Discovery

In a putative class action alleging that a life insurer engaged in an elaborate scheme to pay stockholders huge dividends by shifting its obligations to reinsurers operating in jurisdictions with weak oversight and dramatically raising the cost of insurance on its universal life insurance policies, a federal magistrate judge in the District of Maryland has found that plaintiffs’ discovery requests went too far, while plaintiffs’ responses to discovery were “miserably deficient.”

Defendant objected to the plaintiffs’ discovery requests on the basis that they sought irrelevant documents regarding varieties of policies other than the universal life insurance policies that named plaintiffs’ owned and that received the COI increases, and the magistrate agreed. Defendant also argued that certain requested documents were protected by a Maryland statutory privilege for documents filed with the state insurance Commissioner. Plaintiffs argued that this statute only prevented the state insurance department from disclosing these documents, but the magistrate disagreed. Noting that the statute provided that such documents “may not be made public by the Commissioner, the National Association of Insurance Commissioners, or any other person,” and that the defendant clearly was a person as defined by law, the magistrate found that these documents were not discoverable and that defendant must place them on their privilege log.

Defendant also moved to compel responses to its interrogatories and requests for documents. The magistrate found that plaintiffs did not meet their essential obligations in responding to discovery—“answer the questions, provide the documents or in the alternative assert any applicable privilege.” Plaintiffs’ objections to interrogatories regarding the factual basis for the alleged fraud and for damages, including that the requests were “burdensome and annoying” and “premature at this early stage of litigation,” were inadequate, as were references to documents in response to interrogatories. As plaintiffs’ responses were “miserably deficient,” the magistrate ordered plaintiffs to answer the interrogatories, provide the requested documents, and provide a privilege log for any privileged documents.

Dickman v. Banner Life Insurance Company, Civil No. RDB-16-192 (D. Md. Sept. 28, 2017)

This post written by Jason Brost.

See our disclaimer.

In 2011, Top’s Personnel entered into a reinsurance agreement with Applied Underwriters Captive Risk Assurance Company (“AUCRA”), and several years later executed a promissory note (“the Note”) in favor of a related entity, Applied Underwriters. Applied Underwriters (“Plaintiff”) sued Top’s Personnel (“Defendant”) for breach of its obligations under the Note, and Defendant moved to compel arbitration pursuant to an arbitration clause in the reinsurance agreement. The court denied the motion to compel arbitration because, on the evidence before it, Plaintiff was not subject to the arbitration clause. However, the court acknowledged the possibility that discovery might show circumstances that justify binding Plaintiff to the arbitration clause in AUCRA’s reinsurance agreement.

Defendant sought discovery as to the relationship between the two entities, the reinsurance agreement, and the Note’s connection to that agreement. Defendant moved to compel complete responses to its interrogatories and document requests, as well as sought to depose Plaintiff’s counsel. The court granted that motion in part, requiring revised responses to discovery requests, but denied the request to depose Plaintiff’s counsel. Defendant subsequently filed another motion to compel to remediate what Defendant argued were continued deficiencies in Plaintiff’s discovery responses.

The court granted Defendant’s motion to compel in full, including allowing the deposition of Plaintiff’s counsel and imposing sanctions for Plaintiff’s failure to comply with the court’s first order. The court addressed each disputed response in a piecemeal fashion, issuing specific directives for Plaintiff to cure its deficient responses by answering completely interrogatories regarding the negotiations of the Note and why different entities signed the Note and the reinsurance agreement, producing any correspondence or communications regarding the Note or reinsurance agreement, and supplementing its initial disclosures to include relevant information about all individuals with discoverable information.

Furthermore, the court granted the motion to compel the deposition of Plaintiff’s counsel. Whereas before the court ordered Defendant to attempt to first depose another individual who allegedly had the same information as Plaintiff’s counsel, this time the court determined the deposition was necessary because some of Plaintiff’s revised discovery responses and other communications indicated the attorney was the only individual involved in negotiating the Note on behalf his client.

Finally, the court granted Defendant’s request for sanctions, including attorney’s fees, for Plaintiff’s failure to comply with the court’s prior discovery order. The court concluded that the majority of the second motion was previously addressed during Defendant’s first motion to compel and the resulting order, and moreover it was Plaintiff’s failure to fully comply with the previous order that necessitated the second motion. Thus, an award of sanctions and attorney’s fees was just and sufficient to address Plaintiff’s discovery failures.

Applied Underwriters, Inc. v. Top’s Personnel, Inc., Case No. 15-90 (USDC D. Neb. Aug. 7, 2017).

This post written by Thaddeus Ewald .
See our disclaimer.

The Eastern District of Pennsylvania recently ruled on several discovery motions in a reinsurance dispute between R&Q Reinsurance Company (“R&Q”) and St. Paul Fire and Marine Insurance Company (“St. Paul”) over underlying asbestos claims. Both parties filed cross motions to compel, of which the Court granted R&Q’s motion and denied St. Paul’s, and St. Paul filed motions for protective orders that were also denied in an August 1, 2017 order .

R&Q’s motion to compel first sought unredacted versions of documents which St. Paul claimed contained proprietary information, which the Court granted because its previously issued discovery order sufficiently protected the information and rendered it discoverable. R&Q’s motion next sought to compel production of St Paul’s historical loss reserves, which St. Paul claimed were protected by the attorney-client privilege and work-product doctrines. The Court granted the motion, finding that the reserve information was relevant to when St. Paul had notice of potential losses and thus whether it gave sufficient notice to R&Q, as well as concluding that neither attorney-client nor work-product protection applied because the reserve information was created in the ordinary course of business. Finally, the Court granted the motion as to R&Q’s third request for unredacted information related to other reinsurance policies it maintained on the underlying claims. It found the information was relevant to R&Q’s late notice claim because St. Paul had begun defending against the underlying claims in the late 1980s but didn’t provide notice of loss to R&Q until 2013. The Court summarily dismissed St. Paul’s motions for protective orders because they addressed identical issues to those contained in R&Q’s motion to compel.

On the other hand, the Court rejected both grounds asserted in St. Paul’s motion to compel. First, St. Paul’s objections to insufficient interrogatory responses about whether R&Q suffered prejudice from St. Paul’s notice of loss were moot because R&Q had sufficiently addressed the issue in its response to St. Paul’s motion for protective order. Second, the Court denied St. Paul’s complaints over the minimal number of documents produced by R&Q because the characterization was misleading and because R&Q would naturally have fewer documents because of its relatively recent notice of loss in 2013.

After the Court issued the order deciding the various discovery motions, St. Paul moved on August 11, 2017 for clarification regarding the scope of the Court’s order on R&Q’s motion to compel. In particular, it sought to clarify whether the Court was merely ordering production of unredacted versions of documents previously produced based on its proprietary information and other reinsurers objections, or whether it was ordering a new collection and review of documents, including all other reinsurance information from other reinsurer files. St. Paul stated that it would conduct searches to locate and produce documents regarding the date St. Paul first provided notice of the underlying claims to other reinsurers. In its motion, St. Paul claims that in response to the Court’s order to designate relevant documents, R&Q designated hundreds of thousands of pages of documents without any attempt to narrow the designation to identify only potentially relevant documents.

In a short order issued on August 16, 2017, the Court ordered St. Paul to disclose all documents it previously redacted as “proprietary,” “reinsurance,” or “reserves,” and to provide responsive answers to R&Q’s interrogatories and search for documents relevant to the late notice issue.

R&Q Reinsurance Co. v. St. Paul Fire & Marine Ins. Co., Case No. 16-1473 (USDC E.D. Pa.).

This post written by Thaddeus Ewald .
See our disclaimer.