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Discovery of reinsurance information in insurance coverage litigation.

Insurers are in a dilemma: Should they should make full disclosure of communications, but will that undermine their coverage position?

THE REINSURANCE relationship is premised on the free flow of information. Recently, however, communications between cedents and reinsurers, or reinsurers and their retrocessionares, have become the target of discovery requests in coverage litigation between policyholders and their insurers or between insurers and their reinsurers. What are the circumstances in which reinsurance information or communications between insurers and their reinsurers may become discoverable? What is the quandary this new trend creates for insurers?

IMPORTANCE OF COMMUNICATIONS

In Unigard Security Insurance Co. v. North River Insurance Co., the Second Circuit discussed the importance of communications and the free flow of information in the reinsurance relationship:
      To enable them to set premiums ... and to determine whether to
   "associate" in the defense of a claim, reinsurers are dependent on their
   ceding insurers for prompt and full disclosure of information concerning
   pertinent risks. The reinsurance relationship is often characterized as one
   of "utmost good faith." This utmost good faith may be viewed as a legal
   rule but also as a tradition honored by ceding insurers and reinsurers in
   their ongoing commercial relationships. Historically, the reinsurance
   market has relied on a practice of the exercise of utmost good faith to
   decrease monitoring costs and ex ante contracting costs. Reinsurance works
   only if the sums of reinsurance premiums are less than the original
   insurance premium. Otherwise, the ceding insurers will not reinsure. For
   the reinsurance premiums to be less, reinsurers cannot duplicate the costly
   but necessary efforts of the primary insurer in evaluating risks and
   handling claims. Reinsurers may thus not have actuarial expertise or
   actively participate in defending ordinary claims. They are protected,
   however, by a large area of common interest with ceding insurers and by the
   tradition of utmost good faith, particularly in the sharing of
   information.(1)


In addition to facilitating the economic relationship between insurers and their reinsurers, communications have significant implications for their legal rights. Courts have held that a ceding insurer's duty of "utmost good faith" imposes an affirmative obligation on it to disclose all material facts to its reinsurers during the placement of the reinsurance and that the cedent's duty of utmost good faith imposes on the cedent a duty to "exercise good faith and to disclose all material facts" in the underwriting process.(2)

According to the Second Circuit, the cedent's duty is "to place the underwriter in the same position as himself [and] to give to him the same means and opportunity of judging of the value of the risks. ... The relationship between a reinsurer and a reinsured is one of utmost good faith, requiring the reinsured to disclose to the reinsurer all facts that materially affect the risk of which it is aware and of which the reinsurer itself has no reason to be aware.(3)

A cedent that fails to make full disclosure runs the risk that a reinsurance agreement will be rescinded.(4)

Communications also play an important role in the claims process. Many reinsurance agreements contain provisions requiring cedents to give "immediate notice" or notice "as soon as practicable" upon knowledge of an occurrence "likely to give rise to a claim" under the reinsurance agreement.(5) In Unigard, the Second Circuit grounded the notice obligations of cedents in the duty of utmost good faith:
   [B]ecause information regarding risks lies with the ceding insurer, the
   reinsurance market depends upon a high level of good faith to ensure prompt
   and full disclosure. Absent such disclosure, reinsurers would have to
   duplicate actuarial and claims-handling efforts of ceding insurers, and
   reinsurance would become unavailable. Courts should thus adopt
   information-forcing default rules based on the good faith the reinsurance
   market demands.(6)


Insurers that fail to provide their reinsurers with full and timely disclosures of relevant information run the risk of having their claims denied for late notice.(7)

From the perspective of maintaining their relationships with their reinsurers and ensuring that they can collect on reinsurance claims, cedents have a pressing need to make full disclosure of information relating to events that later may form the basis for reinsurance claims. This free flow of information has been imperiled, however, by recent efforts in insurance coverage litigation to gain access to communications between ceding insurers and their reinsurers.

