Recently, a magistrate judge presiding over an insurance coverage case involving more than a dozen insurers and one insured granted the insured’s motion to compel production of documents and information pertaining to reinsurance, loss reserves, claims handling manuals, and document retention policies. U.S. Fire Ins. Co., et al. v. Bunge North America, Inc., et al., Case No. 05-2192-JWL-DJW, 2007 U.S. Dist. LEXIS 38754 (D. Kan. May 25, 2007). In that case, various insurers filed a declaratory judgment action against the insured, Bunge North America (“Bunge”), seeking a declaration that they did not have an obligation to defend, indemnify or reimburse Bunge in connection with groundwater contamination at one of three insured sites at issue in the coverage dispute. Bunge, in turn, filed bad faith claims against the various insurers and its excess insurers. Specifically, Bunge alleged that the insurers acted in bad faith by failing to fairly investigate its coverage claims in a timely manner and in failing to accept or reject coverage under the policies within a reasonable time. Bunge further alleged that certain insurers failed and refused to produce and acknowledge evidence of at least one policy.
With respect to Bunge’s request for reinsurance information, including any communications between the insurers and their reinsurers and the actual reinsurance contracts, the Court held that such information was discoverable under the circumstances. Specifically, the Court held that reinsurance information was relevant and discoverable for purposes of rebutting the insurers’ late notice defense, for purposes of establishing Bunge’s claims of bad faith and improper (claims) handling, and for purposes of reconstructing the terms of any lost policies. The Court similarly found Bunge’s request for reserve information to be relevant on its face and therefore discoverable in light of the insurers’ coverage position, Bunge’s allegations of bad faith and certain insurers’ alleged failure to provide evidence of at least one policy. With respect to Bunge’s request for certain insurers’ claims manuals, the Court held that the claims handling materials were relevant to Bunge’s allegations of improper claims handling and, additionally, could shed light on the proper interpretation of the relevant policies. Lastly, the Court ordered those insurers who allegedly failed to provide evidence relating to lost policies to disclose their document retention policies.
Although the Federal Rules generally afford wide latitude with respect to the discovery of information that may be relevant to a dispute, courts are sometimes reluctant to order discovery of reinsurance, loss reserve and claims manual information. The Court’s decision in Bunge is an example of a broader view with respect to discovery of this nature. Click here to review the Court’s decision.
