Zurich American, as reinsured, sued its reinsurer, R & Q Reinsurance, alleging that R&Q had breached its reinsurance obligations by not paying its full share of a settlement reached by Zurich with its insured. The dispute involved the allocation of policy limits among successive policies applicable to the loss. Zurich sought discovery of other instances in which R&Q had denied payments based upon allocation disputes. The Court found that R&Q's handling of similar claims might be relevant in the interpretation of the contract at issue, and ordered the production of certain information and the sampling of a claims database maintained by R&Q. Zurich American Ins. Co. v. Ace American Reinsur. Co., Case No. 05-9170 (USDC S.D.N.Y. Dec. 22, 2006).
CIGNA, as the administrator of managed care organizations, became a defendant in a number of federal and state class actions and individual lawsuits, some of which gave rise to a federal MDL action. CIGNA sought coverage and a defense from its insurers, and asserted a bad faith claim against one insurer which refused to provide coverage and which did not settle with CIGNA. A Pennsylvania state court has permitted CIGNA to obtain discovery as to the details of that insurer's reinsurance relationships, on the theory that such information might be relevant or lead to admissible information with respect to CIGNA's bad faith claim. Executive Risk Indemnity, Inc. v. CIGNA Corp., 2006 WL 2439733 (Pa. Ct. Common Pleas Aug. 18, 2006).
Two courts recently addressed discovery issues relating to reinsurance.
- In , Case No. 4-1437 (USDC E.D. Mo. Aug. 30, 2006), a coverage action, the Court denied a motion to compel discovery of information about reserve funds and reinsurance, on the basis that they were subject to work product protection and of limited relevance.
- , Case No. 05-02238 (USDC N.D. Cal. Sept. 13, 2006), involved a claim on a life insurance policy for breach of contract and bad faith. The Court denied a motion to quash a subpoena issued to a reinsurer of the risk, finding that the requested information was discoverable and not privileged.
In a non-insurance matter, the Supreme Judicial Court of Massachusetts has held that a panel of arbitrators convened under the rules of the American Arbitration Association had authority to impose monetary sanctions for discovery abuse, finding that they had the inherent authority to impose monetary sanctions and enter other orders relating to noncompliance with appropriate discovery orders, in order to facilitate their adjudication of claims effectively, in the manner contemplated by the arbitration process. Superadio Limited Partnership v. Winstar Radio Productions, LLC, 446 Mass. 330, 844 N.E.2d 246 (Mass. 2006).
The United States Court of Appeals for the Second Circuit, in a non-reinsurance matter, has held that the Federal Arbitration Act does not authorize nationwide service of process of third-party subpoenas. This opinion is of particular interest since it exposes a jurisdictional gap: the FAA provides that subpoenas issued by arbitrators may be enforced by the District Court in which the arbitration panel sits (the Southern District of New York in this matter), yet that Court did not have jurisdiction over the recipient of the subpoena, which was located in Texas, due to the failure of Congress to provide for nationwide jurisdiction. The Court indicated that this was a problem for Congress to address, and that parties should consider the likely sources of third-party evidence when deciding where to arbitrate disputes. , Case No. 05-3544 (2d Cir. June 13, 2006).