Insurer’s Communications with Reinsurer Not Privileged

A federal district court in Iowa, applying federal law, has held that the work-product doctrine did not protect an insurer’s communications with a reinsurer where the communications were created in the ordinary course of the insurer’s business.  Progressive Cas. Ins. Co. v. Fed. Deposit Ins. Corp., 2014 WL 4168477 (N.D. Iowa Aug. 22, 2014).  Applying Iowa law, the court also held that the communications were not protected by the common interest doctrine because the relationship between the insurer and the reinsurer was commercial in nature. 

The insurer brought a suit for declaratory judgment that its D&O policy did not provide coverage for a bank’s officers and directors in connection with a suit brought by the Federal Deposit Insurance Corporation (FDIC) alleging negligence and breach of fiduciary duties arising from improper investment and loan practices.  In the course of discovery, the insurer redacted certain reinsurance communications based on the work-product doctrine and the attorney-client privilege, and the FDIC filed a motion to compel production of the redacted information.  The FDIC argued that the work-product doctrine did not shield the communications produced in the ordinary course of business and that the insurer waived the attorney-client privilege by voluntarily disclosing the documents to the reinsurers.

The district court agreed.  The court rejected the insurer’s argument the work-product doctrine protected the legal advice and analysis contained in the reinsurance communications.  Instead, the court found that the insurer had failed to meet its burden to show that the documents were prepared in anticipation of litigation because it concluded that the documents were provided for “typical business purposes of the reinsurance industry.”  In reaching that conclusion, the court relied on the insurer’s admission that the documents included case updates, assessments of liability and coverage issues, amounts paid and reserve, and plans for future claim-handling.

The court also rejected the insurer’s argument that the common interest doctrine applied to preserve the attorney-client privilege where the insurer admitted that it had voluntarily disclosed the redacted documents to the reinsurers.  The court found that, even if Iowa courts had recognized the common interest exception, the doctrine would not protect the reinsurance communications because the relationship between the insurer and the reinsurers was “commercial and financial in nature, not legal.”  The court reasoned that because the sole purpose of the insurer’s communications was to obtain or maintain reinsurance coverage, and was not to build a legal defense or litigation strategy, the disclosures constituted a waiver of the attorney-client privilege.  In so doing, the court added that a “joint strategy or legal enterprise” is central to the common interest doctrine and that the “unique circumstances of the reinsurance business do not automatically give rise to a common legal interest.”


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