Discovery

Insured companies sued Travelers for allegedly misrepresenting the scope of coverage afforded for asbestos injury claims under certain Excess Overlayer Indemnity policies. At issue has been the discoverability of a memorandum prepared by Travelers in preparation for and involuntarily produced by Travelers in an earlier related lawsuit in federal court in Pennsylvania and, ultimately, the Third Circuit Court of Appeals. See Travelers Cas. & Sur. Co. v. Ins. Co. of N. Am., previously discussed here. That case involved a dispute surrounding layers of insurance provided for losses relating to breast implants and chemical products. In preparation for that litigation, Travelers requested that its general counsel prepare a reinsurance analysis memo addressing the reinsurance implications of different coverage scenarios for the breast implant claims.

In the present lawsuit, plaintiffs requested production of this memo on the theory that it likely contained information relevant to the current plaintiffs’ claims and Travelers’ prior interpretation of its policies. Travelers, however, refused to produce the memo, claiming that it was protected by attorney-client privilege. A January 2017 discovery ruling ordered an in camera review of the memo. Following the in camera review, the court has now ruled that the significant discussion and quotation of the memo’s contents by the Third Circuit in the earlier lawsuit destroyed the privilege. While the general rule is that a party does not waive privilege for documents which it is compelled to produce, “the exhaustive discussion of it by the Third Circuit makes it impossible to consider it” privileged. The order cited the fact that the memo was admitted as an exhibit at trial as well as the fact that the Third Circuit extensively quoted from the memo and summarized testimony about it, all of which appeared in a published court ruling. As such, the memo was in the public domain, notwithstanding that the court records were later sealed. Travelers was ordered to produce the sections of the memo addressed by the Third Circuit to plaintiffs’ counsel “for attorney’s eyes only.” ITT Corp. v. Travelers Cas. & Sur. Co., Case No. 12-38 (USDC D. Conn. Feb. 27, 2017).

This post written by Gail Jankowski.

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The case involves a dispute over Utica Mutual Insurance Company’s claims for reinsurance proceeds from Munich Re. One of Munich Re’s defenses in the litigation asserts that Utica “strategically orchestrated a settlement structure” with its insured “for the sole purpose of either creating reinsurance coverage which did not exist or maximizing a reinsurance recovery to which, in good faith, Utica is not entitled.” To support its defense, Munich Re sought to compel production from Utica of certain redacted handwritten notes that were written on a draft mediation statement that Utica claims were authored by an attorney from the law firm that represented it during the underlying insurance coverage dispute between Utica and its insured. Munich Re based its motion to compel the document on (1) the “crime fraud exception” to the attorney-client privilege, and (2) Utica’s inability to specifically identify the author of the handwritten notes.

The magistrate judge denied Munich Re’s motion to compel, and the district court affirmed the decision. Regarding the crime-fraud exception, the court found no clear error in the magistrate’s finding that Munich Re failed to establish that the handwritten notes were made in furtherance of Utica’s alleged attempt to defraud its reinsurers. And regarding the unknown identity of the notes, the court upheld the magistrate’s conclusion that the notes were authored by an attorney, notwithstanding that one of Utica’s outside attorneys testified that the notes were not in his handwriting or in the handwriting of one of his partners. The court upheld the magistrate’s ruling that “the identity of the attorney was irrelevant because the contents of the notes clearly establish that this was a notation by a lawyer for Utica relating to the reinsurance implications of [the] settlement.” Utica Mutual Insurance Co. v. Munich Reinsurance America, Inc., Case No. 6:12-CV-196 (USDC N.D.N.Y. Apr. 25, 2016; Jan. 13, 2017) (Magistrate Ruling & Order on Appeal).

This post written by Gail Jankowski.

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A court has denied a motion to reconsider its decision denying a reinsurer’s (Century Indemnity Co.) motion to compel an insurer (Travelers Casualty and Surety Company) to produce certain documents in a case in which Travelers is specifically seeking a declaratory judgment that Century’s obligation to pay claims is not preconditioned on its access to Travelers’ documents.

Travelers filed the lawsuit alleging that Century had breached two reinsurance contracts, seeking reimbursement for underlying asbestos-related claims paid by Travelers, and requesting declarations that Travelers is not obligated to provide Century with privileged documents and that Century’s obligation to pay under the contracts is not preconditioned on Traveler’s providing documents to Century. After Travelers refused to produce certain documents requested in discovery, Century moved for leave to file a motion to compel production. The court denied the motion for two reasons. First, it found that the motion was untimely, as it was not filed until four months after Travelers completed its production. Second, the court found “that the documents that Century seeks to obtain by compelling production are effectively what the underlying dispute in this case is about”. On reconsideration, the court found that Century had provided no basis sufficient for the court to alter its earlier decision. Travelers Casualty and Surety Company v. Century Indemnity Co., 3:16-cv-170 (JCH) (D. Conn. Jan. 19, 2017)

This post written by Jason Brost.

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In a discovery dispute following the liquidation of Western Insurance Company (“Western”), a Utah federal district court granted a motion to compel a 30(b)(6) deposition testimony regarding Western’s reinsurance agreements. Western objected to the discovery on the grounds that the subject Directors and Officers should have made reinsurance claims prior to liquidation, and the failure to do so resulted in millions of dollars lost for the company. The court granted the motion to compel based on that assertion, deeming the testimony regarding reinsurance agreements, payments, and settlements to be relevant to the Directors and Officers’ preparation of their defense to that assertion. The court stated that if no reinsurance proceeds were received by Western, the Directors and Officers were still allowed to verify that through deposition testimony, because had Western received any payments on claims, that might provide evidence of the value of those claims at the time of liquidation.

Western Ins. Co. v. Rottman, Case No. 13-436 (USDC D. Utah Dec. 28, 2016)

This post written by Thaddeus Ewald .

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