Vantus Bank, following a suit by the FDIC against Vantus Bank’s directors and officers.

The first discovery issue involved Progressive-redacted portions of pre-litigation communications with its reinsurers on the basis of attorney-client and work-product privileges in response to the FDIC’s discovery requests. Progressive argued the communications contained opinion work-product information pertaining specifically to anticipated, and ultimately filed, coverage litigation involving Vantus, its officers and directors, and the FDIC. The documents included litigation and mediation strategies and reserve information which had previously been held as protected from disclosure. In response, the FDIC claimed the documents were prepared in the ordinary course of business and therefore not protected. Both the court disagreed with Progressive, holding that the documents were not protected from discovery because were not prepared in anticipation of litigation nor did they contain the lawyer’s mental impressions. The court cited Progressive’s admission that the documents were prepared in the ordinary course of business; that the documents at issue were in the nature of business planning documents; that neither Progressive nor the reinsurers were involved in giving legal advice or in mapping litigation strategy; and the communications served numerous business functions. The court also held that the same rationale applied to specific portions of the documents which Progressive argued were protected even if the entire document was not.

The second discovery issue concerned the production of certain documents which Progressive asserted were protected by the attorney-client privilege but which Progressive had previously disclosed to its reinsurers and brokers. Progressive asserted it shared a common interest with its reinsurers such that its voluntary disclosure of those documents did not waive the privilege. The court again disagreed, holding that Progressive and its reinsurers did not hold a common legal interest. The relationship between them was a commercial and financial one – not legal. Moreover, the court rejected the argument that “if Progressive loses, so do its reinsurers,” concluding that the nature of the reinsurance business in and of itself did not give rise to a common legal interest. Progressive Casualty Insurance Co. v. FDIC, No. C12-4041-MWB (USDC N.D. Iowa Aug. 22, 2014).

This post written by Leonor Lagomasino.

See our disclaimer.

In a reinsurance coverage dispute involving coverage for an underlying settlement of asbestos liability, a New York court considered whether the defenses of failure to provide prompt notice and failure to provide satisfactory proof of loss precluded summary judgment in favor of the cedent. The cedent relied on “follow the settlements” provisions contained in each of the relevant four facultative reinsurance certificates. The court, however, was not convinced that these provisions entitled the cedent to coverage. One of the certificates, the court found, provided for prompt notice as a condition precedent to coverage. The court ruled that the cedent, which had submitted notice of claim to the reinsurer in 2010, had been required to provide notice of the asbestos settlement “in 2006 at the latest, when the settlement agreement was executed.” As a result, no prejudice from the late notice needed to be demonstrated, and the reinsurer was not obligated to indemnify the cedent for unpaid losses under that certificate. For the three other reinsurance certificates, which did not contain provisions deeming prompt notice a condition precedent to coverage, the court still denied the cedent summary judgment as premature, finding that the cedent failed to demonstrate that it had satisfied the certificates’ requirements to “provide[] proofs of loss in a form satisfactory to” the reinsurer. The court did rule in favor of the cedent, however, with respect to one of three reinsurance billings, where the reinsurer waived its defenses by making an initial payment without any reservation of rights. Lexington Insurance Co. v. Sirius America Insurance Co., Index No. 651208/2012 (N.Y. Sup. Ct. Sept. 18, 2014).

This post written by Michael Wolgin.

See our disclaimer.

A federal district court has denied that part of an insured’s motion seeking to compel the insurer to produce all documents relating to its reinsurance coverage. The court ordered the production of the reinsurance agreements themselves, but found the request for all other reinsurance information was “plainly too broad.” The court also recognized the possible application of the common interest doctrine to the communications between the insurer and its reinsurer to support the denial. As to the other documents sought, the court granted that part of the motion seeking documents relating to certain drafting history of the insurance policy at issue, but denied the remaining part of the motion to compel, which sought documents ranging from the insurer’s personnel files for all personnel involved in the claim to the insurer’s loss reserve information. Harleysville Lake States Ins. Co. v. Lancor Equities, Ltd., No. 13-CV-6391 (USDC N.D. Ill. Oct. 31, 2014).

This post written by Renee Schimkat.

See our disclaimer.

A United States district court in Louisiana recently dismissed a suit brought under the Federal Arbitration Act to enforce a subpoena duces tecum issued in an arbitration proceeding. The district court granted the defendant’s motion to dismiss on two grounds. First, the court held that the amount in controversy requirement for diversity jurisdiction was lacking because the plaintiffs were asserting no claim against the defendant in the federal court action; the plaintiffs sought only the production of discovery documents. Second, the court ruled that Section 7 of the FAA provides for the enforcement of a subpoena duces tecum against a non-party only if the non-party is compelled to testify as a witness before the arbitrator. Because the defendant was not summoned to testify in the arbitration proceeding, the subpoena duces tecum was unenforceable. Chicago Bridge & Iron Co. N.V., et al. v. TRC Acquisition, LLC, No. 14-1191, 2014 WL 3796395 (E.D. La. July 29, 2014).

This post written by Catherine Acree.

See our disclaimer.

We previously reported on the decision in Progressive Casualty Ins. Co. v. FDIC, where the federal district court rejected claims of privilege, work product, and the common interest doctrine to certain information disclosed by an insurer to its reinsurers and broker. In a Special Focus article titled “IS IT STILL PRIVILEGED? AN INSURER’S DISCLOSURE OF INFORMATION TO ITS REINSURERS AND BROKERS WAIVES PRIVILEGE … SOMETIMES,” Renee Schimkat discusses Progressive Casualty (including another more recent order in that case) and other decisions where courts have considered whether the disclosure of information between these three parties waives applicable privileges.

This post written by Renee Schimkat.
See our disclaimer.