Plaintiffs sought coverage from the insurer Defendants for a $212.5 million dollar settlement of a claim of violation of the False Claims Act relating to errors and omissions in underwriting and origination of HUD mortgage loans. Defendants disclaimed coverage in part, stating the claim is “interrelated” to an earlier “claim” and thus barred under a later policy, and that Plaintiffs failed to timely notify Defendants of the claim. Plaintiffs sought discovery, and Defendants objected The Court largely agreed with Defendants, denying Plaintiffs’ requests for:

• Other Similar Claims Files: although the parties should not be allowed to withhold extrinsic evidence during discovery while they wait for the Court to make a determination of ambiguity in the insurance contract, each claim is fact specific – involving different policy language and facts – and would not aid the Court in interpreting the policy language or Plaintiffs’ bad faith claims. Additionally, affidavits from each insurer reflected production would be unduly burdensome and disproportionate.
• Claims-Handling & Underwriting Manuals of Excess Insurers: the interpretation of the excess policies depends upon interpretation of the primary policy, thus, any definition of “claim” or “interrelated” in the claims-handling manuals of the excess insurers are irrelevant. Further, what the excess insurers’ underwriting departments knew regarding the earlier “claim” is neither notice under the policies, nor relevant to interpretation of the terms “claim” and “interrelated claims.”
• Reinsurance Communications: although the law on the discoverability of reinsurance communications is unclear, such communications are irrelevant to determining the intent of the parties to the primary insurance contract, or to Plaintiffs’ claim of bad faith.
• Reserves: although courts are divided on the discoverability of reserves, the Court’s prior precedent held such information was a business decision and thus irrelevant to Plaintiffs’ claims.

The only discovery Defendants were compelled to produce were reinsurance agreements pursuant to Fed.R.Civ.P. 26 (a)(1)(A)(iv).

First Horizon Nat’l. Corp., et al. v. Houston Casualty Co., et al., 2:15-cv-02235 (USDC W.D. Tenn. Oct. 5, 2016).