In United States Fire Ins. Co. v. City of Warren, 2012 WL 1454008 (E.D. Mich.), a Federal Magistrate Judge denied discovery of documents reflecting communications between the insurance company defendants and any reinsurers. The case involved a coverage dispute between the City of Warren (“the City”) and several insurance companies regarding the insurers’ duty to defend and indemnify the City in a pending state court class action. Id. at *1. The litigation arose when United States Fire Insurance Company (“US Fire”) sought a declaratory judgment that it was not liable to defend or defend the City in the underlying class action. Id. The City counter-claimed, asserting claims of breach of contract, breach of the implied covenant of good faith and fair dealing and reformation, and also filed third-party complaints against the other third-party insurers seeking a declaratory judgment that the insurers had a duty defend and indemnify the City in the underlying litigation. Id. During discovery, the City sought production of documents reflecting discussions between the companies and reinsurers, which the companies refused to produce on the grounds that the communications were irrelevant to the coverage dispute. Id. at *2.
The Magistrate Judge’s analysis focused on the purpose of reinsurance, finding that, similar to insurance reserves, which the Magistrate Judge also ruled were not discoverable, “reinsurance involves a business decision, not a legal determination regarding policy interpretation or coverage. Id. at 10. Accordingly, while a reinsurance policy is discoverable in a coverage dispute pursuant to Federal Rule of Civil Procedure 26(a)(1)(A)(iv), “all other documents relating to reinsurance are irrelevant and not discoverable.” Id. (emphasis added).