Discovery

In a case of first impression, the Southern District of New York determined Montana Code § 33-28-108(3) did not mandate the Montana Commissioner of Insurance’s report on a captive insurer was privileged. The Code provision stated:

[A]ll examination reports, preliminary examination reports or results, working papers, recorded information, documents, and their copies produced by, obtained by, or disclosed to the commissioner or any other person in the course of an examination made under this section are confidential, are not subject to subpoena, and may not be made public by the commissioner or an employee or agent of the commissioner without the written consent of the company or upon court order.

The Court required the subject documents be produced for three reasons. First, statutory interpretation did not support the privilege, as interpreting the statute so broadly would sweep in almost any company record – such as discoverable business records – that played a part in the Commissioner’s examination. Instead, the statute should be found to protect documents in the possession of the Commissioner, not the examined company. Furthermore, the statute noted the documents are “confidential,” and did not expressly create an evidentiary privilege.

Second, the Court looked at the interpretation of similarly worded statutes from other jurisdictions, as this was a case of first impression under Montana law. Statutes surveyed included Indiana, Rhode Island, New Hampshire, West Virginia and New Jersey – all of which prohibited the state insurance agency from disclosing company records but not information in the company’s control. Notably, California Insurance Code § 735.5, which was also analogous to the Montana statute yet interpreted very broadly to support the withholding of such documents, was not considered by the Court because of the “odd” result such a statutory interpretation would yield.

Finally, the Court looked at the Commissioner’s conduct: it declined to submit any formal administrative interpretation of the statute; it appeared at a deposition to discuss the company; and, it freely discussed the allegedly privileged documents over objections. The documents were thus subject to the case’s confidentiality order, but were not privileged.

Amtrust North America, Inc., et al. v. Safebuilt Insurance Services, Inc., et al., Nos. 16-MC-169 and 16-MC-170 (USDC S.D.N.Y. May 16, 2016)

This post written by Nora A. Valenza-Frost.
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A federal district court dealt with a novel approach where parties to an arbitration wanted to gain access to documents from a previous proceeding. The original case before the court pitted one plaintiff against three defendants—and the parties had a protective order entered following two differing proposals. The plaintiff opposed language in a protective order that would allow the confidential documents to be used in a subsequent arbitration, while the defendants advocated for the documents’ use. The court entered hybrid language allowing “information derived from any Protected Material” to be used in other matters but not allowing the documents themselves to be used. That case was later dismissed.

The matter is now being arbitrated between two of the defendants to the earlier action. The tribunal ordered the parties to produce the relevant documents. The two remaining parties returned to court to modify the protective order to allow the documents to be disclosed. One party sought to have only documents of the third defendant disclosed while the other party sought to have only documents of the plaintiff disclosed. In a March 9, 2016 opinion, the court determined that it had retained jurisdiction to modify the protective order, even though the case was dismissed. Rio Tinto PLC v. Vale, S.A., No. 14-3042 (USDC S.D.N.Y. Mar. 9, 2016).

In an April 18, 2016 opinion, the court took a split approach, determining that the defendant’s documents could be used, while the plaintiff’s could not. In reaching this determination, the court reasoned that the third defendant “had no or minimal reliance interest” because they had advocated for language allowing the documents’ use, whereas the plaintiff had “insisted” that the documents not be used. Rio Tinto PLC v. Vale, S.A., No. 14-3042 (USDC S.D.N.Y. Apr. 18, 2016).

This post written by Zach Ludens.

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On Plaintiffs’ motion to compel discovery in a bad faith action against first-party property insurer Liberty Mutual Fire Insurance Company (“Liberty Mutual”), an Alabama federal court limited, but allowed, discovery related to: past bad faith lawsuits against the insurer; commercial property claims files of the adjuster handling the Plaintiffs’ claim; performance goals and evaluations of the claims department; and, quality assurance manuals. The Court fully denied Plaintiffs’ overbroad and irrelevant requests for information relating to claims files and claims where bad faith was alleged as well as reserves information and personnel records.

The court declined to compel discovery of Liberty Mutual’s reserves, frequently a target of discovery in reinsurance matters, as reserve information “is not relevant as to what an insurer thought of the merits of a claim.” Graham & Company, LLC v. Liberty Mut. Fire Ins. Co., Case No. 14-2148 (USDC N.D. Ala. April 5, 2016).

This post written by Nora A. Valenza-Frost.
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A North Carolina magistrate judge recently denied an insurer’s motion for a protective order in a suit seeking a declaration that American Home Assurance (American Home) owes PCS Phosphate Co. Inc. (PCS) a duty to defend and a duty to indemnify in two underlying environmental contamination suits. In the coverage suit, the magistrate judge denied American Home’s protective order regarding American Home’s reserves because the request fell “within the scope of permissible discovery based upon claims asserted in this matter.” This fact was true, according to the magistrate judge, because PCS had asserted bad faith and breach of contract claims, while American Home asserted a late notice defense. In such an instance, reserve information is relevant and discoverable. Further, the magistrate held that requests regarding claims handling manuals, record retention, underwriting documents, and promotional materials are all relevant and discoverable.  PCS Phosphate Co., Inc. v. American Home Assurance Co., No. 5:14-CV-99-D (USDC E.D. N.C. Dec. 10, 2015).

This post written by Whitney Fore, a law clerk at Carlton Fields in Washington, DC.
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