Discovery

PRE-ARBITRATION SUBPOENAS ISSUED TO HELP IDENTIFY PROPER PARTIES TO CONTEMPLATED ARBITRATION

July 8, 2009 by Carlton Fields

A court granted a petition for pre-arbitration issuance of judicial subpoenas to enable the petitioners to learn the names of potential parties against whom they may have a claim in their contemplated arbitration. Although the contemplated arbitration was to be governed by the Financial Industry Regulatory Authority’s Code of Arbitration Procedure, those rules were silent as to pre-arbitration discovery. However, a New York civil procedure statute specifically permitted pre-action discovery “to aid in arbitration.” That statute had been invoked where application was made to discover the identity of potential parties against whom an action may exist, so the petition was held proper. Petition of VTrader Pro LLC, Index No. 102334/09 (N.Y. Sup. Ct. Apr. 21, 2009).

This post written by Brian Perryman.

ORDER ALLOWING DISCOVERY OF ARBITRATION AWARD’S VALIDITY LACKED FINALITY TO CONFER APPELLATE JURISDICTION

July 6, 2009 by Carlton Fields

In an unpublished opinion, the Third Circuit Court of Appeals declined to exercise jurisdiction over an appeal of an order allowing discovery in connection with a motion to vacate an arbitration award. The Federal Arbitration Act provides for appeals from orders “modifying, correcting, or vacating an [arbitration] award.” The trial court’s decision to permit discovery into whether the award should be vacated might be a prelude to a final order vacating or modifying the award, but it is not a final order for purposes of the Act. Guyden v. Prudential Life Ins. Co. of Am., No. 08-3108 (3d Cir. June 5, 2009).

This post written by Brian Perryman.

REINSURANCE INFORMATION NOT DISCOVERABLE

June 16, 2009 by Carlton Fields

The Flintkote Company (“Flintkote”), an insolvent asbestos manufacturer, brought this action against its insurers for failure to defend or indemnify for claims allegedly covered under a policy in force between 1958 and 1961 and requested discovery of its insurer’s reserves and reinsurance information. In allowing discovery of reserves information, the district court found this information relevant to the plaintiff’s claims of bad faith in that the information could be relevant to show the difference between what the insurers expected to pay for claims and communication with the plaintiff regarding the scope of loss. The court then denied plaintiff’s request to discover reinsurance documents, determining that the reinsurance agreements were not directly at issue or relevant to the litigation. The Flintkote Co. v. Gen. Accident Assurance Co., Case No. 04-01827 (USDC N.D. Cal. May 26, 2009).

This post written by Dan Crisp.

EFFORTS TO COMPEL ARBITRATION OF COMMUTATION AGREEMENT FAIL

May 13, 2009 by Carlton Fields

A group of reinsurers recently lost both their application for a partial stay of litigation pending arbitration and application to appoint an umpire pursuant to the Federal Arbitration Act. The underlying dispute between the parties concerned a disagreement regarding whether the parties’ commutation agreement covered certain reinsurance contracts purchased from various non-party insurance companies. The plaintiff (CNA) filed an action for a declaratory judgment, alleging that the commutation agreement did not apply to the non-party reinsurance contracts. The reinsurers (collectively, SCOR) argued that the commutation settled and terminated those reinsurance contracts, and that the dispute over one of the reinsurance contracts was already the subject of pending arbitration between the parties. The court declined to order a stay in the case since CNA’s claim – a request for a declaration of rights under the commutation agreement – did not fall within any enforceable agreement to arbitrate. The commutation itself did not include an agreement to arbitrate. The court also declined to appoint an umpire since both the existence of an enforceable arbitration agreement between SCOR and CNA as well as the commutation of one of the reinsurance contracts was disputed. The court observed that appointing an umpire before determining whether the parties are required to arbitrate would be premature. Continental Casualty Co. v. Commercial Risk Re-Ins. Co., Case No. 07-6912 (USDC N.D. Ill. Apr. 16, 2009).

Prior to this ruling, the court had also denied the defendant's Motion to Stay Discovery pending its ruling on the afore-mentioned matters.

This post written by Brian Perryman.

COURT ORDERS PLAINTIFF TO PRODUCE CLAIMS FILES AND REINSURANCE POLICIES

April 9, 2009 by Carlton Fields

Plaintiff Clarendon National Insurance Company (“Clarendon”) sued Atlantic Risk Management, Inc. (“Atlantic”), its third party claims administrator (“TPA”), based in part on its contention that it consistently relied on Atlantic’s coverage recommendations to its detriment. The trial court denied Atlantic’s motions to compel production of Clarendon’s claim files and copies of its reinsurance policies. The Appellate Division reversed, ordering Clarendon to produce all of its claims files for which Atlantic served as TPA, as well as copies of its reinsurance policies. The Court held that the claims files were relevant to plaintiff’s claims handling practices at issue, and that the reinsurance policies are required to be disclosed under New York’s procedural rule requiring production of all insurance policies which potentially cover the subject liability. Clarendon Nat’l Ins. Co. v. Atlantic Risk Mgmt. Inc., Nos. 5303N, 5303NA, 5303NB and 5303NC (N.Y. App. Div. Feb. 19, 2009).

This post written by John Pitblado.