Parties in insurance disputes sometimes seek production of information regarding loss reserves and reinsurance. But when should such information be produced? The Western District of Washington recently addressed this issue in Isilon Systems, Inc. v. Twin City Fire Ins. Co., and the result isn’t necessarily good news for insurers and reinsurers.
The case arises in the bad faith context. Isilon, the plaintiff, filed a motion to compel challenging Twin City’s claim that loss reserve and reinsurance information was not discoverable. Twin Cities argued that information about loss reserves is generally not discoverable in bad faith claims, except in narrow circumstances, because such information is irrelevant. Further, Twin City argued that loss reserves information is not relevant because the reserves represent nothing more than an accounting decision made by persons without actual knowledge of the policies involved.
The court, however, felt otherwise. Since Twin City’s loss reserves decisions were made by members of its upper management with knowledge of the actual policies involved, the court applied the general rule that the relevancy of insurance reserves was applicable and ordered Twin City to turn over all materials relating to loss reserves. The court noted, however, that while aggregate reserve information is not protected as attorney work product, individual case reserves calculated by defendant’s attorney may be.
As to reinsurance, the court stated that reinsurance polices themselves are discoverable, regardless of relevance. This rule does not extend to communications between the insured and the reinsurer regarding the reinsurance policies unless the plaintiff demonstrates relevance to the bad faith claim. The court held that Twin City must produce all reinsurance policies, but recognized that Twin City did not have to produce other reinsurance documents unless Isilon presents a basis for the relevance of such documents.