Opinion ID: 148187
Heading Depth: 1
Heading Rank: 8

Heading: The Wigmore Memo

Text: INA contends that each of the specific allocation decisions it cites as questionable must be read against the backdrop of the Wigmore Memo, which it characterizes as direct evidence that Travelers allocated the settlement with an eye toward maximizing its reinsurance recovery. Travelers conceded at trial that it is a breach of the duty of good faith for an insurer to take reinsurance implications into account in making coverage decisions. The District Court concluded that the Wigmore Memo was not evidence that Travelers had generally acted in bad faith. It did so on two grounds. First, the Court essentially accepted Yessman's testimony that the Memo's purpose was to provide him with a general estimate of Travelers' potential net exposure on the breast implant claims, which Travelers wanted in relation to an indemnity agreement it had entered into with Aetna U.S. Healthcare when it acquired Aetna CS, [29] and that he did not use the Memo to aid him in his negotiations with Acme. Second, the Court accepted the testimony of Stonehill-Clafin, Miley and Kingston (who, according to Travelers, were the ones responsible for the details of the settlement agreement and the post-settlement allocation), all of whom testified that they never saw, or heard of, the Wigmore Memo prior to the subsequent litigation, and that, as a general matter, they were walled off completely from any information relevant to Travelers' reinsurance recovery prospects. In its brief, INA cites various reasons why we should not find Yessman credible on this subject, despite the District Court's having found otherwise. It is unnecessary to detail those reasons here. That is because, even were we to agree that Yessman's testimony was not credibleand also agree that Yessman's exposure to the Wigmore Memo contaminated the other Travelers' employees who worked on the settlement and allocation, and whose credibility INA does not contestthat would not change the result. The Wigmore Memo's two main points of emphasis are: (1) that, if the breast implant claims were characterized as arising out of multiple occurrences, the coverage was likely to stay in the AL layer; and (2) that, because Acme's subsidiaries were not obligated to provide reinsurance so long as only defense costs are covered, there was the possibility that Acme would continue to litigate each of the claims without settling. But neither of those points is particularly pertinent to what INA is challenging here. First, as noted above, Travelers had sufficient reasons, apart from concerns about reinsurance recovery, to want to avoid a multiple-occurrence scenario, since such a scenario would have greatly increased its exposure under the AL policies. [30] Thus, the Wigmore Memo is not itself sufficient to show that Travelers insisted on a single-occurrence characterization of the breast implant claims for reasons related to reinsurance recovery (and, at any rate, INA does not raise the number of occurrences issue on appeal). Second, the specific point the Memo raised about defense costs was that, until Travelers covered any losses stemming from liability, it could not access the captive reinsurance. The Memo said nothing about what is at issue herenamely, the effect of defense coverage on Travelers' ability to recover from its outside reinsurers. In sum, we do not discern clear error regarding the District Court's finding that [t]he Wigmore Memo was not used as a `roadmap' by Travelers to negotiate [the] settlement with Acme, or to allocate the settlement dollars to the insurance policies. (J.A. at 57.)