In insurance coverage litigation, cedants and reinsurers have a common financial interest in the investigation and adjustment of complex, high-dollar or questionable claims. In the real world, a joint financial interest is the firmest of foundations for expectations of confidentiality. Cedants have a duty to keep reinsurers informed, and reinsurers may decide to join in the claims process.
Quality plaintiffs’ attorneys know this and, therefore, often seek reinsurance information through discovery. Cedants and reinsurers naturally resist disclosure for a variety of reasons. For example, placement information may reveal confidential financial and marketing information. Claim information may include statements and opinions that, with the benefit of hindsight, portray the claims process in an unflattering light.
A useful logical flowchart in evaluating discovery requests for reinsurance information is (a) whether the information is potentially relevant to the litigation or is otherwise discoverable, (b) whether the information is protected by (i) the attorney-client privilege or (ii) as materials prepared in anticipation of litigation, and (c) if so protected, whether the protections have been waived via voluntary disclosure to a third party. See Parkdale Am., LLC v. Travelers Cas. & Sur. Co. of Am., No. 3:06CV78-R, 2007 WL 4165247, at *8 (W.D.N.C. Nov. 19, 2007); Harper-Wyman Co. v. Connecticut Gen. Life Ins. Co., No. 86 C 9595, 1991 WL 62510, at *2 (N.D. Ill. Apr. 17, 1991). Disputes over the discoverability of reinsurance information typically involve relevance or whether protection has been waived by the cedant’s disclosure to the reinsurer. Decisions and guidelines on these issues are discussed below.
As a threshold matter, under Fed. R. Civ. P. 26(a)(1)(A)(iv) and its state analogs, the cedant must produce any reinsurance coverage under which a cedant may be reimbursed. See U.S. Fire Ins. Co. v. Bunge N. Am., Inc., 244 F.R.D. 638, 641 (D. Kan. 2007); National Union Fire Ins. Co. of Pittsburgh, Pa. v. Continental Illinois Corp., 116 F.R.D. 78, 83–84 (N.D. Ill. 1987). The existence and terms of reinsurance coverage are generally not controversial and to some extent should be in the insurer’s statutory filings. Claimants may also seek reinsurance placement and claims information. In federal courts and most state courts, this information will be discoverable if the claimant can show that it is reasonably calculated to lead to the discovery of admissible evidence, unless protected from disclosure by a privilege or other protection. See, e.g., Fed. R. Civ. P. 26(b) (1), O.C.G.A. § 9-11-26(b)(1). Under this generous standard, claimants may discover “any matter that bears on, or that reasonably could lead to other matter[s] that could bear on, any issue that is or may be in the case.” Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978).
With respect to reinsurance placement information, courts generally hold such information irrelevant to coverage disputes, reasoning that the decision to purchase reinsurance – particularly when done via a broad treaty – sheds little light on the specific terms of coverage. Heights at Issaquah Ridge Owners Ass’n. v. Steadfast Ins. Co., No. C07-1045RSM, 2007 WL 4410260, at *4 (W.D. Wash. Dec. 13, 2007); Great Lakes Dredge and Dock Company v. Commercial Union Assurance Company, 159 F.R.D. 502, 504 (N.D. Ill. 1995). Nevertheless, some courts have permitted discovery of placement information where relevance can be specifically shown. For example, courts have allowed discovery of reinsurance placement information in cases involving rescission, ambiguous policy language, failure to disclose relevant underwriting risks, or the reconstruction of a lost policy. See Fireman’s Fund Ins. Co. v. Great Am. Ins. Co. of New York, 284 F.R.D. 132, 137 (S.D.N.Y. 2012); Medmarc Cas. Ins. Co. v. Arrow Int’l, Inc., No. CIV A 01 CV 2394, 2002 WL 1870452, at *4 (E.D. Pa. July 29, 2002); Rhone-Poulenc Rorer Inc. v. Home Indem. Co., 139 F.R.D. 609, 612 (E.D. Pa. 1991).
For the full article, refer to page 11 in the Winter 2015 article. https://www.airroc.org/assets/docs/matters/airroc_matters_winter_2015_vol_11_no_4%201.pdf