The lawsuit filed by First Horizon National Corp. against Houston Casualty Co. in the Western District of Tennessee is a case that just keeps on giving. Rulings, that is, by the Chief United States Magistrate Judge.
She was faced with numerous discovery disputes recently. Two of the disputes centered around reinsurance: (1) Are reinsurance agreements discoverable and (2) are communications with reinsurance companies about the case discoverable?
First, following precedent, the Court ruled that in a case against an insurance company which includes a claim for money damages, reinsurance agreements are "insurance agreements" which should be produced in the required initial discovery disclosures. First Horizon Nat'l Corp. v. Houston Cas. Co., No. 2:15-cv-2235-SHL-dkv, 2016 WL 58969580, at *12 (W. D. Tenn. October 5, 2016) (Vescovo, Chief U.S.M.J.).
Next, the Court held that in this case the defendant insurance companies' communications with reinsurance companies are not discoverable, for three stated reasons. The first reason is that in this case, the carriers submitted affidavits that "any responsive documents reflect exclusively 'proprietary or business decisions.'" First Horizon Nat'l Corp. v. Houston Cas. Co., No. 2:15-cv-2235-SHL-dkv, 2016 WL 58969580, at *13 (W. D. Tenn. October 5, 2016) (emphasis by the Court). Although the Court did not say so, this is the language a Court uses when it grants a protective order against discovery.
The second stated reason is very broad: "Reinsurance-related communications are also not relevant to a claim of bad faith."
The final stated reason is much more particular. And therefore potentially much more useful in resolving other discovery disputes.
In this case, the carriers argued "that the reinsurance is treaty insurance, under which the reinsurer agrees to accept an entire block of business from the insured." (Emphasis added.) In the eyes of the Court, this made the carriers' communications related to reinsurance "even less relevant" than usual.
More could be said than this, and undoubtedly more will be said in future disputes. The idea here is that since the reinsurance company agrees to accept a block of business which includes the underlying case, then communications about the underlying case are irrelevant because the purpose of making those communications is at most to update the reinsurer with the status of the business block it has assumed. The purpose of communications under treaty reinsurance is arguably unrelated to the merits of the underlying case, thus the holding in this dispute that the "reinsurance-related communications [were] even less relevant to the claims asserted by the Plaintiffs." First Horizon Nat'l Corp. v. Houston Cas. Co., No. 2:15-cv-2235-SHL-dkv, 2016 WL 58969580, at *13 (W. D. Tenn. October 5, 2016).
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