On appeal from the Superior Court, Appellate Division, whose opinion is reported at
The opinion of the court was delivered by: Long, J.
In this case we are required to determine the nature and extent of the pretrial discovery to which the creditors of an insolvent insurer are entitled as against the Commissioner of Insurance (Commissioner) acting as liquidator. More specifically, the issue to be addressed is whether confidentiality claims and privilege may preclude or limit discovery of documents characterized by the Commissioner as deliberative in nature.
Prior to 1986, Integrity Insurance Company (Integrity) was a property and casualty insurer licensed to transact business in every state. Most of its risks were subject to reinsurance. Many of the risks (for example, environmental and products liability) were not expected to translate into reportable claims until many years after the policies were issued. In addition, Integrity wrote excess and umbrella policies, under which a duty to pay does not arise until underlying coverages are exhausted.
In December 1986, the Superior Court, Chancery Division entered an order declaring Integrity to be insolvent. The court directed the rehabilitation of Integrity and appointed the New Jersey Commissioner of Insurance and his statutory successors in office as rehabilitators. On March 27, 1987, the court ordered Integrity into liquidation, and appointed the Commissioner as liquidator pursuant to N.J.S.A. 17:30C-9. The Commissioner was directed to marshal Integrity's assets and liquidate its liabilities for the benefit of all claimants against its estate.
On June 17, 1996, the Commissioner filed a Final Dividend Plan (FDP) with the court to effect the early termination of the Integrity estate. That novel plan to wind up Integrity's affairs essentially reduced the actuarial estimates of Integrity's future liabilities to present value. Briefly summarized, under the FDP, the liquidator was to (1) estimate and allow the present value of all Contingent Claims, including claims for IBNR*fn1 losses; (2) collect from reinsurers the present value of any reinsurance that will be due on such claims; (3) arrive at a final determination of Integrity's assets and liabilities; (4) calculate the percentage to be paid on the Fourth Priority [policyholder] claims; and (5) pay a final dividend on all claims accorded Fourth Priority or higher status.
The FDP will require Integrity's reinsurers to pay off approximately $800 million dollars of debt.
Munich Reinsurance Company (Munich) and other reinsurers oppose the FDP that has been submitted to the court for approval. During discovery, the Commissioner refused to produce certain documents that Munich requested. The Commissioner prepared a "privilege log" listing and describing over 100 documents with respect to which she asserted the deliberative process privilege, the work product privilege, or a combination of the two. The work product and attorney client privileges are not at issue on this appeal. According to the Commissioner, the documents fall into four general categories:
(1) Correspondence summarizing the issues raised and the discussion of those issues that occurred at the monthly status meeting with staff members;
(2) Departmental memoranda and other correspondence relative to issues discussed or to be discussed at the monthly status meeting;
(3) Departmental memoranda discussing, referencing or suggesting advice of counsel litigation strategy and/or potential policy decisions;
(4) Reports of management/administrative studies of Integrity prepared by independent consultants.
The trial court held that there is a deliberative process privilege in New Jersey for inter- or intra-agency communications, but that when the Commissioner is acting as liquidator he or she is not functioning as a government official and, therefore, is not subject to the privilege. In reaching that result, the court observed that the FDP describes the liquidator as "[t]he New Jersey Commissioner of Insurance, acting solely in the capacity of receiver, not as regulator, . . ." and that a number of states, including New Jersey, that have adopted the Uniform Insurers Liquidation Act in whole or part, have recognized that a state insurance commissioner is not acting as a government regulator when serving in the capacity of liquidator. According to the trial court, the Commissioner, functioning as liquidator, "for all intents and purposes slips into the shoes of the insolvent insurance company," and cannot assert the deliberative process privilege.
By leave granted, the Commissioner appealed. The Appellate Division, citing McClain v. College Hosp., 99 N.J. 346, 353 (1985), held that although deliberative process materials may not always be discoverable, "no such qualified privilege exists." In re Liquidation of Integrity Ins. Co., 321 N.J. Super. 399, 415 (App. Div. 1999). The court went on to conclude, however, that the Commissioner acts in a public capacity as a liquidator and can invoke N.J.R.E. 515 to protect official information of the State. Thus, it remanded the case for an in camera hearing to determine whether the documents the Commissioner seeks to protect are relevant and, if so, whether they nonetheless may be withheld from disclosure pursuant to N.J.R.E. 515. Id. at 416-19.
The Commissioner moved for leave to appeal and we granted the motion. 163 N.J. 70 (2000). The Commissioner asks that we declare that a deliberative process privilege exists in New Jersey and that it is entirely distinct from N.J.R.E. 515, which the Commissioner has not invoked in this case.
Generally, pursuant to Rule 4:10-2(a), parties may obtain discovery regarding any non-privileged matter that is relevant to the subject of a pending action or is reasonably calculated to lead to the discovery of admissible evidence. Our discovery rules are to be liberally construed because we adhere to the belief that justice is more likely to be achieved when there has been full disclosure and all parties are conversant with all available facts. Payton v. New Jersey Turnpike Auth., 148 N.J. 524, 535 (1997) (citing Catalpa Inv. Group, Inc. v. Zoning Bd. of Adjustment, 254 N.J. Super. 270, 273 (Law Div. 1991)).
To determine whether the materials sought by the reinsurers are discoverable, their potential relevance is the initial inquiry. In deciding whether evidence is relevant the focus is on the "logical connection between the proffered evidence and a fact in issue[.]" State v. Hutchins, 241 N.J. Super. 353, 358 (App. Div. 1990). N.J.R.E. 401 defines relevant evidence as "evidence having a tendency in reason to prove or disprove any fact of consequence to the determination of the action."
Performing her role as a liquidator, the Commissioner is governed by N.J.S.A. 17:30C-1 to -31, New Jersey's version of the Uniform Insurers Liquidation Act (ULA or Act). Under the Act, in crafting an FDP, the Commissioner is required to weigh all interests and to perform a fair and efficient liquidation of the insolvent company. In re Liquidation of Integrity Ins. Co., 231 N.J. Super. 152, 157 (Ch. Div. ...