DISCOVERY IN COVERAGE LITIGATION BETWEEN POLICYHOLDERS AND INSURERS

In litigation between insureds and their insurers, policyholders often try to discover information concerning the extent and terms of reinsurance coverage potentially applicable to the disputed claim. So they seek to discover communications between insurers and their reinsurers regarding either the claim or coverages at issue. An analysis of what information is discoverable should distinguish between the reinsurance agreements themselves and other communications between cedents and their reinsurers.(8)

A. Discovery of Reinsurance Agreements

Reinsurance agreements themselves may be discoverable under Federal Rule of Civil Procedure Rule 26 and corresponding state law discovery rules. Rule 26(a)(1)(D) provides that a party must provide "for inspection and copying ... any insurance agreement under which any person carrying on an insurance business may be liable to satisfy part or all of a judgment which may be entered in the action or to indemnify or reimburse for payments made to satisfy the judgment."

In National Union Fire Insurance Co. v. Continental Illinois Corp., a federal district discussed at some length the discoverability of reinsurance agreements in coverage litigation between a policyholder and its insurer. The court found that reinsurance agreements were discoverable under Rule 26 for the following reasons:
      Reinsurers ("person[s] carrying on an insurance business") are insurers'
   own insurers. If insurers are held liable under the policies, they will
   turn to their reinsurers for partial indemnification, as provided in the
   reinsurance agreements, for any "payments made to satisfy the judgment."

      Insurers contend their reinsurance agreements are not "insurance
   agreements" under Rule 26(b)(2). True enough, reinsurance agreements are a
   special breed of insurance policy.... But the English language remains the
   same: Reinsurers "carry[] on an insurance business" and "may be liable ...
   to indemnify [insurers] for payments made to satisfy the judgment" that
   movants hope to obtain. Rule 26(b)(2) does not require that a party's
   insurer be directly liable to the other party. It is totally irrelevant
   that the reinsurers would pay insurers and not the defendants and the
   movants cannot directly sue the reinsurers.... Reinsurance agreements are
   thus for the direct insurers within the literal coverage of Rule
   26(b)(2).(9)


Other courts, however, have held that disclosure of reinsurance agreements is not required in cases in which the litigation between a policyholder and its insurer is limited to a request for a declaratory judgment and does not involve a claim for damages. As explained by the federal district court in Rhone-Poulenc Rorer Inc. v. Home Indemnity Co.:
   [P]laintiffs note that there is no "reinsurance exception" to Fed. R.Civ.P.
   26(b)(2). While that may be true in an action for monetary judgement based
   on payment of claims, it is not necessarily true in a declaratory judgement
   action. The rule states in relevant part:

      "A party may obtain discovery of the existence and contents of any
   insurance agreement under which any person carrying on an insurance
   business may be liable to satisfy part or all of judgement which may be
   entered in the action or to indemnify or reimburse for payments made to
   satisfy the judgement."

      Thus, only when money damages are sought for which the insurer (or
   reinsurer) may become liable are the agreements automatically discoverable
   under Rule 26(b)(2).(10)


B. Discovery of Reinsurance Communications

1. Relevance

Whether communications between cedents and their reinsurers are discoverable may depend on the nature of the issues to which they are alleged to be relevant. For instance, in Fireman's Fund Insurance Co. v. Superior Court,(11) the California Court of Appeal held that the lower court should have conducted an in camera review of the reinsurance information to determine whether it was relevant to the policyholder's claim. Some courts have been reluctant to permit discovery of communications for the purpose of establishing the proper interpretation of the underlying insurance policy, but they have been more willing to permit discovery for other purposes, such as defending against an insurer's effort to rescind a policy or to deny claims for late notice.(12)

Two decisions from the Eastern District of Pennsylvania in a dispute between Rhone-Poulenc and its insurers over coverage for underlying AIDS-related litigation illustrate these principles. In Rhone-Poulenc I, the court rejected the policyholder's efforts to discover either the reinsurance agreements or communications with reinsurers for the purpose of interpreting the underlying policies. The court held:
   [D]iscovery concerning reinsurance agreements to which the plaintiffs were
   not parties would "not assist in the determining of the mutual intent of
   the parties in the primary and excess insurance policies issued to the
   plaintiffs, which are in litigation in this case. Any information regarding
   reinsurance would at best be evidence of undisclosed unilateral intention,
   which would not be material to the interpretation of the insurance contract
   at issue."(13)


