5ASR3d31

YHT, INC., Plaintiff,

 

v.

 

OXFORD/PROGRESSIVE GROUP doing

business as PROGRESSIVE INSURANCE COMPANY (PAGO PAGO), LTD.; PROGRESSIVE

INSURANCE COMPANY (APIA), LTD.; OXFORD PACIFIC INSURANCE COMPANY; INSURANCE

COMPANY OF THE PACIFIC; THE BOSTON GROUP;

and DOES 1-5, Defendants.

 

High Court of American Samoa

Trial Division

CA No. 92-00

 

February

21, 2001

 

 

[1] Under definition of “contract of reinsurance” in

A.S.C.A. § 29.1590, T.C.R.C.P. 26(b)(2) allows discovery of existence and contents

of insurance agreement between reinsurer and insurer.

 

[2] T.C.R.C.P. 26(b)(1) requires that discovery be both

non-privileged and relevant to subject matter in pending action. 

 

[3] Reinsurance contract is made by

original insurer for its own protection. 

It creates privity only between

reinsurer and reinsured, and no rights accrue to original insured.

 

[4] Discovery

of identity of reinsurers and their contracts with defendant are not relevant

to subject matter of case. Although T.C.R.C.P. 26(b)(2) allows discovery

as to “any insurance agreements,” Court exercised its discretion to limit discovery.

 

[5] Court

denied plaintiff’s motion to compel discovery, granted defendant’s motion for

protective order, and awarded reasonable expenses of motion, including

attorney’s fees. Plaintiff’s

counsel may resume deposition but shall

not ask irrelevant questions regarding reinsurers of insurance policy issued to

plaintiff.

Before RICHMOND, Associate Justice, ATIULAGI, Associate Judge,

and SAGAPOLUTELE, Associate Judge.

 

Counsel: For Plaintiff, Paul F. Miller

 For Defendants,

William H. Reardon

 

ORDER ON MOTIONS TO COMPEL DISCOVERY

AND

MOTION FOR PROTECTIVE ORDER

 

Plaintiff

YHT, Inc., (“YHT”) started to take the deposition upon oral examination of a

Defendant Oxford/Progressive Group (“Progressive”) representative, specifically

of the entity identified as Progressive Insurance Company (Pago Pago),

Ltd.  During the deposition, the

representative, Julian E. Ashby, refused to identify the reinsurers that may

have responsibility for any liability imposed on Progressive under the

insurance policy at issue in this case. 

On October 17, 2000, YHT moved, pursuant to T.C.R.C.P. 25 and 30, to

compel Progressive, during the discovery process, to reveal the identity of any

and all reinsurers that may be liable under the insurance policy at issue in this case, and generally to require

cooperation in discovery proceedings. In response, Progressive moved, pursuant

to T.C.R.C.P. 30(d), for a protective order to limit the scope of the oral

examination deposition.  We deny the

motion to compel discovery and grant the protective order.

 

1. Motion

to Compel Discovery

 

The first issue concerns

whether discovery may be conducted as to reinsurers.  T.C.R.C.P. 26 governs the liberal scope of

discovery allowed in the trial court. 

T.C.R.C.P. 26(b)(2) specifies the scope allowed for discovery pertaining

to insurance agreements.  It states:

 

A party may obtain discovery of the existence and contents of any insurance

agreement under which any person carrying on an insurance business may be

liable to satisfy part or all of a judgment which may be entered in the action

or to indemnify or reimburse for payments made to satisfy the judgment.

 

T.C.R.C.P.

26(b)(2) (emphasis added).  The question

is thus whether the statute contemplates, and common law allows, the inclusion

of reinsurance agreements in its formulation of “any insurance agreement.”

 

[1] A contract of reinsurance is

defined by A.S.C.A. § 29.1590 as a contract by which “an insurer procures a

third person to insure him against loss or liability by reason of such original

insurance.”  Under such a contract, the

reinsurer essentially indemnifies the original insurer against the loss or

liability that insurer has incurred under a separate contract with the original

insured.  Fontenot v. Marquette Cas. Co., 247 So. 2d 572, 574-76 (La.

1971).

 

Given this definition, the

plain language of T.C.R.C.P. 26(b)(2) would allow for discovery regarding the

existence and contents of “any insurance agreement” between a reinsurer and

insurer.  Our reading is

taken from the explicit language in the rule which allows discovery regarding

contracts where the “[insurer] may be liable to . . . indemnify or reimburse for payments made to

satisfy the judgment [entered in the action].” T.C.R.C.P. 26(b)(2).  Since a

reinsurer would be liable to an insurer to indemnify payments made to an

original insured to satisfy a judgment, we hold that discovery of the existence

and contents of insurance agreements between reinsurers and insurers is allowed

under T.C.R.C.P. 26(b)(2).

 

2. The Issue of Relevancy

 

[2] Despite the above finding, we

exercise our discretion under the general preface of T.C.R.C.P. 26, which

enables us to limit the scope of Rule 26(b) provisions so long as they are in

accordance with the rule.[1]  Specifically, we rule according to the

provision T.C.R.C.P. 26(b)(1), which was applied in Johnson v. Coulter,

25 A.S.R.2d 84, 87 (Trial Div.

1993), and cited by YHT.  This rule

requires that discovery be both non-privileged and relevant to the subject

matter in the pending action.  T.C.R.C.P.

