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Discovery

COURT GRANTS IN PART AND DENIES IN PART PLAINTIFF REINSURER’S MOTION TO COMPEL DISCOVERY RESPONSES FROM DEFENDANT REINSURER

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Plaintiffs Trenwick American Reinsurance Corporation (“Trenwick Re”) and Unum Life Insurance Company of America (“Unum”) brought an action against reinsurer IRC Re, Limited (“IRC Re”) and others arising from a claims dispute under an alleged reinsurance contract under which IRC Re purportedly agreed to reinsure a portion of a risk also partially reinsured by Trenwick Re. Specifically, Trenwick Re alleges that IRC Re agreed to continue to reinsure a 19% portion of a managed workers compensation insurance program (the “Compcare Program”) which IRC Re had previously reinsured, when Trenwick Re and various other parties entered into a quota share reinsurance treaty covering the Compcare Program.

The plaintiffs filed a lengthy Memorandum arguing that the defendants failed to satisfy their discovery obligations by (1) failing to provide responsive documents to certain requests, despite having claimed to have provided them in a 50,000 page purported “document dump;” (2) failing to provide documents under the defendants’ custody or control in the possession of defendant IRC Re’s “management and administrative services provider,” Beecher Carlson, a Bermuda company; (3) failing to produce documents alluded to by defendants’ designated 30(b)(6) deposition witness; and (4) failing to provide complete answers to interrogatories and failing to specify objections beyond “boilerplate” assertions. Defendants filed a Memorandum in opposition. The Court, in a three-sentence electronic order, granted portions of plaintiff’s motion pertaining to points (1) and (4) above, and noted that defendants would not be permitted to rely on any documents not produced in response to plaintiff’s requests. Trenwick American Reinsurance Corp. v. IRC Inc., Case No. 07 -12160 (USDC D. Mass. Dec. 17, 2008).

This post written by John Pitblado.

AIU v. TIG DISCOVERY DISPUTE: THE SAGA CONTINUES

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The bell has rung on the latest round of discovery litigation brought between AIU Insurance Company (“AIU”) and TIG Insurance Company (“TIG”) in litigation in federal District Court. As we wrote in our previous post of October 2, 2008, AIU brought the litigation to recover reinsurance payments allegedly owed to it from TIG on the basis of certain excess liabilities arising from underlying asbestos litigation exposure. In our October post, we noted that the Court ordered TIG to produce documents relating to its anticipated late notice defense from its claim file, despite its objections based on claims of attorney-client privilege and protection under the work product doctrine.

In the latest round of discovery litigation, TIG moved to compel AIU to produce certain documents despite AIU’s claims of privilege. In another split decision, the court ordered some, but not all of the relief sought by the moving party. Despite TIG’s arguments that certain privileged documents were nonetheless discoverable because AIU’s advice of counsel defense put them at issue, the Court held that the advice of coverage counsel is not necessarily at issue in evaluating the reasonableness of an underlying settlement. The Court did order the production of documents pertaining to similar, but unrelated claims, noting that they could lead to the discovery of admissible evidence pertaining to the manner in which the insurer interprets its own obligations under the notice provision of its contracts. The Court also ordered that AIU search the electronic files of certain persons named by TIG, finding that their electronic materials were discoverable. AIU Insurance Company v. TIG Insurance Company, 07-CV-7052 (SHS) (HBP) (USDC SDNY Nov. 25, 2008).

This post written by John Pitblado.

SECOND CIRCUIT COURT OF APPEALS STRICTLY CONSTRUES FEDERAL ARBITRATION ACT’S SUBPOENA POWER PERTAINING TO NON-PARTIES

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Life Settlements Corp. d/b/a Peachtree Life Settlements (“Peachtree”) entered into a contingent cost insurance contract with Syndicate 102 at Lloyd’s of London (“Syndicate 102”) to insure against the risk that living insureds under life policies which Peachtree purchased might live past his or her projected life expectancy. Some of the purchased life policies were placed by Peachtree with Life Receivables Trust (the “Trust”), an entity created by Peachtree for the express purpose of holding the policies. Syndicate 102 declined a claim by Peachtree after an insured outlived his life expectancy, asserting that the Trust made fraudulent misrepresentations regarding the date on which the underlying life policy was purchased, and also regarding the insured’s life expectancy. Syndicate 102 and the Trust arbitrated the dispute under the parties’ agreement, which commanded arbitration under American Arbitration Association rules.

After Syndicate 102 unsuccessfully attempted to join Peachtree as a party to the arbitration (Peachtree was also a party to the contract containing the arbitration agreement), it successfully sought the arbitrators’ issuance of subpoenas commanding Peachtree to produce certain documents that the Trust was unable to obtain from Peachtree, due to Peachtree’s expressed position that it was not a party to the arbitration, and the arbitrators thus had no jurisdiction to issue orders binding on Peachtree. After Peachtree refused to comply with the subpoenas, Syndicate 102 filed an action in the federal district court seeking to compel compliance. The court ordered Peachtree to comply. Peachtree appealed, and the Second Circuit held – noting a split among the circuits – that the plain language of §7 of the Federal Arbitration Act does not authorize pre-hearing discovery from non-parties, and that a non-party may only be compelled to produce documents or testimony in conjunction with an appearance before the arbitral panel. The Court thus reversed the district court’s ruling ordering Peachtree to comply with the subpoenas. Life Settlements Corporation d/b/a Peachtree Life Settlements v. Syndicate 102 at Lloyd’s of London, No. 07-1197-cv (2d. Cir. Nov. 25, 2008).

This post written by John Pitblado.

SANCTIONS AWARDED AGAINST PARTY ISSUING SUBPOENA FOR ARBITRATION

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When plaintiff, in a case submitted to arbitration, issued a third party subpoena using the court’s caption and case number, without advising the opposing party, the arbitrator, or the court, the court granted defendant's motion for sanctions, awarding him attorney's fees associated with filing the motion. The court found that the subpoena issued by plaintiff's counsel to a third party was blatantly improper because: (1) the court had fully stayed the case pending arbitration and placed the case on the suspense calendar; (2) only arbitrators, and not parties, have authority to issue subpoenas; (3) plaintiff failed to give proper notice as required by Rule 45(b)(1); and (4) the subpoena sought documents that the arbitrator had already ruled were not discoverable. The court declined to enjoin plaintiff from issuing additional subpoenas. Kenney, Becker LLP v. Kenney, Case No. 06-2975 (USDC S.D. N.Y. Mar. 6, 2008).

This post written by John Black.

COURT DENIES MOTION TO COMPEL PRODUCTION OF REINSURANCE INFORMATION

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This case arises out of a state court lawsuit asserting claims from a motor vehicle accident, in which Bituminous Casualty sought a declaratory judgment that it did not owe its insured, the defendant in the state court action, a defense under its policy. The plaintiff in the state court action, which was not insured by Bituminous, sought the production of Bituminous’ reinsurance agreements and correspondence with its reinsurers. Although the court compelled the production of other documents, it denied the motion to compel to the extent that it sought information about Bituminous’ reserves, reinsurance agreements and other documents relating to reinsurance. Bituminous Cas. Corp. v. Smith Bros., Inc., Case No. 2:07-cv-354-KS-MTP (USDC S.D. Miss. Sept. 22, 2008).

This post written by Dan Crisp.