The court went on to note, in dictum, that even communications between an insurer and its reinsurer over the meaning of a particular policy provision would be discoverable only if there had been a previous determination by the court that the provision at issue was ambiguous and therefore subject to interpretation by resort to extrinsic evidence.(14)

In Rhone-Poulenc II, the court reconsidered its earlier refusal to allow discovery of communications between the insurers and their reinsurers and granted such discovery. It is important to note that the court remained steadfast that the discovery was "irrelevant to determining the intent of the contracting parties," but it concluded that the discovery was relevant to the affirmative defenses of lack of notice and misrepresentation asserted by the insurers. With respect to the lack of notice defense, the court stated:
      By raising a defense, a party opens the door to the discovery concerning
   that defense .... Since whether or not the insurers gave timely notice to
   their reinsurers is clearly relevant to the notice defenses raised by many
   of the insurers, that information should be discoverable as to those
   insurers.(15)


With respect to the insurers' misrepresentation and nondisclosure defenses, the court held:
      Plaintiffs also seek the reinsurance agreements and communications for
   the purpose of refuting the defenses raised by many of the insurers that
   plaintiff failed to disclose material facts.... These defenses clearly put
   at issue the question of what the defendants knew at the time the disputed
   policies were issued. In my October 1 st order, I held that reinsurance
   information would be tenuously, if at all, relevant to the issue of policy
   interpretation. However, such information may be extremely relevant to the
   defenses raised by most of the insurers.... Because reinsurance appears to
   be always discoverable for purposes of rebutting a defense, particularly of
   misrepresentation (as well as nondisclosure), lack of or late notice, or
   lost policy, the communications will be ordered produced as to those
   companies raising such defenses.(16)


Other courts have been more willing to permit discovery for any purpose, including interpretation of the insurance policies at issue. Young v. Liberty Mutual Insurance Co.,(17) was an appeal from a magistrate's ruling directing an insurer in an action for declaratory judgment, breach of contract and bad faith to produce, among other things, "Liberty Mutual's communications with its reinsurers and auditors, regarding reinsurance and reserve information." Liberty Mutual argued that the material should not be produced because it was "extrinsic evidence" not subject to discovery, relying on a Connecticut state court decision, Heyman Associates, No. 1 v. Insurance Co. of Pennsylvania,(18) in which the court found that where both parties agreed that the insurance policy at issue was unambiguous, discovery of extrinsic evidence would not be permitted.

In affirming the magistrate's order, the Young district court concluded that it would not prejudge the issue of whether or not extrinsic evidence would be admissible but would provide broad latitude for discovery of evidence which might "aid in interpreting the meaning of the terms in the CGL policies."

In Owens-Corning Fiberglass Corp. v. American Centennial Insurance Co., an Ohio state court went one step further, denying an in limine motion by insurers to exclude at trial evidence of their reinsurance of the policyholder's policies. The insurers argued that reinsurance was nothing more than a risk spreading mechanism and that evidence of reinsurance was irrelevant. The policyholder argued that evidence of reinsurance was relevant to determine whether the misrepresentations that the insurers were alleging the policyholder had made were material to the risk assumed by the insurers.

The court held:
   [E]vidence regarding the defendants' reinsurance of OCF's policies is
   relevant to the issue of what the defendants knew at the time they agreed
   to underwrite OCF for its asbestos liabilities. An implication regarding
   the defendants' expectations can be drawn from the fact that the defendants
   reinsured OCF's policies. Evidence of reinsurance indicates that the
   defendants appreciated the likelihood of being called upon to provide
   asbestos coverage to OCF and, therefore, sought to dissipate their losses.
   Taken a step further, if the defendants appreciated the likelihood of
   having to provide coverage, then, perhaps, OCF did not defraud these
   defendants.(19)


The court did exclude evidence of reinsurance of other policyholders' policies on the grounds of relevance.

