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New reinsurance-related and arbitration developments from Carlton Fields

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Discovery

COURT COMPELS PRODUCTION OF REINSURANCE TREATIES, BUT NOT RELATED COMMUNICATIONS

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In a discovery dispute involving requests for documents related to an insurer’s reinsurance treaties, a court compelled the production of the treaties, but reserved ruling on the production of related communications, subject to additional briefing on relevance. The court held that reinsurance policies themselves are discoverable without showing relevance. Communications regarding reinsurance, however, require a showing that the documents are relevant to alleged insurer bad faith. The assumption “that reinsurance decisions do not involve questions of policy interpretation is especially applicable when the reinsurance is treaty insurance.” Isilon Systems, Inc. v. Twin City Fire Insurance Co., Case No. 2:10-cv-01392 (USDC W.D. Wash. Feb. 15, 2012).

This post written by Michael Wolgin.

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COURT DENIES IN PART, GRANTS IN PART CROSS-MOTIONS TO COMPEL DISCOVERY IN ASBESTOS REINSURANCE DISPUTE

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A federal court recently ruled on cross-motions to compel in the ongoing litigation between Travelers Casualty and Century Indemnity. The dispute arose from Century’s denial of certain payment claims (regarding asbestos losses) under a series of reinsurance contracts covering underwriting years 1969-1974. The court denied Century’s motion to compel coverage dispute documents, finding them irrelevant because the underlying coverage was undisputed. Travelers, however, must provide all non-privileged documentation concerning the evaluation of the reinsurance claims. The court also denied Century’s motion regarding Traveler’s communications with other insurers, finding these irrelevant. The court also ordered the parties to meet and confer in an attempt to reach an agreement regarding the discovery of information related to Century’s reinsurance of other companies that insured the underlying insureds for asbestos liability. Finally, Century was compelled to answer an interrogatory related to its allocation of asbestos losses under the reinsurance treaties. Travelers Casualty & Surety Co. v. Century Indemnity Co., No. 3:10-cv-00400 (USDC D. Conn. Nov. 16, 2011).

This post written by John Black.

INSURERS IN COVERAGE SUIT COMPELLED TO PRODUCE DISCOVERY ON REINSURANCE

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Olin Corporation sought a declaratory judgment that it was covered for damages to its industrial plant under a policy issued by a consortium of property insurers. Olin sought to discover information on the property insurers’ reinsurance coverage. The property insurers moved for a protective order and Olin moved to compel. The magistrate judge held that, pursuant to Federal Rule 26(a)(1)(A)(iv), the insurers must produce any reinsurance agreement that might be used to satisfy a judgment or indemnify or reimburse the insurers for payments made to satisfy a judgment. The court further held that communications with the reinsurers were also discoverable because they might contain information relevant to the property insurers’ affirmative defenses relating to their analysis of the sufficiency of Olin’s proof of loss and satisfaction of contractual prerequisites. Olin Corp. v. Continental Casualty Co., Case No. 10-CV-623 (USDC D. Nev. Aug. 30, 2011).

This post written by Ben Seessel.

COURT CONSIDERS PRIVILEGE ASSERTIONS IN DISPUTE INVOLVING ASBESTOS TRUST, EXCESS LIABILITY INSURER, AND REINSURANCE

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In a suit between a bankruptcy trust established to resolve a defunct corporation’s asbestos-related personal injury liabilities and the corporation’s excess liability insurer that had denied coverage to the trust in connection with the asbestos claims, a court resolved various attorney client privilege and work product protection issues. The insurer had sought various documents related to the handling of the underlying asbestos claims by the trust, among others. Many of these documents included communications between counsel and the corporation or between counsel and the bankruptcy creditors’ committee. No privilege existed over documents addressing the handling of the underlying asbestos claims because (1) a common interest exists between the trust and the insurer related to the asbestos claims, and (2) the trust had a duty to cooperate with the insurer based on the primary policy. In contrast, the court held the privilege did exist for a number of documents related to the reinsurance procured by the insurer. Whereas the insurer’s discovery requests were related to the handling of the asbestos claims, the trust’s requests were for the purpose of learning the insurer’s “admissions regarding the matter in dispute.” The court also found a common interest existed between the insurer and its reinsurer regarding the trust’s claims, such that any communications with counsel that may have been shared by the insurer with its reinsurer would not be considered a waiver of privilege. ARTRA 524(g) Asbestos Trust v. Transport Insurance Co., Case No. 09-458 (N.D. Ill. Sept. 28, 2011).

This post written by Michael Wolgin.

COURT ALLOWS DISCOVERY OF ARBITRATOR FOR VACATUR CLAIM BASED ON EVIDENT PARTIALITY

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Chartis insured Lasalle Bank under certain surplus lines policies covering Lasalle’s business trusts. The insurance policies contained mandatory arbitration agreements. After a dispute arose between the parties, Chartis initiated a tripartite arbitration through the AAA as per the agreement. The arbitration entailed more than sixty (60) days of evidentiary hearings, which concluded on September 22, 2010. During the pendency of the arbitration, Chartis discovered that Charles Ennis, one of the three agreed-upon arbitrators, had concealed a past adversarial relationship with Chartis affiliates, and requested his removal through the AAA. After reviewing supplemental disclosures by Ennis, the AAA rejected Chartis’ request and the arbitration was concluded. The panel thereafter issued an award, and the parties and arbitrators entered into a Confidentiality Order. Chartis immediately filed an action in court to vacate the award, based in part on Ennis’ purported “evident partiality.” Chartis moved to seal the award pursuant to the Confidentiality Order, and also moved for permission to seek limited discovery on Ennis’ prior adversarial relationship with the Chartis affiliates. The court denied the motion to seal, but allowed Chartis the opportunity to redact specified portions of the award. The Court granted Chartis’ motion for discovery of Ennis’s past adversarial relationship to Chartis affiliates. Chartis Specialty Ins. Co. v. Lasalle Bank, N.A., C.A. No. 6103-VCN (Del. Ch. July 29, 2011).

This post written by John Pitblado.