OCTOBER 2014 BAD FAITH CASES: COURT REFUSES TO BIFURCATE BAD FAITH AND UIM CLAIMS WHERE SIGNIFICANT FACTUAL OVERLAP EXISTS (Middle District)

In Hoffer v. Grange Insurance Company, the court addressed the insurer’s request to bifurcate the bad faith and UIM claims.  The insured had settled with the other driver and made a UIM claim to his carrier. The insurer denied the claim on the basis that the insured was the one responsible for the collision.  The insured alleged that the carrier failed to objectively and reasonable evaluate the claim, misrepresented the investigation that occurred, and ignored relevant information from official reports in denying the claim without justification.  He brought claims for breach of contract and statutory bad faith.

The court observed the following general legal principles regarding the law of bifurcation: (1) a court may bifurcate separate claims or issues “[f]or convenience, to avoid prejudice, or to expedite and economize,” Fed. R. Civ. P. 42(b), subject to the court’s “informed discretion,”;  (2) “[T]he power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants.”; (3) proper analysis requires the court to “weigh the various considerations of convenience, prejudice to the parties, expedition, and economy of resources,”; (4) bifurcation is not meant to be routine practice, citing the advisory committee note to Fed. R. Civ. P. 42(b); and (5) the moving party bears the burden of showing that bifurcation is appropriate.

The court further observed that bad faith and UIM claims are separate and distinct, and that a plaintiff could lose a UIM claim and still win the bad faith claim.

In this case, the court found that there would be substantial overlap in the discovery relevant to the two claims because they are based upon the same set of facts and they both turn on the determination of responsibility for the collision at issue.

In response to the carrier’s concerns that discovery would reveal documents protected from discovery in the breach of contract claim because they could be discovered in the bad faith case, which worked a prejudice, the court found that: (1) litigating insurers do not automatically waive attorney-client and work product privileges by defending against bad faith claims; and (2) that motions in limine and jury instructions may serve to limit the use of evidence introduced at trial.

Thus, the court ruled that the insurer failed to demonstrate that bifurcation was appropriate and denied the motion to bifurcate the litigation and to stay the bad faith claim.

Date of Decision:  September 29, 2014

Hoffer v. Grange Ins. Co., CIVIL ACTION NO. 1:14-CV-0262, 2014 U.S. Dist. LEXIS 137078 (M.D. Pa. Sept. 29, 2014) (Conner, J.)