Computer Sciences Corp. v. Endurance Risk Solutions et. al., 1:20-cv-01580-MKV  (United States District Court, S.D.N.Y.)

Issue Discussed: March 10, 2022

Submitted by Tom Stillman

Date Promulgated: October 10, 2022

Case: Computer Sciences Corp. v. Endurance Risk Solutions et. al., 1:20-cv-01580-MKV  (United States District Court, S.D.N.Y.)

Court: United States District Court, Southern District Of New York

Date Promulgated: March 10, 2022

Issues Discussed:  In an action for breach of contract and covenant of good faith and fair dealing arising from denial of a claim under an excess policy, are documents and information pertaining to the follow subjects discoverable: (1) underwriting the policy at issue; (2) handling the claim; (3) communications with reinsurers concerning the claim; and (4) claim-handling documents rules, manuals, guidelines, instructions and best practices.

Submitted by: Tom Stillman*

 

Case Description: Discovery dispute in action for breach of contract and covenant of good faith and fair dealing arising from denial of a claim under a 5th layer excess policy in which Plaintiff sought 4 types of documents that Defendants contended should not be produced:

  1. Documents and information pertaining to the underwriting of the policy at issue.
  • Defendant objected that: (1) insurance contracts should be interpreted by their plain language, not extrinsic evidence; (2) the claims only concern the primary policy; and (3) the drafting history of policies other than the excess policy are irrelevant. Defendant also objected that documents and information pertaining to the underwriting of similar policies with other insureds were irrelevant.
  1. Documents and information concerning the handling of plaintiff’s claim other than non-privileged documents in its claim file, which Defendant agreed to produce.
  • Defendant contended that searching for such documents was unnecessary and burdensome.
  1. Documents reflecting communications with its reinsurers.
  • Defendant asserted such documents have no relevance absent an issue concerning the insurer’s ability to satisfy a judgment.
  1. Documents reflecting Defendant’s claim handling rules, manuals, guidelines, instructions and/or best practices in effect at the time period of the claim.
  • Defendant argued that these documents were irrelevant because the only issue in the case was the interpretation of the exclusions and exceptions in the primary policy.

 

Holdings:

The Court held that defendant must produce all documents and information regarding underwriting of the Policy at issue in the case.  It noted that in the Southern District Of New York courts have held that to properly interpret an insurance policy, it is necessary to discern how that policy has been interpreted in the past. In addition, under the laws of the states that might apply, New York and Virginia, evidence of intent can be relevant if the court finds the provisions of the policy are ambiguous. Further, in the Second Circuit courts regularly reject objections like those asserted by defendant that it  should not have to produce extrinsic evidence because the policy is unambiguous, because those objections go to admissibility, not discoverability, especially where, as in the instant case, the court had not yet determined whether the policy terms are ambiguous.

However, the Court agreed with defendant that production of materials and information for policies other than the one issued to Plaintiff need not be produced because they are irrelevant and to search for them would be burdensome and not proportional to the needs of the case.

The Court held that defendant must produce all documents concerning handling of plaintiff’s claim, wherever located, not just those in the claim file, because they are clearly relevant.

The Court held that all communications with reinsurers concerning the claim are relevant.

The Court held that Defendant’s claim handling rules, manuals, guidelines, instructions and/or best practices in effect at the time period of the claim are relevant and must be produced.

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* In addition to reinsurance matters, Tom Stillman concentrates his arbitration practice in business disputes involving insurers and reinsurers.  Prior to becoming an ARIAS-Certified Arbitrator he was Senior Vice President and Deputy General Counsel of the CNA Insurance Companies in charge of Corporate Litigation.