Oregon District Court Rules that Sharing of Privileged Documents with Reinsurers waives Protections Afforded by Attorney-Client Privilege and Work Product Doctrine

Regence Group v. TIG Specialty Ins. Co., No. 07-1337-HA (D. Or.)

The United States District Court in Oregon has issued two related orders that could have significant implications with respect to the sharing of information between ceding companies and their reinsurers.

In the instant case, Regence Group ("Regence") filed suit against its insurer, TIG Specialty Insurance Company ("TIG"), seeking a declaration that TIG was obligated to pay defense and indemnity costs related to three underlying lawsuits. Two of the underlying suits involved RICO claims against Regence and other entities and the third case dealt with similar state law claims brought against Regence by a physicians group (the "underlying litigation").

During the course of the declaratory judgment action, Regence issued subpoenas to TIG's reinsurers (and one reinsurer's counsel), seeking a variety of documents that go to the heart of the reinsurance relationship, including (1) documents related to TIG's reinsurance contracts that cover the Regence policy at issue, (2) documents exchanged between TIG and its reinsurers regarding the underlying litigation, (3) documents related to coverage for the underlying litigation that were exchanged with an opposing party or the arbitrators in the course of TIG's arbitrations with its reinsurers, and (4) documents relating to the payments received by TIG from its reinsurers in connection with settlement of claims for coverage in the underlying litigation. TIG objected to producing such documents on the grounds that documents relating to positions it took with its reinsurers (in the ordinary course of business and in arbitrations) for the purpose of pursuing reinsurance for the Regence claims are protected from disclosure by the attorney-client privilege and work product doctrine. To this end, TIG and the non-party reinsurers moved the District Court for a protective order.

On May 1, 2009, the District Court denied the motion for a protective order, concluding that TIG waived any privilege associated with these materials by sharing the documents with its reinsurers when the interests of TIG and its reinsurers were not aligned. The court specifically noted that TIG had engaged in two contested arbitrations with its reinsurers. The court also rejected TIG's assertion that the common interest doctrine should apply, again citing to adversity between TIG and its reinsurers. However, the court's opinion did not address the facts that at the time some of the materials at issue were disclosed, TIG and its reinsurers were not adverse to one another, that the balance of materials was disclosed only when TIG was compelled to do so in the course of an arbitration, and that TIG's and its reinsurers' interests were aligned with respect to defending against Regence's claim for coverage.

TIG's motion for reconsideration of the District Court's May 1, 2009 Order was denied on February 4, 2010. TIG filed a petition for writ of mandamus before the United States Court of Appeals for the Ninth Circuit on February 22, 2010. The Reinsurance Association of America and the Property Casualty Insurance Association of America have moved to file an amicus brief in support of TIG's petition for writ of mandamus.

If upheld, the District Court's rulings could have far reaching implications with respect to the sharing of information between ceding companies and their reinsurers, particularly considering the obligations regarding the flow of information required by the duty of utmost good faith and, often, by access to records clauses. Although a number of recent decisions rejected the application of the common interest doctrine to the cedent/reinsurer relationship, the Regence case represents a significant extension of that line of authority. Specifically, the Regence case found waiver even though TIG and its reinsurers were not in arbitration at the time of disclosure. Also, the Regence court appears to have implicitly ruled that mandated disclosure pursuant to an arbitration order could be deemed a waiver of privilege even though TIG's production was not voluntary.