Excess Carrier Not Entitled to Compel Production of Insured’s Settlement Agreement with Underlying Carriers

Applying Illinois law, a federal district court has held that a cooperation clause in an excess insurer’s policy did not entitle the excess insurer to compel production of the insured’s settlement agreement with a primary carrier.  Homeland Ins. Co. of N.Y. v. Health Care Serv. Corp., 2019 WL 1499300 (N.D. Ill. Apr. 3, 2019).

The insured, a health care company, was named as a defendant in several putative antitrust class actions.  The insured tendered its defense to its liability insurers, and the primary carrier filed a declaratory judgment action to decide certain coverage issues.  The coverage action was voluntarily dismissed after the insured, the primary carrier, and the first-layer excess carrier entered into a confidential settlement agreement.  The second-layer excess carrier unsuccessfully sought to intervene in the coverage action, and then requested a copy of the settlement agreement from the insured.  The insured refused to produce the settlement agreement, citing its confidentiality provision.  The second-layer excess carrier then instituted a lawsuit and sought to compel the insured to produce a copy of the settlement agreement.

The court denied the second-layer excess insurer’s motion to compel production of the settlement agreement between the insured and the other carriers.  In so holding, the court noted that the motion was premature because the insured had not made a claim under the second-layer excess insurer's policy and because defense costs had not approached the second-layer excess insurer's attachment point.  The court concluded that, unless and until the insured made a claim under the second-layer excess insurer's policy and attempted to prove that it had exhausted the underlying policies, the settlement agreement was not relevant.  The court also determined that the second-layer excess insurer could not rely on the cooperation provision in its policy to require the insured to produce the settlement agreement because the second-layer excess insurer had cited no authority for the proposition that a contractual obligation to provide information justified compelling production.