Communications between an insurance carrier and its reinsurers may or may not be protected by privilege and may or may not be further protected by the common interest doctrine. The analysis is fact-specific, but important where reinsurance communications are sought in litigation. In a recent case, a New York federal court upheld an insurer’s withholding of reinsurance communications based on both work-product privilege and the common interest doctrine.
In Gartner, Inc. v. HCC Specialty Underwriters, Inc., No. 20-CV-4855 (DEH), No. 22-CV-7000 (DEH) (S.D.N.Y. May 1, 2024), the court addressed a motion to compel production of 20 documents withheld by the insurer as privileged in a case involving insurance coverage for event cancellation due to COVID-19. The documents were produced to the court for in-camera review.
In finding in favor of the insurer (and denying the motion to compel), the court held that the work product doctrine applied to all of the documents. As the court described it, all of the documents post-dated the filing of the lawsuit and reflected mental impressions, opinions, and conclusions prepared in anticipation of or because of the litigation. Those mental impressions, held the court, are afforded absolute protection.
The parties seeking disclosure argued that the privilege was waived because of communications with the reinsurers, reinsurance broker and adjuster. In rejecting this argument, the court explained that the protection is waived only when work product is disclosed to a third party in a manner that is inconsistent with the purpose of the protection. Here, the court found that the insurer had shown that they shared a common legal interest with the reinsurers because they were subject to potential liability for a judgment or settlement entered into by the insurer. Second, the court found that the evidence demonstrated that the communications were made to formulate a common legal strategy. Accordingly, the court held that the work product privilege had not been waived.
In its opinion, the court succinctly laid out the test for determining if communications with reinsurers waived the privilege.
Courts have found that communications with “third-party reinsurers” can waive any work product protection, “unless there was a common interest privilege shared by the reinsurer and [the insurer].” (citation omitted). “[T]he interests of the . . . insurer and the reinsurer may be antagonistic in some respects and compatible in others. Thus a common interest cannot be assumed merely on the basis of the status [as a reinsurer].” (citation omitted). Instead, to show a common interest, the party claiming privilege and the third-party “must establish a common legal, rather than commercial interest.” (citation omitted). Then, after establishing that a common interest applies, the party claiming work-product protection must also show the communications “are made in the course of formulating a common legal strategy.” (citation omitted).
These nuances are important and fact-specific, but in a world where disclosure of communications with reinsurers is often compelled, following this court’s roadmap is one way to avoid disclosure of truly privileged communications with reinsurers.