2. Privilege

Policyholders also have argued that disclosure of otherwise confidential information to a reinsurer results in a waiver of any applicable privilege. In Great American Surplus Lines Insurance Co. v. Ace Oil Co., a reinsurer produced correspondence from the insurer's coverage counsel in the underlying suit in response to a subpoena from the policyholder. The reinsurer had obtained the correspondence from the insurer's general agent, who had retained the coverage counsel. The court later was asked to determine whether the disclosure of the coverage opinions to the reinsurer waived the attorney-client privilege otherwise applicable to those opinions. The court, applying a state law rule that permits disclosure of confidential information to persons to whom "disclosure is reasonably necessary for the ... accomplishment of the purpose for which the lawyer is consulted," concluded that the privilege had not been waived, holding:
   [The reinsurer] reinsured the greatest proportion of the policy at issue
   here. Good business practices would lead [the reinsurer] to peruse
   documents indicating the extent of exposure determined by [the agent]
   because [the reinsurer] would be ultimately responsible for a substantial
   portion of any amount paid on the policy. A finding that disclosure was not
   reasonably necessary would require undue interference with communications
   appropriately characterized as confidential by [the insurer and its
   agent].(20)


Similarly, an insurer was successful in protecting at least some of its communications with its reinsurers on the grounds of privilege in Minnesota School Boards Association Insurance Trust v. Employers Insurance Co. of Wausau.(21) An insurer and its insured were involved in a declaratory judgment action over coverage for a fire loss. The insurer had produced its reinsurance file but withheld certain documents on the grounds of privilege. The insured then subpoenaed documents directly from the reinsurers, and the insurer's reinsurance broker and the insurer moved to quash the subpoena.

At issue were three letters--one from a Wausau litigation attorney to a federal magistrate describing Wausau's position in the litigation, another from the Wausau litigation attorney to a Wausau employee describing the status of the litigation, and the third from a Wausau employee to Wausau's reinsurance broker describing the litigation. Each had been sent to Wausau's reinsurers. Wausau argued that each of the letters was protected from discovery by the work product doctrine.

The insured contended that whatever protection might have attached to the documents at the time they were created was waived when the documents were sent to Wausau's broker and its reinsurers. The court rejected this argument, noting first, that for the purposes of a privilege analysis, it was irrelevant whether the documents were sent to the broker or directly to the reinsurers since the function of the broker, among other things, is to function as a conduit for communications between a cedent and its reinsurers.

The court then accepted Wausau's position that the documents were disclosed to the broker and the reinsurers with an expectation that their confidentiality would be preserved. The court further agreed with Wausau that there was a common interest between Wausau and its reinsurers that preserved the confidentiality of the documents under the joint defense doctrine. Accordingly, the court granted Wausau's motion to quash.

A contrary result was reached in McLean v. Continental Casualty Co.,(22) in which the U.S. District Court for the Southern District of New York held that production of otherwise privileged documents to a reinsurer waived the privilege and made the documents discoverable by the insured. The court reasoned that "the relationship between insurer and reinsurer is simply not sufficient to give rise to the common interest privilege."

Front Royal Insurance Co. v. Gold Players Inc.,(23) also involved a coverage dispute and accompanying claims for breach of contract and bad faith. The issue was whether the work product doctrine protected from discovery correspondence and information that Front Royal shared with its reinsurer. The specific documents in issue were a reinsurance loss notice and general reinsurance report concerning the underlying claim sent by a Front Royal employee to Front Royal's reinsurer and the reinsurer's response to the loss notice.

The court rejected Front Royal's claim that the documents were immune from discovery, not because they had been disclosed to the reinsurer but because they were simply not protected in the first instance. The court found that the documents were "created in the ordinary course of business under the contractual obligations between insurer and reinsurer ... were not prepared in anticipation of litigation and, therefore, are not protected from production by the work-product doctrine."

