Axis Insurance Company v. Great American Insurance Company of New York

Background

Axis Insurance Company brought an action seeking a declaration of the parties’ rights and duties to provide coverage and a defense under insurance policies issued to Twin Hill, a manufacturer. The opinion states that multiple actions were pending against Twin Hill in California and Illinois concerning allegedly defective uniforms worn by certain airline employees. Great American contended that Axis was obligated to pay $1,000,000 for each occurrence and/or claim.

The parties disputed whether Axis had to disclose a January 27, 2022 letter that Axis coverage counsel Kristin V. Gallagher sent to Greg Dillion, coverage counsel for Twin Hill. Great American sought disclosure, while Axis asserted that the letter was protected. After reviewing the parties’ submissions and the letter privately, the court ordered Axis to disclose it.

Analysis

The court applied Federal Rule of Civil Procedure 26(b)(1), which permits discovery of nonprotected information relevant and proportionate to the needs of the case.

Work-product protection. Work-product protection generally covers documents prepared by or for a party or its representative because of the prospect of litigation. The court concluded that the letter was not protected because it stated Axis’s coverage position and reservation of rights. The court reasoned that an insurer would need to issue a coverage position, deny coverage, or reserve its rights after receiving notice that its insured had been sued, regardless of whether litigation against Great American later occurred.

Common-interest doctrine. The court explained that the common-interest doctrine is not an independent privilege; it can preserve work-product protection when parties sharing an interest communicate with one another. The court did not need to decide whether the doctrine applied initially because it found no work-product protection. It further held that, even if the letter contained attorney work product, disclosure to Twin Hill waived that protection because Axis represented Twin Hill under a reservation of rights and the parties did not share a common interest concerning the coverage or defense issues addressed in the letter.

Mediation confidentiality. The court found that the letter did not address mediation discussions. The fact that it was written after failed settlement negotiations was not enough to show that the letter materially advanced or fostered a mediation. The letter therefore was not protected by mediation confidentiality.

Settlement protection. The court held that Federal Rule of Evidence 408 concerns whether settlement communications may be admitted at trial and does not protect settlement negotiations from discovery. That rule therefore did not prevent disclosure of the letter.

Disposition

The court ordered Axis to disclose to Great American a copy of the January 27, 2022 letter that Kristin V. Gallagher sent to Greg Dillion within five days of the order. The opinion does not identify the judge by name.