Aggregate Reserves – the meme for the scheme and the schemata of the Defendants in Branch qui tam

Memes, of course, are contagious and those about Katrina litigation tend to spread like wildfire.  In that regard, Judge Vance, who appears to be up-to-date on her shots and fully immunized, might want to suggest others get booster shots before decisions are made on Branch’s Motion to Compel.  Defendants’ response to the Branch motion is an aggregate of aggregation of epidemic proportion.

The schemata employed by the defendants are designed to weaken Branch to the point the case is dismissed as quickly as possible by limiting Branch discovery.  The associated attack of the  aggregated aggravators, a variation of hide and go-seek, targets Interrogatory No. 4 from the Branch Motion to Compel.  Interrogatory No.4  requests aggregate data on each insurer’s Katrina reserves, “the amount of money…[an]… insurance company sets aside on its books to ensure the ability to pay…[claims]”:

As noted in Nicholas v. Bituminous Casualty Corp.:

Setting reserves is a method of managing litigation in which attorneys, claims adjusters and/or line personnel compile their mental impressions and opinions concerning the substance of the litigation as well as the cost of litigation. Specifically, when setting a reserve, attorneys and claims personnel not only assess the value of the claim based on the available evidence and the strengths and weaknesses of the claim, but also take into consideration the probability of an adverse judgment, the jurisdiction, and the fees and expenses that may be incurred in defense of the claim.

Consistent with the schemata, the meme of the aggregated aggravators is one that frames any Branch discovery not specific to a claim as a “fishing expedition”.  While that meme falls short, I did go fishing hoping to catch something that would be relevant to the Branch request for each company’s aggregated reserves for Katrina claims – and while fishing I caught Central Georgia Anesthesia Servs.,P.C. v. Equitable Life Assurance Society of the U.S.,:

During discovery the policyholder learned that the insurance company was losing money on its policies, and that the insurance company’s employees might have been given incentives to deny or take hard stances on claims. The policyholder moved the court to compel the discovery of various documentation relevant to the case — including reserve information. The court held that the insurance company had to disclose the amount of its reserves and the method it used to set those reserves. Although the court noted that other courts have differed on whether reserves are discoverable, it observed that the “overwhelming majority of courts” find reserves discoverable in cases involving bad faith claims, because “reserves bear some relationship to the insurer’s calculation of its potential liability.”

In my now properly attributed post Shall we dance, I made reference to insurers having “investments that were worth less or worthless” at the same time they were facing the unexpected cost of covering policyholder claims for covered loss from Hurricane Katrina.

Data on an insurer’s aggregate reserves for those claims could make or break the case filed by Branch.  In that light, the resistance of defendants strongly suggests the “broad scheme” alleged by the  Branch Consultants is fact.  Further, the more the defendants resist production of a report on aggregate reserves, the more believable the “broad scheme” becomes.  Clearly, the information requested in Interrogatory No.4 is relevant.

Likewise, Liberty Mutual’s Opposition to Branch’s Motion to Compel is telling:

Interrogatory No.4 seeks information regarding “reserves set aside for damages caused by Hurricane Katrina” on a global basis (see Branch Memorandum in Support at p. 5), but the total amount of reserves for damages caused by Hurricane Katrina is wholly irrelevant to Branch’s claim of flood overpayments based on just two flood claims. Reserves on a specific claim generally are not admissible or discoverable because “reserves cannot accurately or fairly be equated with an admission of liability or the value of any particular claim”….

Note the holding of the Georgia court does not equate reserves “with an admission of liability or the value of any particular claim”.  Instead, the Georgia court held, “reserves bear some relationship to the insurer’s calculation of its potential liability”.  Liberty Mutual’s opposition continued with citations of cases supporting the Company’s argument before summarizing with the fallacy of denying the antecedent:

In each of these cases, discovery of reserves on a specific claim was precluded because the setting of a reserve does not establish the value of a claim and thus, the reserve amount is
irrelevant. If the reserve amount on specific claims is irrelevant, the total amount of reserves is even more irrelevant and shows nothing.

Having denied the antecedent, Liberty Mutual’s opposition shifts to the common make a mountain out of a molehill cognitive distortion of “magnification” or “catastrophizing” a situation – the latter more fitting to a cognitive distortion about Hurricane Katrina cases:

In addition, retrieving the total amount of reserves set for Hurricane Katrina cases is unduly burdensome. Liberty Mutual’s homeowners insurance claims are reserved on an individual basis… Once a homeowners insurance claim is closed, the reserve for that claim is set at the actual amount paid…Thus, reserves are maintained on a rolling basis for open claims. To calculate the total amount of reserves set for Hurricane Katrina on a given date would require review and analysis of each of thousands of Hurricane Katrina wind claims.

ANPAC, bless its heart, was the next defendant to file separate opposition to Branch’s Motion to Compel:

ANPAC objects to Interrogatory No. 4 on the basis that it is vague, unduly burdensome, and not calculated to lead to the discovery of admissible evidence. ANPAC further objects to Interrogatory No.4 because it seeks information that is neither relevant nor reasonably calculated to lead to the discovery of admissible evidence. See Fed. Rule Civ. Pro. 26(b )(1). Any purported “estimates” and “reserves” are neither relevant nor calculated to lead to the discovery of admissible evidence for the claims presented against ANPAC, which are limited to the properties identified in Paragraph 27 of the First Amended Complaint.

This discovery request improperly seeks information regarding purported “estimates” and “reserves” without limitation and regardless of whether plaintiff is the “original source” for each and/or all of the claims for which this infonnation is requested. See Rockwell International Corp. v. United States…

“Bless its heart”, again. ANPAC is stuck on stupid Rockwell.  It’s also stuck on the “molehill” but there’s no point repeating the “catastrophizing” of  Branch’ request for electronically stored information delivered in electronic format – particularly with a kid in the back of the class waving his arms to be recognized.  Oh, that’s no kid, it’s Liberty Mutual going after Interrogatory No. 4 again in a sur-reply to the Branch reply and we’ve been there, done that so let’s move on.

Allstate, the new kid in town, shouldn’t find reporting the Company’s aggregate reserves for Katrina claims a problem.  Allstate had no reinsurance coverage for Katrina and covered the claims from its reserves or so Liddy claimed – and evidence of the Company’s loss-shifting scheme is already on the record.

No meme or schemata can trump that!

2 thoughts on “Aggregate Reserves – the meme for the scheme and the schemata of the Defendants in Branch qui tam”

  1. When I get the time I will give you a couple of cites to 2 La. state court cases, non-Katrina, in which the plaintiffs put forth the reserve information at trial as evidence of bad faith against an insurer for low ball tenders. In both cases the plaintffs got zeroed on bad faith penalties. The La. appellate courts affirmed the zeroes.

    Just my opinion, but the insurance company corporate reps. can too easily explain away and hence, diminish the importance of reserves. Furthermore, juries don’t necessarily get the purpose of reserves and how they correlate to bad faith. Just my opinion, but I don’t think the reserve data is that important when trying a bad faith case and I have never used it.

    I welcome other attorneys’ opinions/experiences.

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