The bell has rung on the latest round of discovery litigation brought between AIU Insurance Company (“AIU”) and TIG Insurance Company (“TIG”) in litigation in federal District Court. As we wrote in our previous post of October 2, 2008, AIU brought the litigation to recover reinsurance payments allegedly owed to it from TIG on the basis of certain excess liabilities arising from underlying asbestos litigation exposure. In our October post, we noted that the Court ordered TIG to produce documents relating to its anticipated late notice defense from its claim file, despite its objections based on claims of attorney-client privilege and protection under the work product doctrine.

In the latest round of discovery litigation, TIG moved to compel AIU to produce certain documents despite AIU’s claims of privilege. In another split decision, the court ordered some, but not all of the relief sought by the moving party. Despite TIG’s arguments that certain privileged documents were nonetheless discoverable because AIU’s advice of counsel defense put them at issue, the Court held that the advice of coverage counsel is not necessarily at issue in evaluating the reasonableness of an underlying settlement. The Court did order the production of documents pertaining to similar, but unrelated claims, noting that they could lead to the discovery of admissible evidence pertaining to the manner in which the insurer interprets its own obligations under the notice provision of its contracts. The Court also ordered that AIU search the electronic files of certain persons named by TIG, finding that their electronic materials were discoverable. AIU Insurance Company v. TIG Insurance Company, 07-CV-7052 (SHS) (HBP) (USDC SDNY Nov. 25, 2008).