DISCOVERY IN LITIGATION BETWEEN CEDENTS AND REINSURERS

Cases addressing discovery disputes in litigation between cedents and their reinsurers typically involve one of two issues: (1) a reinsurer's efforts to discover otherwise confidential communications between the cedent and its counsel relating to the underlying claim; or (2) a cedent's efforts to discover how a reinsurer has handled similar claims.

In North River Insurance Co. v. Philadelphia Reinsurance Corp.,(24) the U.S. District Court for New Jersey rejected a reinsurer's efforts to discover attorney-client privileged documents created in the course of alternative dispute resolution proceedings between the cedent and the insured. The reinsurer argued that the documents were discoverable under a variety of theories, including the "common interest doctrine," the "cooperation clause" in the reinsurance agreement, the cedent's "fiduciary obligation of full disclosure" or the "at issue" doctrine. The court rejected each argument.

The common interest doctrine arises when one lawyer represents more than one party. In that situation, communications to the lawyer are not privileged as between the represented parties. The common interest doctrine has been recognized in circumstances in which an insurance company retains counsel to defend a claim brought against a policyholder. In North River, however, the court found that the common interest doctrine was simply not applicable because there was no dual representation of the cedent and the reinsurer. The common interest doctrine was "completely unlashed from its moorings in traditional privilege law when it is held broadly to apply in contexts other than when there is dual representation," the court stated.(25)

The cooperation clause in the reinsurance agreement required the cedent to "make available for inspection ... any of its records relating to this reinsurance or claims in connection therewith." Based on this clause, the reinsurer argued that it had an enforceable contract right of access that negated any reasonable expectation of confidentiality between the cedent and its counsel.

The North River court rejected this argument:
   Although a reinsured may contractually be bound to provide its reinsurer
   with all documents or information in its possession that may be relevant to
   the underlying claim adjustment and coverage determination, absent more
   explicit language, it does not through a cooperation clause give up
   wholesale its right to preserve the confidentiality of any consultation it
   may have with its attorney concerning the underlying claim and its coverage
   determination. Provided that the reinsured has been forthright in making
   available to its reinsurer all factual knowledge or documentation in its
   possession relevant to the underlying claim or the handling of that claim,
   it has satisfied its obligations under the cooperation clause. The
   reinsurer is not entitled under a cooperation clause to learn of any and
   all legal advice obtained by a reinsured with a "reasonable expectation of
   confidentiality."(26)


The court also turned down the reinsurer's argument that the cedent had a fiduciary duty to disclose all information, including attorney-client information, on the grounds that there simply was no fiduciary relationship between the cedent and the reinsurer. The court reasoned:
   Nothing ... indicates that the duty between a ceding insurer and a
   facultative reinsurer rises to the level of being a fiduciary one. The
   presence of sufficient influence and control over the affairs of another
   necessary to give rise to fiduciary responsibilities is absent between
   reinsured and reinsurer. The reinsurer's "right to associate" gives it
   adequate means by which to keep informed of events that may give rise to
   coverage under its agreement, and also provides a sufficient means to
   protect its own interests. Reinsurance agreements are negotiated at
   arms-length between equally sophisticated parties. Reinsurers are well
   aware of the risks inherent in reinsurance obligations and are adequately
   situated to protect their interests. The Court therefore rejects CIGNA Re's
   argument that North River owed it a fiduciary duty to disclose the contents
   of its attorney-client communications.(27)


Finally, the court rejected the argument that the cedent had put the attorney-client communications "in issue" by suing to recover for the amounts paid in the underlying claim. The court concluded that the attorney-client communications would be in issue only to the extent the cedent intended to rely on them to prove its claims.(28)

In North River Insurance Co. v. Columbia Casualty Co.,(29) the issue was whether a cedent could discover from the defendant reinsurer and related reinsurers underwriting and claims files for treaties and claims similar to those at issue in the lawsuit. The cedent argued that any inconsistent positions taken by the reinsurer on similar claims would operate as admissions against interest. The federal district court granted the reinsurer's motion for protective order, holding that information involving different ceded policies and different reinsurance agreements was not relevant. Even if the information were relevant, the court added, the discovery requests were "patently overbroad."

