AUGUST 2008 BAD FAITH CASES: INSURER’S MOTION TO BIFURCATE BAD FAITH CLAIM PENDING DISPOSITION OF THE DUTY TO DEFEND CLAIMS DENIED (Philadelphia Federal)
The insureds commenced an action seeking a declaratory judgment that the insurer had a duty to defend and indemnify insureds in connection with a lawsuit brought against insureds for alleged exposure to contaminated air and groundwater from insureds’ manufacturing facility. Insureds also asserted breach of contract and a bad faith claim arising from insurer’s handling and investigation of the underlying claim.
Insurer moved to bifurcate discovery and trial relating to the bad faith claim pending the outcome of the duty to defend claims because the insurer argued that a ruling in its favor on the duty to defend claims would dispose of the bad faith claim. The court acknowledged that claims may be bifurcated for convenience, to avoid prejudice, or to expedite and economize.
Addressing the insurer’s argument, the court noted that, while bad faith claims generally require a predicate contractual claim, such as breach of a duty to defend, bad faith claims may also proceed based on other grounds, such as the handling and investigation of the underlying claim in bad faith. Therefore, the duty to defend claims were not necessarily dispositive of the bad faith claim.
The court also noted that that the insurer failed to demonstrate that bifurcation would promote expedition or economy. As a result, the insurer’s motion to bifurcate was denied.