ALLIANZ GLOBAL RISKS US INSURANCE COMPANY et al. v. FEDERAL INSURANCE COMPANY et al., SC 18300

Judicial District of Hartford

 

    Discovery; Subpoena; Whether Trial Court's Order Requiring Disclosure of a Company's Tax Records should be Reversed on the Ground that they do not Contain Relevant Information or, Alternatively, Because the Information Sought may be Obtained from Other Sources.  In 2001, Allianz Global Risks US Insurance Company (Allianz), Federal Insurance Company (Federal), AXA Corporate Solutions Insurance Company (AXA), and Zurich American Insurance Company (Zurich) entered into an insurance program to insure Taunus Corporation's properties.  As a result of the terrorist attacks of September 11, 2001, two of Taunus' office buildings near the World Trade Center site were extensively damaged.  Taunus made a property insurance claim of nearly $2 billion, claiming that the buildings suffered catastrophic environmental damage that rendered them permanently untenantable.  Young Laboratories, Inc. (YLI), a Connecticut corporation, was retained on behalf of the insurers to perform environmental consulting and testing services in connection with Taunus' insurance claim.  YLI submitted bills, totaling $11.4 million, to the insurers for its services.  Federal and Zurich decided to contest YLI's bill.  Allianz and AXA subsequently entered into an agreement with YLI, whereby Allianz and AXA agreed to pay YLI's bill in its entirety, including Federal's and Zurich's shares, and YLI assigned all of its claims against Federal and Zurich to Allianz and AXA.  In 2007, Allianz and AXA instituted a breach of contract action against Federal and Zurich in New York.  They claimed that, by refusing to pay their share of YLI's bill, Federal and Zurich breached independent contractual obligations they owed to YLI under the retention agreement, and to Allianz and AXA pursuant to a cost share agreement among the insurers.  Federal moved in the New York court for the issuance of a subpoena in Connecticut.  The subpoena sought various documents pertaining to the work performed by YLI in connection with the Taunus claim.  The New York court signed a commission on November 13, 2007, which was presented to the Connecticut Superior Court on November 16, 2007.  When YLI failed to produce all of the documents sought in the subpoena, Federal moved for an order compelling production.  During the hearing on Federal's motion to compel, YLI admitted that, based on its customary practice, it had destroyed its Taunus project file, which included documents containing "Taunus project cost information" sought by Federal.  Thereafter, the trial court overruled YLI's objection to the disclosure of its financial records and ordered YLI to produce all of its financial statements for the period encompassing 2001 and 2003, including its income tax records.  On appeal, YLI claims that the trial court abused its discretion in ordering YLI to disclose its tax records because the Taunus project cost information that Federal seeks is not contained in those records.  Alternatively, YLI claims that, even if the Taunus project cost information were contained in the tax records, the tax records are still not disclosable because such cost information is available from other sources, specifically, the third party laboratories utilized by YLI to work on the Taunus project.