Archive for the 'PA - Bifurcate/Sever & Stays' Category
After 20 Years, Berg v. Nationwide is Headed to the Supreme Court.
We once again note that the Supreme Court has granted an appeal in the long running Berg v. Nationwide bad faith litigation. Our original post can be found here.
The Court’s Order focuses the appellate issues on the Superior Court’s review of the trial judge’s evidentiary findings and mindset, as well the issue of whether the insurer assumed a specific additional responsibility under its duty of good faith and fair dealing.
There is always the possibility, however, that the Court could go beyond the proper scope of appellate review or the potential specific duty assumed, and into more fundamental issues of what constitutes bad faith.
UIM/Bad Faith Severance and Stay Granted.
The excellent Tort Talk Blog, authored by Attorney Daniel Cummins, continues to be the leading resource on severance/bifurcation and stay issues in post-Koken UIM/UM litigation. The most recent post summarizes a Pike County opinion granting a motion to sever and stay, and can be found here.
Dan Cummins of the excellent Tort Talk Blog has provided the latest on the split in opinions on granting or denying severance and stays in the UIM bad faith context. This is a split of authority within the Allegheny County Court of Common Pleas. Tort Talk’s Post-Koken Scorecard indicates “a vast majority of the county courts have ruled in favor of severing the bad faith claims.”
The insurer moved to sever and stay the plaintiffs’ UIM bad faith claim. In ruling against the insurer, Judge Baylson reviewed four cases he has previously decided on this issue, Zinno (2016), Corley (2016), Reeves (2017), and Jones-Silverman (2017).
First, the Court observed generally that bifurcation is not routine, and a court must balance the parties’ convenience, avoiding prejudice, and promoting expeditious resolution. The four factors to consider on a Federal Rule 42 motion to sever claims include: “(1) [W]hether the claims sought to be tried separately are significantly different from one another, (2) whether the claims require different evidentiary proof, (3) whether the non-moving party will be prejudiced by severance, and (4) whether the moving party will be prejudiced by proceeding to one trial.”
Of Judge Baylson’s four prior cases, only one severed and stayed the bad faith claim. In that case, discovery was essentially complete on the contract claim, but at least a year from completion on bad faith. Thus, focusing on the expediency factor, it made sense to hold the trial on the contract issue instead of waiting a year or more to complete discovery on bad faith. In the other three cases, however, there was no similar expediency issue as neither claim was ready for trial. Further, the evidence needed on both claims overlapped.
Applying these precedents and principles, the court denied the motion to sever and stay the bad faith claim in this case.
COURT REFUSES TO SEVER BAD FAITH CLAIM
First, severance would not promote economy or an expeditious result. The case was not complex. Rather it was a personal injury auto accident case, and not a commercial or property damage case.
Second, the court rejected the argument that a judge must decide the bad faith claim, while a jury would decide the contract claim. While true in Pennsylvania state court, this did not apply in the present federal action.
Third, the court rejected the notion that the claims should be severed because resolving the contract claim would moot the bad faith claim, and thus be a more expeditious course. The court followed the line of reasoning that the potential for such a result did not outweigh the inefficiencies of having two discovery periods, two dispositive motion schedules, and two trials.
The court also cited cases finding that success on the insurer’s contract claims might not resolve the bad faith claims, e.g., if there is a delay in paying benefits or there is some form of bad faith that goes beyond a refusal to provide coverage. [As set forth previously in this blog, there is an argument over whether a bad faith claim can in fact proceed if the insurer has no duty to defend or indemnify the insured, and thus has not denied the insured any benefits under the policy.]
Fourth, the court found no prejudice in denying the motion. The insurer’s chief concern was that facts concerning bad faith would prejudice the jury on the contract claim. Judge Baylson observed, however, that even though the jury would be required to address two different legal issues in deciding on bad faith and contract issues, there would be an overlap in the facts presented going to both breach of contract and bad faith and to present the same facts twice would waste resources.