26(b)(1).

 

[3] We find that the existence and

content of Progressive’s reinsurance contracts are irrelevant to the subject

matter before the Court. A reinsurance contract is made by the original insurer

for its own protection as to the whole or part of a risk.  People ex rel. Sea Ins. Co. v. Graves,

8 N.E.2d 872, 873, 874 (N.Y. Ct. App. 1937). 

Reinsurance is neither double insurance nor co-insurance.[2]  A reinsurance contract creates privity only between the reinsurer and the

reinsured.  It protects the first insurer

from a risk he has already assumed, and “creates no privity whatever between

the reinsured and the person originally insured, the reinsurer being in no

respect liable to the person originally insured.” Bethke v. Cosmopolitan

Life Ins. Co.,

262 Ill. App. 586, 591 (Ill. App. 1931); see

also Hunt v. New Hampshire Fire Underwriters’ Ass’n, 38 A. 145,

147 (N.H. 1985); Southwestern Surety Ins. Co. v. Stein Double Cushion Tire Co., 180 S.W. 1165,

1168 (Tex. Civ. App. 1915); Philadelphia Ins. Co. v. Washington Ins. Co.,

23 Pa. 250, 253 (Pa. 1854).  As

stated in Thomas v. Land, 30

S.W.2d 1035, 1037 (Mo. Ct. App. 1930), “no rights could accrue to

[the original insured] by virtue of such contract of reinsurance.”

 

Thus, we reject all arguments by

YHT’s counsel made in the document submitted on October 25, 2000, entitled the

“Attorney’s Declaration in Support of Motion to Compel.”  In this document, counsel declares “under

penalty of perjury” that YHT has asserted claims based on A.S.C.A. § 29.1537

against unknown defendants Does 1-5, and that the identity of these defendants

is “central to the theory of liability asserted as is the extent of that

liability.”  First, contrary to counsel’s

avowal, there are no claims pleaded in the complaint pertaining to

defendants Does 1-5, nor any mention of A.S.C.A. § 29.1537.  Second, A.S.C.A. § 29.1537, which grants injured persons a right of direct action against insurers

and is liberally construed by the courts, Holland v. Haleck’s Island Motors, 15 A.S.R.2d 44, 46 (Trial

Div. 1990), is not applicable to reinsurers by any courts of the United States

or western world.  As held in Fontenot,

247 So.2d at 580, “[t]he direct action statute is not applicable to

reinsurance policies where neither a novation of the original policy obligation

nor a merger of the companies has occurred.” 

See also Arrow Trucking Co. v. Cont’l Ins. Co., 465

So. 2d 691, 692 (La. 1985); 19 Lee R.

Russ & Thomas F. Segalla, Couch

on Insurance 2d § 80.69, at 676 (1983).

 

[4] Accordingly, discovery of the identity

of reinsurers and their contracts with Progressive are not relevant to the

subject matter of this case at hand. 

Counsel should exercise caution in swearing to averments.  Progressive should consult T.C.R.C.P. 41 as

regarding Does 1-5.

 

The plain language of T.C.R.C.P. 26(b)(2) allows YHT

to conduct discovery as to any insurance agreements, including those between

Progressive and its reinsurers.  We

exercise our discretion, however, to

limit this power because YHT’s discovery does not meet the relevancy test

established generally in T.C.R.C.P. 26(b)(1).

3. Protective Order

 

[5] Progressive applies to the court to issue a

protective order pursuant to T.C.R.C.P. 30(d) against YHT counsel’s inquisition

of Progressive’s representative. T.C.R.C.P. 30(d) states:

 

upon a showing that the examination is being conducted in bad

faith or in such manner as unreasonably to annoy, embarrass, or oppress the

deponent or party, the court . . . may order the officer conducting the

examination to cease forthwith from taking the deposition or may limit the

scope and manner of the taking of the deposition as provided in 26(c)

TCRCP.  If the order made terminates the

examination, it shall be resumed thereafter only upon the order of the court in

which the action is pending. . . .  The provisions of 37(a)(4) TCRCP apply to the

award of expenses incurred in relation to the motion.

 

We grant

Progressive’s motion for a

protective order.  YHT’s counsel may resume the deposition of Progressive’s representative, but

will be constrained to ask questions that are non-privileged, relevant, and if

inadmissible at trial are “reasonably calculated to lead to the discovery of

admissible evidence.”  T.C.R.C.P.

(b)(1).  YHT’s counsel shall not ask

further irrelevant questions regarding the reinsurers of the insurance policy

issued to YHT by

Progressive.  We will further award

reasonable expenses of the motion, including attorney’s fees, to Progressive.

 

Order

 

1.

The motion to compel discovery from Progressive’s representative, Julian E. Ashby,

is denied insofar as the contracts of reinsurance on the subject matter of

YHT’s insurance policy at issue is concerned.

 

2.

The motion for a protective order is granted to Progressive constraining YHT’s

counsel to relevant discovery.

 

3. Expenses, including attorney’s fees, of bringing the motion for a

protective order are awarded to Progressive against YHT in the amount of $300.00.

 

It is so ordered.