Reinsurance Focus

In a suit between a bankruptcy trust established to resolve a defunct corporation’s asbestos-related personal injury liabilities and the corporation’s excess liability insurer that had denied coverage to the trust in connection with the asbestos claims, a court resolved various attorney client privilege and work product protection issues. The insurer had sought various documents related to the handling of the underlying asbestos claims by the trust, among others. Many of these documents included communications between counsel and the corporation or between counsel and the bankruptcy creditors’ committee. No privilege existed over documents addressing the handling of the underlying asbestos claims because (1) a common interest exists between the trust and the insurer related to the asbestos claims, and (2) the trust had a duty to cooperate with the insurer based on the primary policy. In contrast, the court held the privilege did exist for a number of documents related to the reinsurance procured by the insurer. Whereas the insurer’s discovery requests were related to the handling of the asbestos claims, the trust’s requests were for the purpose of learning the insurer’s “admissions regarding the matter in dispute.” The court also found a common interest existed between the insurer and its reinsurer regarding the trust’s claims, such that any communications with counsel that may have been shared by the insurer with its reinsurer would not be considered a waiver of privilege. ARTRA 524(g) Asbestos Trust v. Transport Insurance Co., Case No. 09-458 (N.D. Ill. Sept. 28, 2011).

This post written by Michael Wolgin.

Chartis insured Lasalle Bank under certain surplus lines policies covering Lasalle’s business trusts. The insurance policies contained mandatory arbitration agreements. After a dispute arose between the parties, Chartis initiated a tripartite arbitration through the AAA as per the agreement. The arbitration entailed more than sixty (60) days of evidentiary hearings, which concluded on September 22, 2010. During the pendency of the arbitration, Chartis discovered that Charles Ennis, one of the three agreed-upon arbitrators, had concealed a past adversarial relationship with Chartis affiliates, and requested his removal through the AAA. After reviewing supplemental disclosures by Ennis, the AAA rejected Chartis’ request and the arbitration was concluded. The panel thereafter issued an award, and the parties and arbitrators entered into a Confidentiality Order. Chartis immediately filed an action in court to vacate the award, based in part on Ennis’ purported “evident partiality.” Chartis moved to seal the award pursuant to the Confidentiality Order, and also moved for permission to seek limited discovery on Ennis’ prior adversarial relationship with the Chartis affiliates. The court denied the motion to seal, but allowed Chartis the opportunity to redact specified portions of the award. The Court granted Chartis’ motion for discovery of Ennis’s past adversarial relationship to Chartis affiliates. Chartis Specialty Ins. Co. v. Lasalle Bank, N.A., C.A. No. 6103-VCN (Del. Ch. July 29, 2011).

This post written by John Pitblado.

Louisiana Generating LLC faced an action by the U.S. government seeking injunctive relief and civil penalties for its alleged violations of the Clean Air Act. It sought a defense and coverage under a Custom Premises Pollution Liability Insurance Policy issued to it by Illinois Union. Illinois Union denied coverage. Louisiana Generating brought a declaratory judgment action in federal court to establish coverage. The court entered a scheduling order allowing the parties discovery on the dispositive legal issue of Illinois Union’s duty to defend. Louisiana Generating sought information pertaining to Illinois Union’s reinsurance, pursuant to the “any insurance agreement” language of F.R.C.P. 26(a)(1)(iv), as well as information pertaining to prior coverage provided to other policyholders with Clean Air Act liabilities, among other things. Illinois Union objected, contending that the information was irrelevant to the purely legal issue of the duty to defend, to be determined as a matter of law solely by reference to the terms of the policy and the allegations of the underlying complaint. The court agreed with Illinois Union, denied the motion, and ordered Louisiana Generating to pay $2,000 to Illinois Union for its efforts in defending against the motion, which the court found to be “not substantially justified.” Louisiana Generating, LLC v. Illinois Union Ins. Co., No. 10-516 (USDC M.D. La. Aug. 8, 2011).

This post written by John Pitblado.

A federal magistrate judge denied plaintiff’s motion to compel deposition testimony regarding a transaction reinsuring defendant Unum’s individual disability block of business. Plaintiff brought suit alleging that Unum breached the parties’ insurance contract by refusing to pay him total disability benefits. Plaintiff moved to compel Unum’s deposition on, among other topics, Unum’s actuarial analysis of its transaction with Northwind reinsuring its individual disability block. In support of his motion, plaintiff cited a press release by Unum’s president stating that the Northwind reinsurance arrangement created capital for Unum’s business that could be deployed for other uses. Plaintiff argued that discovery of information regarding the deal was relevant because it might show how Unum was using money set aside for claims to create capital rather than to pay claims like plaintiff’s. The court denied plaintiff’s motion, holding that Unum’s capital management strategy was irrelevant to the case. Raab v. Unum Group, Case No. 2:10-cv-00186 (USDC S.D. Ohio Aug. 8, 2011).

This post written by Ben Seessel.

