In nearly every insurance coverage, bad faith or defense counsel legal malpractice case the insurance company is asked to produce reinsurance information and communications related to the underlying claim. This information is requested for the possibility that the insurance company has revealed something to the reinsurers that might help the policyholder or other counterparty. Whether reinsurance information is ever really helpful is a discussion for another day but what we do see from the courts is a clear trend toward compelling discovery of reinsurance information.
Two recent cases demonstrate the trend toward allowing discovery of reinsurance information and communications. In both cases production was ordered in part.
In Ansur America Insurance Co. v. Borland, No. 3:21-CV-59-SMY-MAB (S.D. Ill. Oct. 23, 2023), the carrier brought a legal malpractice claim against appointed defense counsel for the carrier’s insured in an underlying products liability action. The defendant law firm sought discovery, including reinsurance communications on the products case between the carrier and its reinsurers that the carrier withheld from production on the basis of privilege. The defendant law firm sought to compel production of those documents, along with other withheld items.
The issue in Ansur was the applicability of the common interest doctrine to the reinsurance communications. The court noted that the common interest doctrine is not actually a privilege in and of itself. “Instead, the doctrine extends a preexisting ‘privilege to communications made in the presence of third parties for the purpose of coordinating a defense strategy or pooling information for common legal purpose.'” (citations omitted). Importantly, the court stated that the party withholding documents based upon the common interest doctrine bears the burden of establishing the common interest and the underlying privilege. The key issue that many people miss in applying the common interest doctrine is first establishing that the communication itself was a privileged communication.
While the court found that the carrier had demonstrated that a common interest between the carrier and its reinsurers existed, the court was unable to determine whether the common interest doctrine was applicable without first examining the communications and documents to determine whether an underlying privilege existed. Thus, in partially granting the defendant’s motion, the court ordered that the carrier review the documents it claimed were protected under the common interest doctrine to determine whether they involved privileged attorney-client communications or work product in the first instance.
In ordering the carrier to review the documents, the court provided some helpful guidance on what will not be privileged and therefore not subject to being withheld under the common interest doctrine. For example, communications only related to finance or other insurance matters or communications that are merely non-privileged discussions between the carrier’s employees related to reinsurance are not privileged if they are not related to legal advice and a joint legal strategy.
In San Juan Associates, Outdoor World, LLLP v. Depositors Insurance Co., No. 22-cv-001137-CNS-NRN (D. Col. Oct. 24, 2023), a bad faith claim was brought against the carrier by its insured. The insured requested production of the the relevant claims files and the carrier redacted information in the claims files, including reinsurance information. The insured sought to compel production of the redacted information, including the redacted reinsurance information.
In ordering the carrier to remove the redactions related to reinsurance, the court noted that the basis for the reinsurance redactions were relevance-based and not related to privilege. The court held that if the carrier included references to reinsurance interspersed within its otherwise discoverable claims files with no privilege attaching to them then the carrier should not have redacted those references.
In both cases, it is pretty clear that a lack of an underlying privilege will preclude the carrier from withholding or redacting reinsurance information.
Published by Larry P. Schiffer, Schiffer Law & Consulting PLLC
After 38-years with boutique and global law firms, Larry P. Schiffer launched an independent legal and consulting practice, Schiffer Law & Consulting PLLC, where he provides services as a lawyer, counselor, consultant, mediator, arbitrator and expert witness. He practices commercial, insurance, and reinsurance litigation, arbitration, and mediation. He provides advice on a wide variety of insurance and reinsurance issues, including claims and disputes, policy wording analysis and drafting, insurance insolvency issues, due diligence for transactions and have insurance or reinsurance components, insurance and reinsurance education and other advice. He is available to appear for clients outside of NY at mediations and conferences as needed on a per diem basis. He is active in legal and trade associations where he has held various leadership positions. He has lectured and has been widely published on reinsurance and other insurance topics. He serves as an Expert Commentator on reinsurance for IRMI.com and co-authored the chapter on reinsurance in the New York State Bar Association’s Insurance Law Practice treatise. He is the editor of the ARIAS•U.S. Quarterly. Mr. Schiffer received his J.D. from Albany Law School, where he graduated cum laude, was a member of the Albany Law Review and a member of the Justinian Society, and received his B.A. magna cum laude from Brooklyn College of the City University of New York. He was admitted to practice in New York in 1980.
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