(1) BAD FAITH CLAIM SURVIVES MOTION TO DISMISS WHERE CLAIM “HAS BEEN PRESENTED” IN THE COMPLAINT; (2) MOTION TO SEVER AND STAY DENIED WITH LEAVE TO SEEK LATER CASE MANAGEMENT ON DISCOVERY TIMING (New Jersey Federal)
The defendant excess insurer was not notified of the claim and suit until after a jury verdict had been rendered. It denied coverage. The insured’s primary insurer paid the full verdict, and, as subrogee and assignee, brought breach of contract and bad faith claims against the excess insurer. (The complaint also brings breach of fiduciary duty claims against the insured’s broker, which are not addressed below.)
The excess insurer moved to dismiss the bad faith claim, arguing it could not be liable for bad faith because it had a reasonable basis to deny coverage. The court disagreed. It drew a distinction between adequately pleading a claim sufficient to survive a motion to dismiss, vs. adducing sufficient facts to defeat summary judgment. On a motion to dismiss, the issue is whether a “claim has been presented.” (Emphasis in original). Here, a claim had been presented in the pleadings.
The excess insurer alternatively moved to sever and stay the bad faith count. The court rejected this argument as well.
Judge Shipp ruled the bad faith claim was “not so ‘significantly different’ from the other claims … that it must be severed.” He added that the relief [the insurer] seeks—avoiding discovery into the bad faith claim—if appropriate, can be accomplished by staged discovery without severing the claim entirely.” Thus, while not severed or stayed, the insurer could raise discovery related requested to the assigned magistrate judge at the proper time.