APRIL 2018 BAD FAITH CASES: INSURER FAILS TO (1) MEET ITS BURDEN OF SHOWING THAT PRIVILEGED INFORMATION SOUGHT IS MATERIAL AND (2) THAT BIFURCATION OF BAD FAITH CLAIM WOULD SERVE JUDICIAL ECONOMY (New Jersey Federal)

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In this complex coverage dispute, the insurer appealed two magistrate judge’s decisions to the district judge: (1) a 2017 opinion and order denying insurer’s motion to compel the insured’s production of privileged documents concerning the underlying lawsuits and settlements; and (2) a 2018 opinion and order denying the insurer’s motion to bifurcate and stay discovery regarding the insured’s bad faith counterclaim. The underlying litigation concerned occurrence-based policies that provided coverage for over two decades, and whether insurer has a duty of coverage regarding several class-actions and anti-trust actions brought against the insured after the policy period.

In affirming the magistrate’s 2017 order, the court held that the insurer failed to show how the privileged information was both relevant and material, and failed to show how it could not obtain this information through less intrusive means.

Regarding the 2018 bifurcation order, the insurer argued that “under New Jersey law ‘a policyholder should not be permitted to engage in discovery related to a bad faith claim until such time as it has established as a matter of law that it was entitled to coverage.’” The court rejected this argument, under Federal Rule 42 which governed in this federal action. The district judge held that the insurer failed to meet its burden of showing that bifurcating the bad faith claim would serve judicial economy and not prejudice the parties.

Date of Decision: April 12, 2018

Travelers Casualty & Surery Co. v. Becton Dickinson & Co., United States District Court, District of New Jersey, Civil Action No. 14-4410 (JMV), 2018 U.S. Dist. LEXIS 61853 (D.N.J. Apr. 12, 2018) (Vazquez, J.)

 

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