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National Union Fire Insurance Co. of Pittsburgh v. Transcanada Energy USA, Inc.

Supreme Court, New York County

August 15, 2013

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PENNSYLVANIA, ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES LIMITED, ACE INA INSURANCE COMPANY, and ARCH INSURANCE COMPANY, Plaintiffs,
v.
TRANSCANADA ENERGY USA, INC. and TC RAVENSWOOD SERVICES CORP., Defendants. TC RAVENSWOOD, LLC, Plaintiff,
v.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH PENNSYLVANIA (a/k/a AIG, n/k/a Chartis), ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES LIMITED, ACE INA INSURANCE, AND ARCH INSURANCE COMPANY, and FACTORY MUTUAL INSURANCE COMPANY, Defendants. Index Nos. 650515/2010, 400759/2011

Unpublished Opinion

For TransCanada: John G. Nevius, Esq. John M. O'Connor, Esq. Kathleen Donovan, Esq. Anderson Kill & Olick, P.C

For the market insurers: Charles J. Rocco, Esq. Malcolm J. Reilly, Esq. Mara Hsiung, Esq. Foran Glennon, et al.

For FMIC: Henry J. Catenacci, Esq. H. Richard Chattmen, Esq. Gregory D. Miller, Esq. Podvey, Meanor, et al.

DECISION AND ORDER

BARBARA JAFFE, J.S.C.:

By notice of motion dated May 11, 2012, Factory Mutual Insurance Company ("FMIC") and Chartis, Ace INA Insurance, and Arch Insurance Company (collectively, the "market insurers", with FMIC, the "insurance companies") move to partially confirm and partially reject the special referee's report entered on April 20, 2012. TransCanada Energy USA, Inc., TC Ravenswood Services Corp., and TC Ravenswood, LLC (collectively, "TransCanada") oppose. By notice of motion dated May 11, 2012, TransCanada moves to confirm the special referee's report entered on April 20, 2012. The insurance companies oppose.

I. BACKGROUND

On September 12, 2008, Unit 30, a steam turbine power generator at Ravenswood Generating Station in Queens, NY, shook violently, and was shut down. There was a crack in the generator's rotor. Unit 30 remained out of service until May 11, 2009. On September 16, 2008, TransCanada gave the insurance companies notice of the loss, making claims for repair costs and business interruption losses under its insurance policy.

To investigate the claims, the insurance companies hired experts, including insurance adjusters from Crawford Global Technical Services, and attorneys at firms Clausen Miller and Podvey Meanor to assist in the investigation and coverage determination. All of the insurance companies except FMIC denied coverage on June 2, 2010 and together filed a declaratory judgment action that same day. FMIC denied coverage on July 2, 2010 and was sued by TransCanada soon after.

II. PROCEDURAL BACKGROUND

On January 6, 2012, TransCanada moved to compel the production of documents that the insurance companies claimed were protected work product and attorney-client privileged communications. Almost all of the documents were created before coverage was denied. On February 1, 2012, the insurance companies cross-moved for a protective order, and on March 14, 2012, the dispute was referred to a special referee to hear and report who, on April 18, 2012, conducted a hearing, reviewed a selection of the disputed documents in camera, considered the parties's legal arguments, and recommended that "any documents that pre-date the rejection of the claim are not subject to the privilege." (April 18, 2012 Hearing Tr. at 54 [Doc 60 NYSCEF]). The referee also recommended that all deposition questions related to reserves and reinsurance be barred, and that any dollar amounts and hours be redacted from the billing records.

On May 11, 2012, the insurance companies moved to reject and confirm partially confirm the referee's recommendations, and TransCanada moved to confirm them. Soon thereafter, the parties submitted oppositions and replies. On April 19, 2013, TransCanada sought to supplement their briefing with additional information. On June 7, 2013, this court issued an interim order directing the parties to submit the disputed documents for an in camera review, and at a June 12, 2013 conference, TransCanada indicated that the insurance companies had added approximately 140 documents to the privilege log, each dated before the denial and subject to the same issues presented in the motion. The parties were instructed to provide these documents for in camera review, and to submit any additional arguments by letter. TransCanada submitted their letter motion on June 26, 2013. The insurance companies opposed on July 10, 2013, and TransCanada submitted a reply on July 17, 2013. The documents were provided for in camera review in letters dated June 19, 2013, June 20, 2013, and July 17, 2013.

III. CONTENTIONS

TransCanada contends that the referee's recommendation is correct in that all documents are pre-denial, that documents created before an insurance company denies coverage are never protected attorney-client communications or work product, and that even if the documents were protected, the protection ...


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