COURT CAN ADDRESS RISK OF JURY CONFUSION DOWN THE ROAD
The court would not presume in advance that the jury would become confused in deciding the contract and bad faith issues, or would fail to disregard certain irrelevant evidence from the bad faith case in deciding the contract claim. If, however, the “concern were deemed valid as trial approaches, there are adequate procedures available in federal court to address it, such as bifurcated trials and jury verdicts.”
COURT REFUSES TO STAY DISCOVERY
The court did not agree that the potential for discovery disputes in bad faith litigation was a sufficient basis to stay bad faith discovery. Rather, in opposing a stay and bifurcation, the plaintiff accepts the risk that delay over discovery disputes may arise.
Date of Decision: November 28, 2018
Goldstein v. American States Insurance Co., U.S. District Court Eastern District of Pennsylvania CIVIL ACTION NO. 18-3163, 2018 U.S. Dist. LEXIS 201100 (E.D. Pa. Nov. 28, 2018) (Baylson, J.)
The excellent Tort Talk Blog has posted a recent Luzerne County Common Pleas decision, severing a UIM bad faith claim from the breach of contract claim, but allowing discovery to proceed. The Court’s Opinion also includes specific instructions on how that discovery is to proceed.
In keeping with its leading place in reporting post-Koken UIM bad faith law, the excellent Tort Talk Blog has summarized Judge Nealon’s opinion out of Lackawanna Common Pleas denying a motion to sever and stay bad faith claims, but ruling that the bad faith claim would be bifurcated for trial. The opinion gives a thoroughgoing analysis of these issues.
As always, thanks to Dan Cummins for his good work in keeping all of us up to date on these issues.
The Court denied a motion to sever and stay in this UIM bad faith case.
The tortfeasor’s insurer had paid its policy limits, the insured sought her $300,000 UIM limit, but her carrier offered $40,000 to settle. The insured brought breach of contract and bad faith claims. The insurer sought to sever and stay the insured’s bad faith claim.
The federal court found under the Federal Rules that “both the convenience of the parties and judicial economy weigh against severance.” Specifically, the court found that “if the bad faith claim is severed, Plaintiff would have to bear the costs of two trials and the resolution of both claims would be delayed.”
Further, “although Defendant argues that resolution of the breach of contract action will greatly impact and potentially moot the bad faith claim, it is sufficient to note that ‘litigation on the bad faith claim is not contingent upon the success of the breach of contract claim.’”
The court stated that an insured could “’simultaneously prevail on a bad faith claim and lose on a UIM claim.’”
The court went on that “severance would hinder judicial economy by requiring separate cases and separate trials instead of handling these claims in a single action.” The court did not “see how [bifurcation] is reasonable given the circumstances.
Discovery, dispositive motions, pre-trial motions, and trial place a substantial burden on any party. Bifurcation would essentially double the life of this action requiring a second discovery period, more dispositive motions, more pre-trial motions, and a completely separate second trial.’” Any potential prejudice from simultaneous litigation of contract and bad faith claims did not outweigh “countervailing interests of judicial economy and the prompt resolution of this entire matter.”
“Additionally, the potential evidentiary problems identified by Defendant do not provide a sufficient basis for severing the claims in this matter.” Under the Federal Rules of Evidence, “documents and testimony to be entered for narrow purposes[, and at] this point it is premature to determine whether specific pieces of evidence would be admissible wholly or on a limited basis. The best way to make that determination is to keep the matters joined, allow discovery to proceed, and bring both claims to trial as quickly as possible. Any discovery disputes or questions of privilege can be handled through the discovery dispute procedures employed by the court.” The insurer’s “proffer of prejudice does not outweigh the interests of convenience and judicial economy, nor does it justify the severance and stay of Plaintiff’s bad faith claim.”
Date of Decision: October 11, 2017
An underinsured motorist injured the insureds. The tortfeasor’s insurer ultimately tendered $15,000 to the insureds. The insureds’ own UIM policy contained maximum benefits of $100,000, or $200,000 with stacking. The insureds demanded full benefits under the policy.
