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R&Q Reinsurance Co. v. St. Paul & Marine Ins. Co., Civil Action No. 16-1473, 2017 WL 3272016 (E.D. Pa. Aug. 1, 2017)

In a discovery dispute between a ceding company and its reinsurer, a federal court rejected the ceding company’s efforts to withhold from production almost twenty years of reserve information relating to underlying asbestos claims as well as contracts involving other reinsurers.

In R&Q Reinsurance Co. v. St. Paul & Marine Ins. Co., Civil Action No. 16-1473, 2017 WL 3272016 (E.D. Pa. Aug. 1, 2017), at issue were R&Q’s contractual obligations to St. Paul under a facultative certificate, which reinsured an excess liability policy St. Paul issued to the Walter E. Campbell Company. Although St. Paul began paying asbestos claims under the Campbell excess policy in 2001, St. Paul did not provide notice of the claims to R&Q until April 2013.

R&Q filed suit seeking a declaration that it had no liability under the certificate on account of St. Paul’s late notice. During discovery, St. Paul redacted historical loss reserves relating to the claims arising under the Campbell excess policy, failed to produce information concerning other reinsurers of the same policy and of other St. Paul excess policies covering Campbell asbestos claims, and otherwise objected to the production of certain documents on the basis of “proprietary information.”

R&Q moved to compel. In granting R&Q’s motion, the district court held that St. Paul’s historical loss reserves were relevant to R&Q’s argument that St. Paul failed to provide prompt notice under the facultative certificate, and given that the reserves had to be set up after St. Paul was on notice of the underlying losses, such information might demonstrate when St. Paul was obligated to give prompt notice to R&Q. The court determined that the loss reserves were not protected by the attorney-client privilege or work-product doctrine because claims adjustors, not attorneys, created the reserves in the ordinary course of business. Further, the court rejected St. Paul’s argument that disclosure of reserve information contravened public policy. In this case, R&Q was not seeking the reserves St. Paul had posted with regard to the pending litigation but, rather, with respect to the underlying asbestos claims involving its insured.

In addressing R&Q’s document requests for “other reinsurer” information, the court noted that while contracts with other reinsurers were not normally relevant, the facts of this case warranted a different determination. Observing that St. Paul began defending Campbell in the 1980s but did not notify R&Q until April 2013, the court stated: “The decades-long dearth of information regarding notice impairs R&Q’s preparation of a late notice argument.” Thus, information relating to St. Paul’s other reinsurers, inasmuch as they also reinsured the policy at issue and other Campbell policies, was relevant and discoverable.

Lastly, with regard to St. Paul’s claims of “proprietary information,” the court held that the information was already subject to a protective order. St. Paul could not now, “in the absence of any further justification, withhold or redact as ‘proprietary’ documents already covered by the protective order.”

For inquiries about this decision, contact partners Lloyd Gura or Michael Goldstein, or associate Maegan McAdam.