Insurance Coverage Litigation Lawyer & Attorney : Rivkin Radler Law Firm : Long Island, New York

Policyholders often seek discovery of carriers’ representations to reinsurers. The thinking is that if the carrier took a certain position with its reinsurers it must also take that position with its policyholders. Not so, says the United States District Court for the Southern District of Indiana. Irving Materials, Inc. v. Ohio Cas. Ins. Co., 2008 U.S. Dist. LEXIS 18692 (D. Ind. Mar. 10, 2008). There, the policyholder challenged a multiple-occurrence ruling on the grounds that the carrier had made a single-occurrence argument to its reinsurer. The court, however, ruled that the representations to the reinsurer were not material.

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On January 25, 2008, a Southern District of Ohio magistrate found that a reservation of rights letter established an expectation of litigation that supported a work product claim. St. Paul Fire and Marine Insurance Co. v. ConAgra Foods, Inc., 2008 U.S. Dist. LEXIS 8945 (S.D. Ohio Jan. 25, 2008). This decision will be welcomed by Insurers seeking work product protection. But, insurers should also expect that this shield will be the policyholders' sword. Policyholders will surely be arguing that reservation of rights letters trigger an expectation of litigation that requires a litigation hold. The developments in this area will be interesting to watch.

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If you have any doubt about the impact and pitfalls of electronic discovery, read about the Qualcomm litigation.  Evidently, 21 emails were recently found that undercut Qualcomm's lawyers' arguments.  The emails may be part of 300,000 pages of other documents that had not been produced.  The sad tale is presented in this morning's Wall Street Journal, Recovered Emails Bedevil Qualcomm in Court, Don Clark, 10/9/07, at B1.  Insurers facing litigation cannot over-emphasize the importance of managing electronic discovery.  And insurers with ADR clauses have another reason to celebrate.

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Definitely read the commentary in the 10/4/07 Wall St. Journal titled "International Tort Crisis," by Norman Lamont.  The author speaks about foreign companies' concerns about being brought into American courts.  These issues will be before the Supreme Court next week, Stoneridge v. Scientific Atlanta.  The non-U.S. companies may become vulnerable to private securities lawsuits involving allegations that their U.S. listed partners misrepresented transaction.  This case could be very significant for insurers of non-U.S. companies that have U.S.-listed companies as customers, suppliers, or clients.

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Law.com recently published a very interesting article discussing how insurers are beginning to consider policyholders' obligations for electronic discovery.  Another side of electronic discovery presents a more direct challenge: insurers' obligation to respond to discovery requests propounded directly on the insurers in coverage litigation.  Much of policyholders' discovery is designed to disrupt and annoy insurers, rather than advance the cases. Policyholders bludgeon insurers with discovery in the hope that the aversion to discovery will increase settlement value.  Electronic discovery will certainly present special challenges to insurers.

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I’m excited to announce that my blog has been selected for the “Top Blogs” section of LexisNexis’ Insurance Law Center at: http://law.lexisnexis.com/practiceareas/insurance. I received an e-mail today from Tom Hagy, their VP of Emerging Solutions letting me know. He said that, “[LexisNexis] take[s] pride in associating with the best talent in the legal world, so we are thrilled to include you as part of this dynamic new platform that features commentary from insurance experts, and gives visitors the ability to interact with the authors and one another.” Tom went on to say that, “The selection of your blog was made by a team of insurance editors at Matthew Bender and Mealey’s – both LexisNexis companies – as one that is most often visited, referred to and relied on.”

I’m truly honored to be included in LexisNexis’ Insurance Law Center and continue to welcome your feedback and thoughts regarding insurance law.

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I was happy to see the California Supreme Court decline to order an insurer to produce reinsurance information. Catholic Mutual Relief Society v. Superior Court of Los Angeles (Aug. 27, 2007). I’ve been representing insurers for more than 20 years. While reinsurance information is always sensitive, it’s almost never probative. In the few instances that I’ve seen it produced in any form, it did not advance the insured’s case. It only caused the insurer pain. Pain is the ultimate goal, and that certainly doesn't justify the discovery request.

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I'm off today to the ABA's annual meeting in San Francisco where I will be co-chairing the annual program of the Tort Trial & Insurance Practice Section's Insurance Coverage Litigation Committee.  Our program will be reexamining the Tripartite Relationship among insurer, insured, and defense counsel.  Our panel will be addressing the procedure, ethics, and privilege issues arising here.  I'm fortunate to be working with leading practitioners, law school professors, and an appellate judge.  These programs always elevate my game.

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Electronic discovery obligations is a rapidly evolving area important to insurers.  On 7/19/07, a federal judge in New York, addressing an insurance dispute, rejected certain electronic discovery because the burden outweighed the benefit. National Union Fire Insurance Co. v. Clearwater Insurance Co., 2007 U.S. Dist. LEXIS 52770, 04-CV-5032, (S.D.N.Y. 7/19/07).  Lesson: electronic discovery is broad, but it has limits; the FRCP burden test is meaningful.

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As dispute resolution is a critical component of insurance practices, I must note research concerning the "neuroeconomics" of negotiating.  The research, by a Harvard University professor, was reported in the July 7, 2007 edition of The Economist.  The professor correlated negotiation patterns against testosterone levels.   The report, as summarize in The Economist, concluded that "what people really strive for is relative rather than absolute prosperity.  They would rather accept less themselves than see a rival get ahead."   Thus, negotiating behavior that is often thought to be irrational, is in fact "differently rational" in that the negotiator is often pursuing social status, not money.  This conclusion also suggests a larger lesson: when the other side in a negotiation seems to be acting against it's best interest, pause before dismissing the other side as irrational.   It may be that you are misperceiving the other side's primary objective.

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As noted in my June 18, 2007 post, Richard Scruggs’s acquisition of Katrina-related insurance documents from his adversaries raised many ethical questions. Those issues are detailed and explained in an expert declaration supporting a disqualification motion.   Look for Scruggs to be disqualified.

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Mealeys reported that a federal magistrate in Kansas ordered the production of reinsurance and reserves information.  United States Fire Insurance Co. v. Bunge North America Inc., No. 05-2192-JWL-DJW, D. Kan.; 2007 U.S. Dist. LEXIS 38754).  Reinsurance and reserves discovery irritates insurers, but does it benefit policyholders?  This information rarely advances policyholders' cases.  Sophisticated policyholders must be (should be) seeking something more than making their insurers unhappy.  This can't all be about schadenfreude.    Yet, the discovery fights about reinsurance and reserves are usually unstatisfying wastes for policyholders as well as insurers.

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An insurer recently asked me whether a litigation hold is required for all coverage denials. 

In Zubulake v. UBS Warburg, the United States District Court for the Southern District of New York held that: “Once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a ‘litigation hold’ to ensure the preservation of relevant documents.” Can it be said that a claims department anticipates litigation whenever it issues a denial? I don’t think so. And even if litigation is always anticipated, insurers should be spared the obligation of litigation holds because the burden would be excessive if litigation holds were required for all denials. 

Surprisingly, I have not seen insurance-specific decisions this issue.   I’d be interested in hearing whether anyone has litigated this issue in the insurance context.

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