Reserves Discovery Irrelevant, Potentially Prejudicial to Hurricane Wilma Coverage Claim.

 

   In 1550 Brickell Associates v. QBE Insurance Corp.,  Download 1550 Brickell Associates v. QBE Insurance Corp. (S.D. Fla. Case No. 07.2283, Order Filed January 3, 2011) PUBLIC ACCESS, also published as 2011 WL 9506*1 (S.D. Fla. January 3, 2011)(authorized password required to access Westlaw), the Defendant Property Insurance Company filed a Motion in Limine to bar introduction of evidence of its "Indemnity Reserves" at Trial of a Hurricane Wilma Case.  The Defendant's Motion identified Indemnity Reserves as providing "a measure of the insurer's total expected exposure on a given claim based upon information known at that time and reasonable investigation."

   The Federal District Judge granted the Motion in Limine in this case.  The Claims going to Trial were for Breach of Contract and Declaratory Relief.  The Court viewed Reserves evidence as irrelevant.  Further, the Court held that evidence of Reserves in a Breach of First-Party Contract Case held the potential of impermissible prejudice in the absence of a Bad Faith Claim (which was still on appeal), 1550 Brickell Associates v. QBE Insurance Corp., 2011 WL 9506 at *3:

Even assuming evidence of Defendant's indemnity reserves is relevant, there exists a real danger such information would prejudice Defendant and potentially mislead the jury. The Court is not convinced that jurors would not equate Defendant's increasing reserve amounts with admissions of coverage. It could tend to inject a bad faith element into a simple breach of contract action. In addition, there is nothing in Bertucci's [an independent adjuster's] reports that explains the basis for the reserve calculations or why any changes in the amount were made. Thus, the there is a significant risk that evidence of Defendant's indemnity reserves would confuse the issues and mislead the jury. 

Discovery of Reserves information issues addressed by the reported Case Law is analyzed in Sections 8:6 (Third-Party Cases) and 12:16 (First-Party Cases) by Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" (Shepard's/McGraw-Hill Second Edition, West Publishing Co. 2010 Supplement).

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