NOVEMBER 2017 BAD FAITH CASES: NO CLAIM SEVERANCE BECAUSE (1) EXTRA LITIGATION STEPS PREJUDICE INSURED AND BURDEN COURT; (2) LOSING UIM COVERAGE CLAIM DOES NOT AUTOMATICALLY RESOLVE BAD FAITH CLAIM; (3) AND DISCOVERY AND EVIDENTIARY ISSUES COULD BE HANDLED DURING DISCOVERY PROCESS AND/OR AT TRIAL (Middle District)

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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

Mulgrew v. Government Employees Insurance Co., No. 3:16-CV-02217, 2017 U.S. Dist. LEXIS 167770 (M.D. Pa. Oct. 11, 2017) (Caputo, J.)

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