MARCH 2015 BAD FAITH CASES: NEW JERSEY APPELLATE DIVISION MAKES CLEAR THAT PROPER PRACTICE REQUIRES SEVERING BAD FAITH CLAIM FROM UNINSURED MOTORIST CLAIM, AND STAYING DISCOVERY OF THE BAD FAITH CLAIM UNTIL THE UNDERLYING CLAIM IS DETERMINED (New Jersey Appellate Division)

In Wacker-Ciocco v. GEICO, the court addressed the applicability of its earlier decision in Procopio v. Government Employees Insurance Company, 433 N.J. Super. 377, 80 A.3d 749 (App. Div. 2013), on the issue of discovery and severance of bad faith claims.  In the earlier case, the appellate court had ruled that where an uninsured motorist and bad faith claim are bifurcated for trial, it was an abuse of discretion for the trial court to order that discovery on both claims proceed simultaneously.

In Wacker-Ciocco, some bad faith materials had been produced prior to the motion to sever, and the trial court found the cat was therefore out of the bag, and the motion to sever was denied.  The appellate court found that this was a misinterpretation of its prior case law on the severance of bad faith claims from the uninsured motorist claim, and the stay of bad faith discovery pending the outcome of the uninsured motorist claim.

In Procopio, the Court had stated: “[It] promotes judicial economy and efficiency by holding in abeyance expensive, time-consuming, and potentially wasteful discovery on a bad faith claim that may be rendered moot by a favorable ruling for the insurer in the UM or UIM litigation. This procedure also avoids the premature disclosure of arguably privileged materials to the prejudice of the insurer’s defense while, at the same time, preserving the insured’s pursuit of its bad faith claim.”  The court observed that an insured cannot reach the bad faith claim until it proves its entitlement to coverage, and the court further observed the higher standard placed on an insured in proving bad faith claims (and that the plaintiff’s complaint only pleaded bad faith in a conclusory manner, and failed to plead wrongful intent).

The judicial efficiency arguments set out in Procopio did not disappear “simply because some discovery relevant to the bad faith claim was produced,” and it was clear discovery on that issue was not complete.  Thus, “the competing interests implicated by ordering simultaneous discovery on both the coverage and bad faith claims remained in play.” The court reversed the trial court orders, and granted the motions “to sever and stay the bad faith claim and related discovery until the underlying UIM claim was decided.”

Date of Decision: March 16, 2015

Wacker-Ciocco v. GEICO, DOCKET NO. A-2547-13T4, 2015 N.J. Super. LEXIS 38   (App. Div. March 16, 2015) (Espinosa, Lihotz, St. John, JJ.)