Cedents have been successful, however, in retaining notes of meetings held by London reinsurance underwriters addressing how reinsurers would respond to environmental claims. The notes were produced inadvertently in litigation between a cedent and its reinsurer, and the reinsurer sought an order compelling their return. In Aetna Casualty and Surety Co. v. Certain Underwriters at Lloyd's London,(30) a New York court held that the documents were not protected by either the common interest or work product doctrines.

As the court explained, the common interests between the various reinsurers were economic rather than legal. The court concluded that shared economic interests would not shield the documents from discovery. "Thus this court will not apply the `common interest' privilege except where the underlying circumstances require that communications be protected, as with ordinary attorney-client matters, and the common legal interest impacts potential litigation against all of the participants."(31)

CONCLUSION

The increasing focus on discovery of reinsurance communications places insurers in a difficult position. On the one hand, an insurer has a significant incentive to make the fullest disclosure possible to preclude a reinsurer from claiming inadequate disclosure in either the underwriting or claims process. This disclosure should discuss the possibility that a court or jury may find for the policyholder rather than the insurer. On the other hand, insurers have a real incentive not to create documents that would undermine their coverage position when presented to a jury, which may fail to appreciate that an insurer can believe its coverage position to be correct but at the same time recognize the risks of an adverse determination at trial.

There is no perfect solution to this dilemma. Insurers can reduce their exposure by giving careful consideration to whether the defenses they assert in coverage litigation make reinsurance communications relevant and by drafting those communications with the understanding that they are potentially discoverable. Insurers and reinsurers engaged in litigation between themselves also should carefully consider whether the discovery requests they make in that litigation will result in case law that will prove harmful to their interests in future coverage litigation with their policyholders.

(1.) 4 F.3d 1049, 1054 (2d Cir. 1993) (internal citations omitted).

(2.) See, e.g., Compagnie de Reassurance d'Ile de France v. New England Reins. Corp., 57 F.3d 56, 72-73 (1st Cir.), cert. denied, 516 U.S. 1009 (1995); Christiania Gen. Ins. Corp. v. Great Am. Ins. Co., 979 F.2d 268, 280 (2d Cir. 1992); Allendale Mut. Ins. Co. v. Excess Ins. Co., 992 F.Supp. 278, 282 (S.D.N.Y. 1998).

(3.) Christiania, 979 F.2d at 280, 278. Accord Allendale, 992 F.Supp. 278. Unless asked, however, a cedent has no obligation to disclose what a reinsurer "already knows or ought to know" or to make a "minute" disclosure of every circumstance. Compagnie, 57 F.3d at 80. See China Union Lines Ltd. v. Am. Marine Underwriters Inc., 755 F.2d 26, 29 (2d Cir. 1985) ("silence concerning well-established practices and matters of general knowledge does not affect the validity of a marine insurance contract."). Thus, for example, a cedent is not obliged to disclose the terms of the underlying insurance policy where those terms are generally to be found in policies of that type, but it is required to disclose extended coverages or unusual terms. Sumitomo Marine & Fire Ins. Co. v. Cologne Reins. Co. of Am., 552 N.E.2d 139. 143 (N.Y. 1990).

(4.) Compagnie, 944 F.Supp. 986, 994 (D. Mass. 1996); Reliance Ins. Co. v. Certain Member Cos., 886 F.Supp. 1147 (S.D.N.Y.), aff'd, 99 F.3d 402 (2d Cir. 1995); In re Liquidation of Union Indem. Ins. Co. of New York (Michigan Nat'l Bank-Oakland v. Am. Centennial Ins. Co., 674 N.E.2d 313 (N.Y. 1996); Calvert Fire Ins. Co. v. Unigard Mut. Ins. Co., 526 F.Supp. 623, 648 (D. Neb. 1980) (applying Nebraska law), aff'd, 676 F.2d 707 (8th Cir. 1982). Rescission is a remedy that may be available to reinsurers able to establish material misrepresentations in the process of underwriting the reinsurance agreement and, in some jurisdictions, material breaches of the reinsurance agreements after they are executed. Rescission is an equitable remedy that essentially voids the reinsurance agreement, relieving a reinsurer of all obligations.

