OCTOBER 2013 BAD FAITH CASES: RULE 42 MOTION TO SEVER AND STAY BAD FAITH CLAIM IN UIM CASE DENIED BY FEDERAL DISTRICT COURT (Western District)

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In Cooper v. Metlife  Auto & Home, the insured sought UIM coverage from his carrier, after the tortfeasor’s carrier paid its $50,000 limit.  The UIM carrier refused to settle and the insured brought breach of contract and bad faith claims against the carrier in Mercer County, which was removed to federal court.  The carrier brought a motion to sever and stay the bad faith claim until the contract claim was decided.

The Court looked at Federal Rule 42(b), which gives courts broad power to sever and stay proceedings.  In exercising this discretion, the court is required to weigh the competing interests of the parties and attempt to maintain an even balance. It must consider whether “there is ‘even a fair possibility’ that the stay would work damage on another party.”

The court must balance considerations including the convenience of the parties, the avoidance of prejudice to either party, and “promotion of the expeditious resolution of the litigation.” It must “consider: (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 nonmoving party would be prejudiced if bifurcation is not granted.” Further, the moving party bears the burden of demonstrating that bifurcation is appropriate.

First, the court addressed various prejudice arguments from the carrier, and a series of state court cases supporting the carrier’s position.  The court observed that Judge Lancaster of that Bench had  previously decided this issue in favor of plaintiffs’ position in Craker v. State Farm, reasoning that there was considerable overlap in the issues.

Both the breach of contract and bad faith claims centrally involved the insurer’s valuation of injuries and losses; there was no question that the insurer’s UIM coverage had been triggered and that the plaintiffs were without fault in the accident; that the plaintiffs suffered serious injuries; and that the insurer refused to meet the insureds’ demand for payment of full UIM coverage. The same central issue of valuation went to the contract and bad faith claims.  Thus, Judge Lancaster concluded, the potential prejudice presented by that situation did not outweigh the court’s obligation to promote the expeditious resolution of this matter, particularly given the substantial overlap in issues and evidence.

The court in the instant case found that the factual circumstances and legal standards in Craker mirror those in the instant case as the insureds’ breach of contract and bad faith claims both “centrally involve the insurer’s valuation of plaintiffs’ injuries and losses.” Thus, the issues are not “significantly different” and do not warrant bifurcation. The court cited case law from the Middle and Eastern Districts as well denying bifurcation.

Next, the court looked to the issue of separate witnesses and documents, and found nothing to suggest that such were going to be required in this case if the both claims were tried together.  Rather many of the same witnesses and documents would be used and it would waste judicial resources and cause inconvenience to bifurcate.

Finally, the court rejected the arguments that there may be prejudice in proceeding with the bad faith contemporaneously with the contract count if the court refuses to order discovery with respect to the claims handler’s mental impressions until the resolution of contract claim; and that the plaintiffs would not be prejudiced by bifurcation because plaintiffs are “potentially entitled to interest at prime rate plus three percent and attorney’s fees if they successfully prove [d]efendant acted in bad faith.  These “conjectural assertions” did not outweigh the court’s obligation to promote the expeditious resolution of this matter, particularly given the “substantial overlap in issues and evidence.”

Thus, the motion was denied.

Cooper v. Metlife  Auto & Home, CIVIL ACTION NO. 13-687, 2013 U.S. Dist. LEXIS 110248 (W.D. Pa. August 6, 2013) (Conti, J.)

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