FEBRUARY 2018 BAD FAITH CASES: COURT REVERSES ITS DECISION TO BIFURCATE BAD FAITH DISCOVERY BECAUSE OF LENGTH OF DISCOVERY PROCESS; ALLOWS BAD FAITH QUESTIONS AT 30(b)(6) DEPOSITION; AND QUASHES SUBPOENA ON INSURED’S LAWYER IN UNDERLYING ACTION (New Jersey Federal)

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This case involves a discovery dispute regarding coverage litigation between the parties, and the court’s reversing its decision to bifurcate bad faith discovery.

The insurer was seeking a declaration there was no obligation to defend or indemnify in connection with two antitrust lawsuits the insured settled for $100,000,000. The insured brought claims for bad faith, alleging the insurer failed to conduct a reasonable investigation of the underlying actions and the claim for coverage. The insurer argued the insured breached various policy conditions, specifically when it failed to notify the insurer of the underlying action until ten years after the settlement, with the insured arguing no appreciable prejudice from the late notice.

The Court previously bifurcated the bad faith discovery in the interests of judicial economy.

The insurer sought a protective order prohibiting the insured from inquiring into certain topics related to the bad faith claim during a Rule 30(b)(6) deposition of the insurer’s corporate representative. On the other hand, the insured moved to quash the insurer’s subpoena upon its attorney in the underlying action.

First, the Court vacated its earlier order bifurcating the bad faith discovery, reasoning that years later discovery does not appear to be nearing the finish line. The Court explained that further bifurcation would just lead to two protracted discovery battles. As such, the Court denied the insurer’s motion for a protective order.

Regarding the insured’s motion to quash, the Court found that the insurer “failed to establish that [the insured] placed . . . privileged information sought at issue in this matter or that such information is material to the issues before th[e] Court . . . .” and consequently granted the insured’s motion to quash the subpoena.

Date of Decision: January 30, 2018

National Union Fire Insurance Co. of Pittsburgh, P.A. v. Becton, No. 14-4318, 2018 U.S. Dist. LEXIS 14558 (D.N.J. Jan. 30, 2018) (Clark, III, MJ.)

 

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