(5.) See, e.g., Nat'l Am. Ins. Co. v. Certain Underwriters at Lloyd's London, 93 F.3d 529, 537-38 (9th Cir. 1996).

(6.) 4 F.3d at 1066. Accord Casualty Ins. Co. v. Constitution Reins. Co., No. 91 L 14732, (Cir. Ct., Cook County, Illinois, Jan. 22, 1996), reprinted in Mealev's Litigation Reports--Reinsurance Vol. 6, No. 18 (Jan. 31, 1996) ("This case, like any insurance/reinsurance dispute, cannot turn on subjective points of view of ceding insurers, but rather must turn on the objective obligations imposed on those insurers to share information to all with a right to know on a basis of objective reasonableness where the standard is one of `utmost good faith' in information sharing.")

(7.) Unigard, 4 F.3d at 1066; Casualty Ins., supra note 6; Constitution Reins. Corp. v. Stonewall Ins. Co., 980 F.Supp. 124 (S.D.N.Y. 1997), aff'd, 182 F.3d 899 (2d Cir. 1999).

(8.) See, e.g., Potomac Elec. Power v. California Union Ins. Co., 136 F.R.D. 1 (D. D.C. 1990) (permitting discovery of reinsurance agreements but not communications or documents outside of those agreements on the grounds that such information would comprise a "fishing expedition" without "sufficient indicia of relevance"); Clark Equip. Co. v. Liberty Mut. Ins. Co., 1995 WL 867344 (Del. Super., April 21, 1995) (permitting discovery of reinsurance policies but upholding objections to discovery of reports from insurer to its reinsurer).

(9.) 116 F.R.D. 78, 84 (N.D. Ill. 1987) (citations and footnotes omitted). Accord Missouri Pac. R.R. Co. v. Aetna Cas. & Surety Co., 1995 WL 861147 (N.D. Tex.); Potomac Elec. Power v. California Union Ins., 136 F.R.D. 1 (D. D.C. 1990); Great Lakes Dredge & Dock Co. v. Commercial Union Assur. Co., 159 F.R.D. 502 (N.D. Ill. 1995); Morton Int'l Inc. v. Liberty Mut. Ins. Co., 1995 WL 868455 (W.Va. App.)

(10.) 139 F.R.D. 609, 613 (E.D. Pa. 1991). See also In re Texas Eastern Transmission Corp., No. MDL 764, at *2 (E.D. Pa. July 26, 1989).

(11.) 286 Cal. Rptr. 50 (Cai.App. 1991).

(12.) See also Olin Corp. v. Ins. Co. of North Am., No. 84 Civ. 1968 (AGS) (S.D. N.Y. March 21, 1996), reprinted in Mealey's Litigation Reports--Reinsurance, Vol. 6, No. 24 (April 25, 1996) (denying motion to compel production of communications between cedent and reinsurers on all issues other than documents' relevance to lost policy defense); Temple-Inland Inc. v. Highlands Ins. Co., No. 28,449-95-03 (Tex. Dist. Ct., Angelina Cty. March 4, 1996), reprinted in Mealey's Litigation Reports--Reinsurance, Vol. 6, No. 24 (April 25, 1996). Cf Indiana Gas Co. v. Aetna Cas. & Surety Co., 1995 WL 866417 (N.D. Ind.) (denying motion to strike paragraphs of complaint alleging that defendant insurers had purchased reinsurance for risks arising under plaintiff's insurance policies and had construed reinsurance policies in manner consistent with insured's request for coverage on grounds that, at early pleadings stage, court could not determine whether existence and scope of reinsurance was relevant to dispute before court). But see Lipton v. Superior Court, 56 Cal.Rptr.2d 341 (Cal.App. (1996) (reinsurance and reserving information potentially subject to discovery in bad faith action).

(13.) 139 F.R.D. 609, 611-12 (E.D. Pa. 1991).

