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The court recently permitted the UIM bad faith claim to proceed in this case. The defendant insurer then moved to bifurcate the breach of contract and bad faith claims, and to stay discovery on the bad faith claims. Middle District Magistrate Judge Carlson denied both motions.

Parties can move to sever under Federal Rule 21, and bifurcate under Federal Rule 42(b). Courts balance various factors in weighing bifurcation, and must be concerned whether “there is even a fair possibility that the stay would work damage on another party.” The four factors considered are: “(1) whether the issues are significantly different from each other; (2) whether they require separate witnesses and documents; (3) whether the non-moving party would be prejudiced by bifurcation; and (4) whether the non-moving party would be prejudiced if bifurcation is not granted.”

As to the first two factors, Magistrate Judge Carlson found “the factual allegations supporting [the] breach of contract claim and … bad faith claim significantly overlap.” The contract claim was premised on an alleged failure to fairly and objectively evaluate plaintiff’s UIM claim, and a failure to make prompt and reasonable settlement efforts. “Thus, the plaintiff’s breach of contract claim will focus on her injuries, as well as the defendant’s investigation of the claim and attempts to settle the claim.”

The court observed that the vast majority of the claim file would be common to both counts, and the bad faith case would “only require a few additional witnesses who will discuss evidence of the plaintiff’s damages that will likely be admitted in conjunction with the breach of contract claim.”

In supporting this conclusion, the court cited Dunleavy v. Encompass Home for the principle that a defendant’s good faith “must be determined by reference to the circumstances surrounding the automobile accident and the nature of” plaintiff’s injuries. The court also cited a number of cases refusing to bifurcate breach of contract and bad faith claims: Griffith v. Allstate, Newhouse v. GEICO, Craker v. State Farm, and Cooper v. MetLife.

Magistrate Judge Carlson also rejected the insurer’s work product prejudice argument. The court observed that a claim file “generally includes correspondence from plaintiff’s counsel, medical records, wage-loss records, logs indicating what material has been received, and notes from the claims adjuster regarding his or her impression of the claim’s value. … [and] only the claim adjustor’s notes or other impression may qualify as work product.” Relying on Dunleavy, Magistrate Judge Carlson found “the procedural safeguards [of asserting the work-product privilege] are sufficient to protect defendant’s interests from prejudice.”

In addition, the court found trying these matters together would not unfairly prejudice the insurer. The concern over plaintiff’s counsel having to testify was ameliorated because plaintiff changed counsel. In any event, citing Craker, “[t]he possibility that counsel will be called to testify is a ‘risk of litigation’ and does not require bifurcation.”

Further, bifurcation would not promote judicial economy. Instead, it would create “two discovery periods, additional potential dispositive motions, and a completely separate trial for each claim. Given that the underlying factual allegations and potential discovery will significantly overlap, we conclude that judicial economy would be better promoted by trying these claims together.”

Upon denying the motion to bifurcate, Magistrate Carlson states, “Because we are denying the motion to bifurcate, we further conclude that the defendant’s motion for a protective order, which seeks to prevent the plaintiff from obtaining discovery related to her bad faith claim, be denied.”

Date of Decision: October 29, 2020

Yohn v. Selective Insurance Company of America, U.S. District Court Middle District of Pennsylvania No. 3:20-CV-565, 2020 WL 6343138 (M.D. Pa. Oct. 29, 2020) (Carlson, M.J.)