Reinsurers and Cedents Seek Reversal of Federal District Court Ruling in Oregon Finding Waiver of Privilege
April, 2010
Portland, Oregon has recently become the unlikely focus of the reinsurance world. The largest reinsurance and insurance industry associations have petitioned the Ninth Circuit Court of Appeals for leave to file amicus curiae briefs to join in a Petition for Writ of Mandamus by TIG Specialty Insurance Company, seeking to overturn a federal district court's ruling that TIG must produce to TIG's insureds confidential communications that TIG provided to its reinsurers regarding coverage issues raised by the claims made against its insured in the underlying action.
In The Regents Group, et al. v. TIG Specialty Insurance Company, Case No. 07-1337-HA, the policyholder, Regents, sued TIG for coverage for damages sought in three underlying actions. In the context of that lawsuit, the policyholder issued subpoenas to two of TIG's reinsurers and their counsel seeking production of all documents TIG had exchanged with its reinsurers, including confidential legal opinions and advice from TIG's coverage counsel.
TIG and its reinsurers moved for a protective order, seeking relief on the grounds that some or all of the requested documents were subject to the attorney-client and/or work product privileges. In May 2009, the district court denied the Motion for Protective Order, finding that TIG had waived any privilege by sharing the documents with a reinsurer "when the parties' interests [were] not aligned." The district court found that TIG's interests were not aligned with its reinsurers for purposes of the common interest doctrine where they later opposed each another in private reinsurance arbitrations regarding whether there would be reinsurance coverage for the underlying claims. TIG only produced the privileged documents to its reinsurers pursuant to an arbitration panel's order.
TIG moved for reconsideration, clarification, or certification of the privilege issues for immediate appeal. On February 4, 2010, the district court denied TIG's motion. A copy of the district court's Order can be found at the following link: TIG8 Order 2-4.pdf.
Since the district court issued its Order on February 4, TIG has filed a Petition for Writ of Mandamus to the Ninth Circuit. In support of TIG's Petition, several of the nation's largest reinsurance and insurance industry associations have sought permission to file amicus briefs, including the Reinsurance Association of America, Property Casualty Insurers Association of America, the Complex Insurance Claim Litigation Association, and The Federation of Defense and Corporate Counsel.
The Ninth Circuit's decision on the pending petition could dramatically affect the reinsurance industry. If cedents can no longer reasonably expect the preservation of applicable privileges when disclosing information to their reinsurers, costs will rise if reinsurers are forced to allocate more resources to monitoring risks. Reinsurers may also be reluctant to cover risks in markets where cedents are compelled to withhold information about reinsured risks because they do not want to be held to have waived privilege.
Bullivant Houser Bailey's Insurance Industry Services Group is monitoring developments in this case, and will provide future eAlerts on any rulings by the Ninth Circuit.
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