(14.) Accord Texas Eastern Transmission, supra note 10.

(15.) 1991 WL 237636, at *2 (E.D. Pa.).

(16.) Id. at *3. Accord Leksi Inc. v. Fed. Ins. Co., 129 F.R.D. 99 (D. N.J. 1989) (reinsurance information discoverable for purpose of reconstructing lost policy); Stonewall Ins. Co. v. Nat'l Gypsum Co., 1988 WL 96159 (S.D.N.Y.) (reinsurance information discoverable to rebut misrepresentation defense); Continental Illinois Corp., 116 F.R.D. 78 (reinsurance information discoverable to defend against insurer's rescission claim); Morton Int'l Inc. v. Liberty Mut. Ins. Co., 1995 WL 868455 (W.Va. App.) (reinsurance information discoverable to defend against late notice defense).

(17.) 1999 WL 301688 (D. Conn.).

(18.) 653 A.2d 122 (Conn. 1995).

(19.) 660 N.E.2d 807, 810-11 (Ohio Comm.Pl. 1995).

(20.) 120 F.R.D. 533, at 537-38 (E.D. Cal. 1988). Other decisions are in accord. See Minnesota School Boards Ass'n Ins. Trust v. Employers Ins. Co. of Wausau, 183 F.R.D. 627, 631-32 (N.D. Ill. 1999); United States Fire Ins. Co. v. Gen. Reins. Corp., 1989 WL 82415, at *3 (S.D.N.Y.); Hartford Steam Boiler Inspection and Ins. Co. v. Stauffer Chem. Co., 1991 WL 230742 at *2 (Conn. Super.).

(21.) 183 F.R.D. 627 (N.D. Ill. 1999).

(22.) No. 95 Cir. 10415 (HBP) (S.D.N.Y. Nov. 25, 1996), reprinted in Mealey's Litigation Reports--Reinsurance, Vol. 7, No. 15 (Dec. 14, 1996). Accord Massachusetts Bay Ins. Co. v. Stamm, 700 N.Y.S.2d 707 (App. Div. 1st Dep't 2000).

(23.) 187 F.R.D. 252 (W.D. Va. 1999).

(24.) 797 F.Supp. 363 (D. N.J. 1992).

(25.) Id. at 367, criticizing a contrary result in Waste Management Inc. v. Int'l Surplus Lines Ins. Co., 579 N.E.2d 322 (Ill. 1991).

(26.) Id. at 369. Accord United States Fire Ins. Co. v. Phoenix Assur. Co. of New York, 598 N.Y.S.2d 938 (App. Div. 1st Dep't 1993) (once coverage dispute has arisen, cooperation clause cannot act as waiver of attorney-client privilege).

(27.) 797 F.Supp. at 370.

(28.) Id. at 370-71. A cedent, however, will be required to produce fee bills or other records supporting a claim for recovery of attorney's fees from a reinsurer. See, e.g., ERA Franchise Systems Inc. v. Northern Ins. Co. of New York, 183 F.R.D. 276 (D. Kan. 1998).

(29.) 1995 WL 338296 (S.D.N.Y.).

(30.) 676 N.Y.S.2d 727, 676 N.Y.S.2d 734 (Sup. Ct. N.Y. Cty. 1998), aff'd, 692 N.Y.S.2d 384 (App. Div. 1st Dep't 1999), leave to appeal denied, 726 N.E.2d 483 (N.Y. 2000).

(31.) 676 N.Y.S.2d at 733.

IADC member Paul M. Hummer is a partner at Saul Ewing in Philadelphia and co-chair of its Insurance Group LLP. He is a graduate of the University of California at Santa Barbara (B.A. 1980) and Hastings College of the Law (J.D. 1984, member of the Hastings Law Review 1982-83). He concentrates his practice in the representation of insurers, reinsurers and intermediaries in litigation and regulatory proceedings.
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Author:Hummer, Paul M.
Publication:Defense Counsel Journal
Geographic Code:1USA
Date:Jul 1, 2001
Words:5570
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