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United States District Court, Northern District of Illinois, Eastern Division

March 19, 2003


The opinion of the court was delivered by: Milton I. Shadur, Senior United States District Judge


Native American Arts, Inc. ("Native American Arts") has sought to springboard from the literal language of Fed.R. Civ. P. ("Rule") 26(a)(1)(D), which requires the automatic disclosure of "any insurance agreement" that provides (or might provide) coverage to a defendant, to its claimed entitlement to obtain any reservation-of-rights letters that have been delivered by any insurers in this case to their respective insureds. In response to this Court's request for the interested parties' submission of letters citing authorities on the subject, counsel for Native American Arts and for defendants Bundy-Howard, Inc. and Ronald C. Sass and Judith A. Sass d/b/a 9-Mile Creek Traders have provided such letters.

Here is the language by which the Rule itself defines the scope of a litigant's obligatory advance disclosure;

for inspection and copying as under Rule 34 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.
Though the parties dispute the answer to the question at issue, what their submissions clearly have in common is a demonstration that no reported case has dealt directly with the question whether the Rule's reference to "any insurance agreement" embraces an insurer's reservation-of-rights letter.

Just a few words should be said as to Native American Arts' submission before this opinion turns to ruling on that subject. Its counsel has cited to one opinion by a Magistrate Judge that does refer to a reservation of rights, Blockbuster Corp. v. McComb Video, Inc., 145 F.R.D. 402 (M.D. La. 1992) — but what counsel has neglected to mention is that the ruling was made in a case in which the insurer itself was being sued under the Louisiana direct action statute, so that matters affecting the insurer's liability or potential liability were directly discoverable (a very different situation from what is involved here) Native American Arts' counsel has also miscited the ruling in Great Lakes Dredge & Dock Co. v. Commercial Union Assurance Co., 159 F.R.D. 502 (N.D. Ill. 1995), — an opinion by this Court's colleague Honorable Joan Lefkow — as having "held that information regarding reserves under an insurance policy is discoverable under Rule 26(a)(1)(D)." In fact Judge Lefkow held exactly to the contrary (id. at 504 & n. 2), limiting discoverability to the insurance policies themselves (id. at 504-05).*fn1 Finally, Native American Arts' citation to Wright & Miller substantially overstates what that treatise indicates as to the scope of required discovery.

By contrast, even though (as stated earlier) none of the cases adduced by defense counsel has expressly ruled that an insurer's reservation of rights letter is not encompassed within the term "insurance agreement" employed in the Rule, the thrust of several cases that they have cited counsels a negative answer to that question even apart from the literal language in Rule 26(a)(1)(D),*fn2 indeed, the Wright & Miller treatise (speaking of the version of the Rule that antedated its shift to a mandatory initial disclosure regime) makes the point that the existence of any reservation of rights did not negate the obligation to disclose the insurance agreement itself, given the specific reference to an insurer that "may be liable."

What controls for this Court, in addition to what has already been said, is the fact that a reservation of rights (as contrasted with an actual denial of coverage, which would surely have to be disclosed) does nothing more than to preserve for future decision the question whether insurance coverage does or does not exist. And that question of coverage vel non is one as to which the party to whom an insurance agreement is disclosed must make its own judgment, irrespective of the existence or nonexistence of a reservation of rights.

Accordingly Native American Arts' motion is denied. It is entitled to nothing more than the disclosure of the insurance policies themselves.

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