Reinsurance Focus

In an insurance coverage case arising out of the sinking and salvage of a dry dock, the insured sought the production of documents concerning reinsurance purchased by its insurer, from the procurement of the reinsurance through the claim submitted to the reinsurer. The insurer resisted production based upon two grounds: (1) relevance; and (2) the common interest privilege, claiming that it and its reinsurer had “a joint legal interest in the outcome of the litigation ….” The insured contended that the reinsurance documents were discoverable and potentially relevant in that the insurer had contended that the insured had fraudulently failed to disclose certain information to it about the dry dock, and the facts considered by the reinsurer in pricing the reinsurance might reveal that the information allegedly not disclosed was in fact known to the insurer. Accepting this argument, the court found the reinsurance file, including information concerning reserves, to be relevant and discoverable.

The court held that the common interest doctrine requires a two-part showing: (1) a common legal, rather than solely commercial, interest; and (2) an exchange of privileged information made in the course of formulating a common legal strategy, with an understanding that the communication would be in furtherance of a shared legal interest. The first element requires an oral or written agreement “embodying a cooperative and common enterprise towards an identical legal strategy.” Finding that the mere status of insurer-reinsurer did not establish these elements, and the fact of the reinsurer merely turning its file over to the insurer was insufficient, the court analyzed the facts and determined that neither of these two elements of the common interest privilege had been satisfied. Accordingly, it ordered the production of the reinsurance information. In a separate order, the court deferred other discovery issues not related to reinsurance to a later hearing. Fireman’s Fund Insurance Company v. Great American Insurance Company of New York, Case No. 10-1653 (USDC SDNY July 3, 2012).

This post written by Rollie Goss.

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On an appeal arising out of a foreign shipping contract billing dispute between Consorcio Ecuatoriano de Telecomunicaciones S.A. and Jet Air Service Equador S.A., the Eleventh Circuit held that the arbitral tribunal before which the dispute is pending is a foreign tribunal for purposes of 28 U.S.C. 1782’s discovery rules. Consorcio had applied in the Southern District of Florida to obtain discovery for use in proceedings in Ecuador. These proceedings included both a pending arbitration brought by Jet Air as well as possible other litigation. The district court granted the application and authorized Consorcio to issue a subpoena. Jet Air moved to quash the subpoena and vacate the order granting the application. Jet Air appealed the denial of its motions. The Eleventh Circuit affirmed, concluding that the arbitral panel acts as a first-instance decision maker and permits the gathering and submission of evidence. It resolves the dispute and issues a binding order which is subject to judicial review. Application of Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., No. 11-12897 (11th Cir. June 25, 2012).

This post written by John Black.

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On March 8, 2012, we reported on a settlement of Travelers’s claims against certain of its “excess of loss” reinsurers in a dispute over the extent to which Travelers could claim that its settlement of thousands of underlying asbestos insurance claims constituted one “loss” or occurrence for purposes of meeting the dollar amount threshold for entitlement to reinsurance coverage. Nationwide Mutual, a reinsurer still a defendant in the action, has sought discovery from Travelers, including Travelers’s files related to its settlement of the underlying insurance claims. Travelers has disputed Nationwide’s entitlement to these materials, contending that the “follow the fortunes” doctrine renders irrelevant the details of Travelers adjudication of the underlying claims. The court recently denied (on non-substantive grounds) Nationwide’s motion to compel the discovery, without prejudice for Nationwide to re-file a more detailed motion. Travelers Casualty & Surety Co. v. Nationwide Mutual Insurance Co., Case No. 2:11-cv-00063 (USDC S.D. Ohio May 10, 2012).

This post written by Michael Wolgin.

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In the latest development in the ongoing litigation between Granite State Insurance Company and Clearwater Insurance Company, Granite unsuccessfully moved to set aside a magistrate judge’s discovery order. As we reported in July 2011, Granite was ordered to produce certain asbestos loss reserve documents in response to Clearwater’s request for production of documents. The motion objecting to that order was denied, the district judge concluding that, first, the magistrate judge’s order was not contrary to law as the crucial issue was not merely, as Granite suggested, whether a ceding insurer has any practices in place regarding providing notice and, second, the order was not “clearly erroneous” because the notice procedures were relevant to the ultimate issue in dispute. The district judge explained that Granite’s arguments were largely tied to the merits of its defenses rather than to the permissibility of the discovery sought. Granite State Insurance Co. v. Clearwater Insurance Co., Case No. 09-10607 (USDC S.D.N.Y. Apr. 20, 2012).

This post written by John Black.

