Connecticut Federal Court Rules that Certain Communications Between a Cedent and Reinsurer in a Hurricane Katrina-Related Case are Not Protected by the Work-Product Privilege

In a case arising out of Hurricane Katrina-related damages, the United States District Court for the District of Connecticut ruled that communications between a cedent and reinsurer that were prepared in the ordinary course of business are not protected by the work-product privilege.  Mid-Continent Casualty Co. v. Eland Energy Inc., et al., 2007 U.S. Dist. LEXIS 53252 (D. Conn. July 23, 2007).

Due to damage caused during Hurricane Katrina, the oil and gas production facilities of Eland Energy, Inc. and Sundown Energy LP (collectively “Sundown”) leaked oil into certain wetlands that drain into the Mississippi River.  Thereafter, a number of lawsuits were filed against Sundown.

Sundown’s primary and excess commercial general liability carrier, Mid-Continent Casualty Company (“Mid-Continent”), filed suit seeking a declaration that it did not owe a duty to provide a defense or indemnity to Sundown because its policy limits had been exhausted.  Sundown subsequently filed a counterclaim alleging bad faith as to Mid-Continent.  During discovery, Sundown sought to compel production of communications between Mid-Continent and its reinsurers.  Mid-Continent withheld a number of those documents based on the work-product privilege.

After determining that the documents withheld by Mid-Continent were all prepared after the “prospect of litigation” existed, the court noted, “the mere fact that a document was created after a certain date does not confer work product status on the document,” and found that any documents created in the ordinary course of business were not protected by the work-product privilege.  On the other hand, the court noted that any communications relating to the declaratory judgment action itself fell within the confines of the protections afforded by the privilege.

As a result of the court’s order, Mid-Continent was ordered to produce two additional documents which, although referring to the underlying action, constituted ordinary business communications.

For a copy of the District of Connecticut’s decision, click here. We will continue to provide Hurricane Katrina-related developments at www.InsureReinsure.com.