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Policyholders should seek production of reinsurance-related documents during discovery as they might provide valuable information about the timing of when the insurer actually received notice and the insurer’s frank and honest evaluation of the claim. Contradictions in communications between an insurer and its reinsurer, as compared to the positions asserted by an insurer in litigation, can be used to prove both the existence of coverage for a disputed claim as well as the insurer’s bad faith in denying that claim.
In a recent ruling from the U.S. District Court for the Western District of Louisiana, a federal judge held that reinsurance documents and related communications were discoverable because they were relevant to the insured’s claim of bad faith under Louisiana law. Leevac Shipbuilders LLC v. Westchester Surplus Lines Ins. Co., Case No. 2:14-cv-00399, 2015 WL 224890 (W.D. La. Jan. 15, 2015).