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A dispute arose between the city of Warren, Michigan and several insurance companies regarding their duties to defend and indemnify with respect to a state court class action suit against the city. The city sought to compel discovery of underwriting manuals, documents reflecting the company’s interpretation of key policy terms, and documents reflecting discussions with reinsurers and the setting of reserves from United States Fire Insurance Company as well as a series of other insurers who had provided coverage at various points between the 1960s and 2001. The district court granted the city’s motion to compel as to the claims manuals, underwriting manuals, and related documents, and denied all other requests. Specifically, the court found that (1) the other claims-related material was covered by attorney-client privilege or the work-product doctrine; (2) materials evidencing interpretation of policy terms were not relevant; and (3) while reinsurance policies themselves are discoverable, all other documents relating to reinsurance are irrelevant and not discoverable. United States Fire Insurance Co. v. The City of Warren, No. 10-13128 (E.D. Mich. Apr. 26, 2012).

This post written by John Black.

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In a matter involving an arbitration with a reinsurance company, the Second Circuit Court of Appeals affirmed a district court’s order denying Utica Mutual Insurance Company’s motion to disqualify R & Q Reinsurance Company’s attorneys, the law firm of Chadbourne & Park, LLP. Utica had unsuccessfully argued to the district court that Chadbourne should be disqualified because a part-time associate had been exposed to Utica’s confidential information. The Second Circuit further affirmed the district court’s order unsealing certain confidential non-privileged information underlying Utica’s motion to disqualify, and the district court’s decision requiring R & Q to withdraw certain discovery requests that Utica had identified as suggesting an inference of Chadbourne’s improper knowledge of Utica’s confidential information. Utica Mut. Ins. Co. v. INA Reinsurance Co., No. 10-4164 (2d. Cir. Mar. 15, 2012) (See the district court disqualification and discovery orders).

This post written by Ben Seessel.

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The Colorado Supreme Court vacated a district court’s order enforcing subpoenas issued by an arbitrator against out-of-state nonparties. The court held that a district court has the same authority to enforce subpoenas in civil actions regardless of whether arbitration is involved or not, and that Colorado courts have no authority to enforce civil subpoenas against out-of-state nonparties. The court rejected the argument that Colorado’s long-arm statute gives a Colorado court the authority to enforce such subpoenas. It further stated that, under the Uniform Interstate Depositions and Discovery Act (“UIDDA”), which Colorado and other states had recently adopted, a subpoena issued for discovery in the “trial state” must be submitted to the clerk of court in the “discovery state” at which time the clerk in the discovery state re-issues the subpoena. Colorado Mills, LLC v. SunOpta Grains & Foods, Inc., No. 11SA82 (Colo. Feb. 6, 2012).

This post written by Ben Seessel.

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In a discovery dispute involving requests for documents related to an insurer’s reinsurance treaties, a court compelled the production of the treaties, but reserved ruling on the production of related communications, subject to additional briefing on relevance. The court held that reinsurance policies themselves are discoverable without showing relevance. Communications regarding reinsurance, however, require a showing that the documents are relevant to alleged insurer bad faith. The assumption “that reinsurance decisions do not involve questions of policy interpretation is especially applicable when the reinsurance is treaty insurance.” Isilon Systems, Inc. v. Twin City Fire Insurance Co., Case No. 2:10-cv-01392 (USDC W.D. Wash. Feb. 15, 2012).

This post written by Michael Wolgin.

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A federal court recently ruled on cross-motions to compel in the ongoing litigation between Travelers Casualty and Century Indemnity. The dispute arose from Century’s denial of certain payment claims (regarding asbestos losses) under a series of reinsurance contracts covering underwriting years 1969-1974. The court denied Century’s motion to compel coverage dispute documents, finding them irrelevant because the underlying coverage was undisputed. Travelers, however, must provide all non-privileged documentation concerning the evaluation of the reinsurance claims. The court also denied Century’s motion regarding Traveler’s communications with other insurers, finding these irrelevant. The court also ordered the parties to meet and confer in an attempt to reach an agreement regarding the discovery of information related to Century’s reinsurance of other companies that insured the underlying insureds for asbestos liability. Finally, Century was compelled to answer an interrogatory related to its allocation of asbestos losses under the reinsurance treaties. Travelers Casualty & Surety Co. v. Century Indemnity Co., No. 3:10-cv-00400 (USDC D. Conn. Nov. 16, 2011).

This post written by John Black.

Olin Corporation sought a declaratory judgment that it was covered for damages to its industrial plant under a policy issued by a consortium of property insurers. Olin sought to discover information on the property insurers’ reinsurance coverage. The property insurers moved for a protective order and Olin moved to compel. The magistrate judge held that, pursuant to Federal Rule 26(a)(1)(A)(iv), the insurers must produce any reinsurance agreement that might be used to satisfy a judgment or indemnify or reimburse the insurers for payments made to satisfy a judgment. The court further held that communications with the reinsurers were also discoverable because they might contain information relevant to the property insurers’ affirmative defenses relating to their analysis of the sufficiency of Olin’s proof of loss and satisfaction of contractual prerequisites. Olin Corp. v. Continental Casualty Co., Case No. 10-CV-623 (USDC D. Nev. Aug. 30, 2011).

This post written by Ben Seessel.