In a case upon which we have reported on January 6, 2016, and November 24, 2015, a New York federal district court held that the work of an audit firm hired to review the billing practices of a third-party administrator (“TPA”) could constitute attorney work product and be shielded from disclosure in discovery. The case centers on a reinsurance dispute between AmTrust North America, Inc. (“AmTrust”) and SafeBuilt Insurance Services, Inc. (“SafeBuilt”). Specifically, AmTrust reinsured insurance policies underwritten by SafeBuilt and its subsidiaries on the understanding that SafeBuilt’s subsidiaries would enter into retrocessions, which included coverage for the expenses of using a TPA.

However, AmTrust’s TPA began charging costs as high as twenty percent of the premium — where SafeBuilt maintains that the average is typically about four percent. Because of SafeBuilt’s objections to the cost of the TPA, AmTrust retained an audit firm to conduct a comprehensive review of the TPA’s billing practices to ensure that they were legitimate. Later, in the heated litigation between AmTrust and SafeBuilt, SafeBuilt sought to compel the production of the audit firm’s “work product and related material.”

AmTrust took the position that the material was attorney work product because, even though the audit firm was not made up of attorneys, the review was done “in anticipation of litigation.” Because AmTrust’s executives continually testified that they consulted counsel regarding SafeBuilt’s failure to reimburse for the TPA prior to retaining the audit firm, the court concluded that AmTrust hired the audit firm “because of the prospect of litigation.” The court dealt with SafeBuilt’s argument that the audit firm was retained for “dual purposes”—i.e., for both business purposes and litigation—by noting that this argument only carries water where an expert would have been retained “regardless of litigation prospects and . . . would have carried out its analysis in essentially similar form irrespective of the litigation.” Thus, the court declined to compel production of the audit firm’s file.

AmTrust N. Am., Inc. v. SafeBuilt Ins. Servs., Inc., Case No. 14-cv-9494 (S.D.N.Y. June 10, 2016).