A federal court granted in part a motion to compel filed by the defendant reinsurer, Clearwater, against the plaintiff cedent, Granite State. Clearwater reinsured Granite State under a facultative reinsurance agreement covering certain losses arising from underlying asbestos bodily injury claims against Granite State’s insured. Granite State made claim for payment under the agreement to Clearwater. Clearwater disputed its obligation to pay under the agreement, claiming that Granite State failed to promptly notify Clearwater of the claims. Granite State sued. In discovery, Clearwater sought information pertaining to Granite State’s reserving, relative to an underlying settlement of certain asbestos claim coverage disputes. Granite State objected to the request. The court, in a summary opinion, ordered Granite State to produce “copies of any final reviews, analyses or studies, conducted by any consultants or other third parties, on the principal subject of the adequacy of Granite State’s reserves for asbestos exposures, claims, and/or losses, during the period from 1980 through 2009.” Granite State Insurance Co. v. Clearwater Insurance Co., No. 09-Civ-10607 (USDC S.D.N.Y. June 27, 2011).

This post written by John Pitblado.

Recently, the US District Court for the District of New Jersey granted defendant American National Insurance’s motion to compel discovery responses, extend discovery, and for a protective order. The dispute arose out of a reinsurance contract where, according to plaintiff Munich Re, defendant agreed to reinsure certain liabilities arising as a result of Munich Re’s participation in a Workers Comps Excess of Loss Reinsurance Agreement. Granting American National’s motion, the Court ordered that Munich Re produce a 30(b)(6) designee for deposition regarding relating to whether plaintiff will pay certain claims (and thus whether defendant will be liable) and provide substantive responses to interrogatories, rather than merely citing to all documents produced. The Court also extended the discovery period and granted American National’s motion for protective order pending an in camera review of the purported privileged documents. Munich Reinsurance Am., Inc. v. American Nat. Ins. Co., Case No. 09-6435 (D. N.J. Apr. 18, 2011).

This post written by John Black.

The UK Commercial Court, Queens Bench Division, recently decided a discovery matter in a reinsurance dispute. The litigation arose out of a dispute under a facultative reinsurance contract, which reinsured claimant Axa Seguros’ participation in an insurance policy covering risks of physical damage to a “Toll Road Network concession” in Mexico. After a hurricane caused damage to a highway, Axa Seguros initiated arbitration and subsequently filed suit against Allianz, seeking indemnity for sums said to be due under the reinsurance contract. Axa sought all reports and associated documents produced by Halcrow, an engineering company hired to inspect the damaged highway. Allianz, for its part, claimed a litigation privilege on the basis that it was obtained and prepared for the purpose of obtaining legal advice in connection with expected litigation. The presiding justice concluded that, although litigation was reasonably expected at the time the reports were made, the reports were not generated for the predominant purpose of anticipated litigation. Rather, they were generated to assess whether the highway had been constructed up to international standards, and to determine what damage had been caused by the hurricane. Accordingly, Axa was entitled to the materials sought. Axa Seguros, S.A. DE C.V. v. Allianz Ins. PLC, 2011 EWHC 268, Case No. 2007 Folio 1396 (Comm. Ct. Q.B. Feb. 3, 2011).

This post written by John Black.

Teck Metals Ltd. sued London Market Insurance in a direct insurance coverage action arising from alleged environmental pollution claims asserted by Federal, State, and Tribal authorities against Teck. London Market declined coverage for the claims under certain umbrella liability policies. Among a morass of various discovery issues in the case (some of which are the subject of a pending interlocutory appeal to the Ninth Circuit), Teck sought information from London Market pertaining to its notification of the claims to its reinsurers, as well as certain reinsurance claims and reserve information. A Magistrate recommended that the date, method of transmittal, and author of London Market’s first communication to its reinsurers is relevant to late notice issues and should be provided, but that reinsurance reserves and claim information was not relevant. The district court adopted the magistrate’s recommendations with some agreed-upon compromises, including a protective order regarding the reinsurance information. Teck also made a request under the Hague Convention to obtain the depositions of three London Market-affiliated foreign nationals, including two claims administrators and an underwriter. Teck Metals, Ltd. v. London Market Insurance, Case No. 05-411 (USDC E.D. Wash. Nov. 19, 2010).

This post written by John Pitblado.

Global Reinsurance denied reinsurance claims for asbestos claims, in part on the basis that it was notified late of the claims, and then refused to provide discovery that might have revealed that it had been advised of the claims by a third party or that it had sufficient knowledge of the claims to advise its own reinsurers of the claims. The court granted a motion to compel, rejecting the arguments in the opposition to the motion, denying discovery only as to issues that were withdrawn or previously determined, and hence moot in terms of discovery. Pacific Employers Insurance Company v. Global Reinsurance Corp. of America, Case No. 09-6055 (USDC E.D. Pa. Nov. 12, 2010).

This post written by Rollie Goss.

In a dispute involving the interpretation of an excess policy issued by TIG Insurance Company, insured Grinnell Corporation moved to compel TIG to produce underwriting manuals, information relating to its reinsurance agreements, and reserve information. The court granted Grinnell’s request with respect to TIG’s underwriting manuals but rejected the insured’s request for information relating to TIG’s reinsurance agreements as irrelevant. The court held that “what TIG and its reinsurers may agree a term means . . . is not, ipso facto, probative of what that term means in the subject policy” and TIG’s coverage with its insureds was not necessarily co-extensive with the coverage TIG secured from reinsurers. The court also denied Grinnell’s request for reserve information, finding that TIG’s consideration of possible policy interpretations in setting reserves “is of little value in determining the meaning of a policy term or terms.” TIG Ins. Co. v. Tyco Int’l, LTD., Case No. 3:08-1584 (U.S.D.C. M.D. Pa. Nov. 12, 2010).

This post written by Ben Seessel.