April 2010 Bad Faith Cases: Court Denies Insurer’s Requests For Severance- Bifurcation and Stay of Bad Faith Claim; and for Stay of Discovery (Middle District)

In Amitie One Condominium Association v. Nationwide Property & Casualty Insurance Company, the insurer denied coverage for losses to the insured’s property as a result of sinkhole activity.  The insured sued for breach of contract and bad faith seeking monetary damages and a declaratory judgment.  After two years of discovery, the insurer moved to sever and stay the insured’s bad faith claim, and to stay discovery on that claim, until the contract claim was resolved.  The insurer argued that (1) it would be prejudiced and judicial resources would be wasted if the bad faith claim and breach of contract claim were litigated simultaneously; (2) staying discovery on the bad faith claim would moot certain discovery disputes; and (3) allowing discovery to proceed on the insured’s bad faith claim at the same time as the parties are litigating the contract claim “is tantamount to letting the Plaintiff have a copy of the Defendant’s ‘playbook.’”
The Court granted the insurer’s motion insofar as the court would hear the declaratory judgment action before proceeding with the other issues, but denied the remaining requests.  There was presumably a jury demand for at least the bad faith portion of the case; however, it appears from an Order issued the day after this Opinion that the Court was going to decide the declaratory judgment action on coverage/breach of contract on dispositive motions, staying its pre-trial and trial schedule dates on all other issues (though allowing the case itself to otherwise proceed on discovery and as to both claims).
Thus, the court held that it would resolve the insured’s claim for declaratory judgment prior to trial on the remaining issues.  The court explained that if it resolved the insured’s declaratory judgment in the insurer’s favor, the decision would dictate the resolution of the insured’s bad faith claim as well, thereby conserving judicial resources. The court denied the insurer’s request to sever and stay discovery on the insured’s bad faith claim stating it was not persuaded that the mere existence of discovery disputes warranted a stay.  Additionally, the court held that considerations of convenience and economy outweighed any prejudice to the insurer particularly in light of the significant overlap between the claims.
Date of Decision: March 22, 2010
Amitie One Condo. Ass’n v. Nationwide Prop. & Cas. Ins. Co., Civil Action No. 1:07-CV-1756, United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 26867 (M.D.  Pa. Mar. 22, 2010) (Conner, J.).