A new trial court decision from Illinois holds that counsel for a reinsurance pool in a lawsuit brought by the pool against a pool member is obligated to produce documents and information within the possession of each of the approximately 500 pool members when responding to Rule 34 requests for production of documents and Rule 33 interrogatories.

In this commentary, Robert C. Leventhal , a litigation partner at Foley & Lardner discusses the court’s decision in National Council On Compensation Insurance, Inc. v. American International Group, Inc, 2007 U.S. Dist. LEXIS 91518 (N.D. Ill. Dec. 11, 2007). Lexis.com subscribers may access a copy of the decision by clicking here.

Although the court acknowledged that each pool member was not a party to the lawsuit and could not be individually served with requests for production of documents or interrogatories, the court concluded that the pool had control over documents and information in the possession of pool members and was therefore required to include such documents and information in its responses to document requests and interrogatories. The court also stated that counsel for the pool was required to insure that no responsive documents were destroyed by any pool member.

The author writes: “Given the paucity of cases addressing the discovery obligations of reinsurance pool members (and the fact that many disputes involving reinsurance pools are addressed in confidential arbitrations) it is difficult to determine whether the reasoning of NCCI is likely to be adopted by other courts (or arbitration panels). However, the NCCI decision is important because it creates serious potential pitfalls for lawyers representing reinsurance pools.”

The court’s decision, if adopted by other courts, would place substantial burdens on counsel for reinsurance pools by requiring them to obtain and preserve documents and information in the possession of numerous pool members. This article discusses how other courts have treated the issue, the implications of the case, and steps that can be taken to minimize the scope of potential discovery against pool members.

The author states: “There are also steps that counsel can take to minimize the scope of potential discovery of pool members. A complaint that raises issues about the knowledge of pool members is more likely to lead to broad discovery against pool members than a complaint that raises no such issues. Allegations that each pool member was defrauded may put the mental state of each pool member directly at issue, thereby increasing the potential scope of discovery. Narrower allegations could result in more limited discovery of pool members.”

The author concludes: “A pool agreement could be drafted to specifically address each pool members obligation to cooperate with the pools counsel in the event of litigation and could require pool members to preserve information for use in litigation. The problem with such language is that it almost certainly would be used against the pool in determining the scope of information that the pool is required to produce in discovery. A party seeking discovery would undoubtedly argue that such contractual provisions demonstrate that the pool has control over all information in each pool members possession and would make it difficult for the pool to convince a court that it should define the scope of discovery against the pool more narrowly.”

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