Discovery

Plaintiff Mine Safety Appliances (“MSA”) moved to compel discovery from defendant insurers on coal-dust-related claims submitted to the insurers by other, non-party, policyholders as well as the insurers’ agreements and communications with non-party reinsurers about the insurance policies issued to MSA. A special master denied the motion to compel regarding information related to other policyholders’ claims but ordered the production of the reinsurance agreements as to those insurers from whom money damages were sought. The master also ordered that, insofar as any insurer had asserted a late notice defense, it must produce all communications relating to when notice of a claim by MSA was received or communicated to its reinsurers. The Delaware state court rejected arguments from MSA and defendant insurers regarding the propriety of the special master’s ruling and approved it in all respects. Mine Safety Appliances Co. v. AIU Ins. Co., Case No. 10C-07-241 (Del. Super. Ct. June 6, 2013).

This post written by Ben Seessel.

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On a motion to compel, a United States District Court in South Dakota ordered production of a reinsurance agreement entered into between Ability Insurance Company and Ability Reinsurance (Bermuda) Limited. Plaintiffs sought production of the document in connection with their claims for breach of contract, bad faith, fraud, and misrepresentation against several Ability entities related to the scope of coverage under a long-term care insurance policy. The court found the agreement to be relevant to the case because “reinsurance agreements and other agreements between the parties are relevant to the makeup of an insurance company and could lead to the discovery of admissible evidence.” The court stated that any concerns regarding confidentiality should be addressed through protection orders. Burke v. Ability Insurance Company, Case No. CIV. 12-4051 (D.S.D. May 31, 2013).

This post written by Abigail Kortz.

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An insurer denied coverage to a corporate insured for losses sustained at one of its Indiana processing plants under the pollution exclusion, arguing that Michigan law should apply and that Michigan law recognizes such exclusions. The corporation argued instead that Indiana law applied and, thus, the exclusion could not be enforced. After both parties moved for summary judgment on the choice of law issue, the corporation sent discovery requests related to reinsurance and premium calculation information, which the magistrate judge determined were irrelevant to the choice of law issue. In addition, the magistrate judge stated that it was inconsistent for the corporation to claim it needed additional discovery to brief the choice of law issue after they had already moved for summary judgment. The district judge affirmed, holding it was only relevant for the choice of law issue where the insurance premiums were paid, not the rationale for calculating premiums. Visteon Corp. v. National Union Fire Insurance Co., Case No. 1:11-cv-200 (USDC S.D. Ind. June 17, 2013).

This post written by Brian Perryman.

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A Connecticut federal court decided some thorny discovery issues in a reinsurance dispute between Travelers and one of its reinsurers, Excalibur. The suit arose from underlying asbestos claims settled by Travelers, for which it looked to Excalibur and its other reinsurers for coverage.

Holding that New York law applied, the Court identified several operative principles. First, a “follow the settlements” clause in a reinsurance contract requires deference to a cedent’s decision on the allocation of settlement payments among reinsurers. Second, a cedent’s allocation decision, however, is not immune from scrutiny, and must be reasonable. That is, it must be one that the parties to the settlement of the underlying insurance claims might reasonably have arrived at but for the reinsurance. Third, an allocation that violates or disregards the reinsurance contract’s provisions is invalid.

Excalibur argued that as one of Travelers’ reinsurers, it was entitled to challenge Travelers’ allocation of its settlement among the reinsurers. It argued that Travelers’ allocation was unreasonable, and contrary to the reinsurance policies, and that it was therefore entitled to discovery of information pertaining to the allocation decision. Travelers responded that the “follow the settlements” clause meant Excalibur could not challenge, question, or inquire into Travelers’ settlement and allocation decisions. Holding that Excalibur’s position accorded better with New York law, the court allowed Excalibur’s requested discovery. Travelers Indemnity Co. v. Excalibur Reinsurance Corp., No. 3:11-CV-1209 (USDC D. Conn. April 8, 2013).

This post written by John Pitblado.

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