A federal court in Georgia recently granted the plaintiffs-cedents’ motion for leave to conduct certain expedited discovery from their reinsurer, holding that the potential prejudice to the cedents if discovery is not allowed outweighs the prejudice to the reinsurer.

Canal Insurance Company and Canal Indemnity Company brought suit alleging that Golden Isles Reinsurance Company fraudulent transferred amounts due Canal under two reinsurance agreements. Golden Isle and certain individual defendants moved to dismiss in lieu of answering Canal’s complaint. While that motion was pending, Canal sought limited discovery from Golden Isles related to certain bank transfers it made to the various individual defendants. Defendants opposed on the grounds that such discovery was premature, given that their motion to dismiss was pending and no answer had been filed. Notwithstanding that, the United States District Court for the Northern District of Atlanta granted Canal’s motion for leave to conduct limited discovery, finding that their need for pre-answer discovery “outweighs the prejudice” to Golden Isles, warranting a deviation from the applicable local rules of procedure which conditioned discovery upon the filing of an answer. While the expedited discovery sought would not unduly burden or prejudice Golden Isles, the delay might impact Canal’s substantive claims. Canal Insurance Co. v. Golden Isles Reinsurance Co., Case No. 15-cv-3331 (USDC N.D. Ga. July 22, 2016).