Discovery

This case, arising from a dispute over insurance coverage following a deadly collision when a tractor trailer struck several other vehicles, was first reported on in a February 28, 2007 posting. Recently, defendant American Re (now known as Munich Re) filed a motion to compel Scottsdale to produce documents. Specifically, American Re sought two categories of documents – documents relating to premium bordereaux and documents relating to underwriting guidelines. With respect to the first request, Scottsdale did not argue the merits of each request, but simply asserted that the requests were irrelevant, overbroad, and burdensome. The court found Scottsdale’s arguments insufficient to bar production, but did limit the timeframe to documents created on or after January 1, 1997.

The court denied American Re’s request with respect to the second category of documents, concluding that American Re did not meet its burden of showing how the requested information was relevant to its claims or defenses. Scottsdale Ins. v. American Re-Insurance Co., Case No. 8:06cv16 (USDC D. Neb. Sept. 10, 2007).

The issue presented in this case was whether a statutory provision authorizing limited discovery of a defendant’s insurance coverage information authorized pretrial discovery of a nonparty liability insurer’s reinsurance agreements for purposes of facilitating settlement of an underlying tort action. In a 4-3 decision, the court concluded that while such discovery may be appropriate in limited circumstances, such as where the reinsurance agreement was functioning the same way as a liability policy or where the reinsurance agreement was itself the subject matter of the litigation at hand, the present case did not present such narrow circumstances. The dissenting opinion stated that the relevant statute “unambiguously provides for discovery of reinsurance policies, by including ‘any agreement under which any insurance carrier may be liable to . . . indemnify or reimburse for payments made to satisfy the judgment.’” Catholic Mutual Relief Society v. Superior Court of Los Angeles, S134545 (Cal. Sup. Ct. Aug. 27, 2007).

In an insurance coverage case involving fifteen insurance companies and one insured, the insured, Bunge North America, filed a motion to compel discovery relating to reinsurance, loss reserves, claims handling manuals, and document retention policies. The insurers filed a declaratory judgment action against Bune seeking a declaration that under the terms of the policy, they did not have an obligation to defend, indemnify, or reimburse Bunge for damages caused by pollution at one of Bunge’s sites. In various counterclaims and cross claims, Bunge alleged that the insurers acted in bad faith in failing to fairly investigate Bunge’s coverage claims in a timely manner.

The Kansas District Court ruled that the reinsurance agreement, normally beyond the scope of discovery in a declaratory judgment action, was discoverable because Bunge had brought several counterclaims in which it sought a monetary award. Specifically, the court found that reinsurance was relevant “for purposes of rebutting the Insurers’ defense of late notice, for purposes of establishing Bunge’s claims of bad faith and improper handling, and for purposes of reconstructing the terms of any lost policies.” United States Fire Ins. v. Bunge North America, Case No. 05-2192-JWL-DJW (USDC D. Kan. May 25, 2007).