After investigation, the insurer offered $10,000 to settle the UIM claim. The insureds filed suit in the Court of Common Pleas. The insurer removed the action to federal district court and filed a motion to dismiss. The Court denied the insurer’s motion to dismiss. The insurer then filed a motion to bifurcate the bad faith claim pursuant to Federal Rule of Civil Procedure 42.
In considering a party’s bifurcation motion, courts are careful to consider whether a stay would damage a party. Specifically, courts consider four factors in deciding a Rule 42 motion: “(1) whether the issues are significantly different from each other; (2) whether they require separate witnesses and documents; (3) whether the nonmoving party would be prejudiced by bifurcation; and (4) whether the moving party would be prejudiced if bifurcation is not granted.” The movant bears the burden to show that bifurcation is appropriate.
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First, the Court found that the claims are not “so profoundly different” as to justify bifurcation.
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The Court ruled that “both claims would utilize similar documents, such as the [insurer’s] claim file, relevant medical evidence . . ., and the [insurer’s] settlement attempts.” In addressing the insurer’s concerns on privileged materials pursuant to the attorney work-product doctrine, the Court ruled that the insurer failed to identify specific documents that enjoy such privilege. Furthermore, the Court reasoned that the insurer is free to file such motions going forward in order to assert its privilege at any time.
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The Court held that the insured would suffer economically if the bad faith claim was stayed, because the insured would have to pay its attorney to do twice the work. “Bifurcation would require two discovery periods, double the dispositive motions, and double pre-trial motions.”
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Lastly, the Court held that the insurer would not be prejudiced were its motion to bifurcate be denied, because the insurer could simply defeat the bad faith claim by showing a reasonable basis for its settlement offer and investigatory conduct.
In conclusion, none of the four factors weighed in favor of bifurcation and the Court denied the motion to sever and stay the bad faith claim.
Date of Decision: September 18, 2017
Newhouse v. GEICO Cas. Co., No. 4:17-CV-00477, 2017 U.S. Dist. LEXIS 150793 (M.D. Pa. Sept. 18, 2017) (Brann, J.)
In this UIM action, the insured alleged she suffered severe and permanent injuries following an auto accident that significantly exceeded the tortfeasor’s $25,000 policy limit. The insurer refused to accommodate the insured’s request of a $350,000 payment under the policy’s UIM provision. The insured brought breach of contract and bad faith claims.
The insurer moved to bifurcate the trial of both claims. In deciding the insurer’s motion, the Court considered “(1) whether the claims sought to be tried separately are significantly different from one another, (2) whether the claims require different evidentiary proof, (3) whether the non-moving party will be prejudiced by severance, and (4) whether the moving party will be prejudiced by proceeding to one trial.”
The insurer argued there is no evidentiary overlap between the two claims; that the resolution of the breach of contract claim may render the bad faith claim moot; and that some evidence relevant to the breach of contract claim may be protected attorney work product, thus prejudicing the insurer and causing juror confusion. The Court rejected the insurer’s arguments.
While the Court acknowledged the distinct causes of action between a breach of contract claim and a bad faith claim, it found that “any reasonableness of [insurer’s] investigation would surely include the facts and documentation surrounding the underlying accident, meaning that both claims are likely to rely on the same documentation and witness testimony at trial….”
Given the overlapping nature of the evidence, the Court ruled that bifurcation would be a waste of judicial resources. Furthermore, the Court found that even if the parties resolved the contract claim, the insured could still pursue her bad faith claim on a theory of undue delay in claims handling.
Thus, resolution of the breach of contract claim does not necessarily render the bad faith claim moot.
Lastly, the Court held that it is more efficient to require the insurer to prove its entitlement to any attorney work product, rather than to bifurcate the claims. The Court is equipped to address any issue of prejudice that may arise through the normal rules and procedures of litigation.
Therefore, the Court ruled that insurer failed to meet its burden to show the appropriateness of bifurcation, and denied the motion.
Date of Decision: July 31, 2017
