Ronald S. Gass
Reinsurance and Insurance Arbitrator and Umpire
Reinsurance and Insurance Dispute Resolution Services Consultant

Treaty’s Access to Records Clause Does Not Constitute a Blanket Waiver of Attorney-Client Privilege

In a dispute over a cedent’s indemnification of a sizeable claim settlement, it is not unusual for a reinsurer to seek discovery in arbitration of the entire underlying claim file, including any communications between outside claims counsel and in-house claims personnel, some of whom may also be attorneys. This scenario often raises important questions about whether those attorney communications should be protected from disclosure pursuant to the attorney-client privilege or the work product doctrine. Under these circumstances, reinsurers have argued that the reinsurance agreement’s boilerplate access to records clause constitutes a blanket waiver of such privilege claims. However, this contention was recently rejected in a litigation context by the Appellate Division of the Supreme Court of New York.

Following a $226 million settlement of a lawsuit brought by a bank insured arising from its claim under a vehicle residual value protection policy, the insurer ceded the loss to its quota share reinsurers. The reinsurance agreement provided that “the Reinsurers . . . will have the right to inspect . . . all records of the Company that pertain in any way to this Agreement” – typical access to records clause wording. The reinsurers invoked this clause and demanded to inspect the insurer’s claim files, including those of its in-house and outside claims counsel.

Although the insurer produced 22 bankers boxes of documents, it refused to turn over any attorney files asserting attorney-client privilege and claiming that they were not subject to the access to records clause. The reinsurers subsequently refused to pay their share of the loss. The insurer then sued for payment, and the reinsurers counter-sued for rescission and also claimed that the settlement was unreasonable, in bad faith, and ex gratia. In the context of this litigation, the reinsurers again sought the withheld attorney files, and the trial court granted their motion to compel discovery of these documents holding that the access to records clause was “extremely expansive . . . without any limitation.”

Citing North River Insurance Co. v. Philadelphia Reinsurance Corp., 797 F. Supp. 363 (D.N.J. 1992) as precedent, the Appellate Division on appeal unanimously reversed and ruled that the “[a]ccess to records provisions in standard reinsurance agreements, no matter how broadly phrased, are not intended to act as a per se waiver of the attorney-client or attorney work product privileges.” Otherwise, according to the court, these privileges would be rendered “meaningless.”

The Appellate Division hastened to add, however, that its ruling did not preclude the usual challenges to privilege claims or mean that the court would be bound by counsel’s characterization of a document as privileged, i.e., these documents would still have to satisfy each element of the attorney-client privilege or work product doctrine and the burden of proving those elements rests with the party asserting the privilege. In deciding whether to uphold the privilege for the type of attorney-generated claims documents in dispute in this litigation, courts have typically focused on whether they were created by claims counsel in the ordinary course of the insurer’s business of investigating and settling claims and whether outside claims counsel were merely acting as a claims adjuster and not as a true legal advisor. If so, some courts have rejected such claims of privilege.

Gulf Insurance Co. v. Transatlantic Reinsurance Co., No. 4762, 2004 N.Y. App. Div. LEXIS 15691 (Dec. 28, 2004).


TELEPHONE: 203-858-9936