Reinsurance Newsletter - December 2013: California Federal Court Directs Production of Reserve Information

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McAdam v. State Nat’l Ins. Co., No. 12cv1333-BTM, 2013 U.S. Dist. LEXIS 157202, 2013 WL 5936338 (S.D. Ca. Nov. 1, 2013).

A California federal court granted a motion to compel production of, among other things, reserve information established by an alleged reinsurer on the underlying claim.  The dispute arises out of a hull and machinery protection and indemnity policy issued to the insured.

In determining whether reserve information should be disclosed, the court set forth the broad legal standard for discovery under the Federal Rules of Civil Procedure.   The court noted that the determination of relevance of reserve information depends on the claims asserted by the plaintiff.  Because plaintiff alleged bad faith, the evidence of loss reserves established by the carrier and by its alleged reinsurer was relevant and subject to disclosure.  The court also found that the alleged reinsurer was actually a “front-line” insurer and not a reinsurer.