Court Rules Insurance Companies Must Produce Documents in Coverage Fight With TransCanada

   By Pamela D. Hans, managing shareholder of Anderson Kill's Philadelphia Office

On August 15, 2013, the Supreme Court of the State of New York, New York County, rejected arguments by Factory Mutual Insurance Company, AIG, ACE, and Arch, that the work done by their coverage counsel in connection with handling a claim was not discoverable.

Granting TransCanada’s motion to compel production of documents, the court held that documents generated by an insurance company as part of its handling of a claim, but before it decides to deny a claim, are not work product even if they were prepared by counsel.  Allowing a narrow exception for documents that actually contain legal advice, the Court ordered the insurance companies to produce documents that the insurance companies argued were attorney work-product or protected by the attorney-client privilege.

Rejecting the insurance companies arguments, the court further held that an insurance company cannot shield documents from discovery merely because those documents were prepared by attorneys, if those documents were prepared as part of handling a policyholder’s claim.  Emphasizing that claims handling is an “ordinary business activity for an insurance company”, the court held that documents generated by an insurance company or its counsel as part of that claims handling process and before denying its policyholder’s claim are not trial preparation materials and are not privileged.

   John Nevius, Kathleen Donovan, John O’Connor and Pamela Hans are counsel for TransCanada.

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