An Iowa federal district court addressed the alleged privileged relationship between an insurer and its reinsurer in the context of two discovery requests involving communications between Progressive Casualty Insurance Company and its reinsurers. Progressive disputed coverage under a directors and officers policy issued to its insured, Vantus Bank, following a suit by the FDIC against Vantus Bank’s directors and officers.

The first discovery issue involved Progressive-redacted portions of pre-litigation communications with its reinsurers on the basis of attorney-client and work-product privileges in response to the FDIC’s discovery requests. Progressive argued the communications contained opinion work-product information pertaining specifically to anticipated, and ultimately filed, coverage litigation involving Vantus, its officers and directors, and the FDIC. The documents included litigation and mediation strategies and reserve information which had previously been held as protected from disclosure. In response, the FDIC claimed the documents were prepared in the ordinary course of business and therefore not protected. Both the court disagreed with Progressive, holding that the documents were not protected from discovery because were not prepared in anticipation of litigation nor did they contain the lawyer’s mental impressions. The court cited Progressive’s admission that the documents were prepared in the ordinary course of business; that the documents at issue were in the nature of business planning documents; that neither Progressive nor the reinsurers were involved in giving legal advice or in mapping litigation strategy; and the communications served numerous business functions. The court also held that the same rationale applied to specific portions of the documents which Progressive argued were protected even if the entire document was not.

The second discovery issue concerned the production of certain documents which Progressive asserted were protected by the attorney-client privilege but which Progressive had previously disclosed to its reinsurers and brokers. Progressive asserted it shared a common interest with its reinsurers such that its voluntary disclosure of those documents did not waive the privilege. The court again disagreed, holding that Progressive and its reinsurers did not hold a common legal interest. The relationship between them was a commercial and financial one – not legal. Moreover, the court rejected the argument that “if Progressive loses, so do its reinsurers,” concluding that the nature of the reinsurance business in and of itself did not give rise to a common legal interest. Progressive Casualty Insurance Co. v. FDIC, No. C12-4041-MWB (USDC N.D. Iowa Aug. 22, 2014).