Wednesday, October 12, 2011

Post-Koken UIM - Bad Faith Decision Out of Western District Federal Court

I was recently advised of a post-Koken severance vs. consolidation bad faith post-Koken case out of the Federal District Court for the Western District Court of Pennsylvania.

In Craker v. State Farm, No. 2011 – Civil – 0225 (W.D.Pa. Sept. 29, 2011 Lancaster, C.J.), Chief Judge Gary L. Lancaster addressed State Farm’s Motion to Sever and Stay the bad faith portion of the post-Koken claim presented and allow the UIM portion of the claim to proceed.

In this matter, the Plaintiff sought bad faith discovery during the pendency of both claims. State Farm refused to participate in such discovery under the position that it did not need to do so until the UIM claim was resolved.

The Plaintiff filed a Motion to Compel State Farm to respond to the bad faith discovery requests. State Farm argued that it would be irreparably prejudiced if it were forced to produce its UIM claims file, including the mental impressions, conclusions, and opinions of the handling claims representative, in response to this discovery.

As an additional defense to the Motion to Compel, State Farm filed a Motion to Sever and Stay the bad faith claim.

The Craker court denied the Motion to Sever and Stay the bad faith claim and also granted the Motion to Compel filed by the Plaintiff seeking discovery relevant to the bad faith claim.

Judge Lancaster did deny a portion of the Plaintiff’s Motion to Compel as to waiver of the attorney-client privilege as he found that the parties had not provided the court with sufficient facts to decide that issue.

On the severance issue, Judge Lancaster noted that although the parties argued in their briefs as to whether or not the UIM claim and the bad faith claim should be tried together, bifurcation of the trial was not the “real question” being presented to the court. Rather, the court viewed the issue presented as to whether or not State Farm was entitled to “phased discovery” as requested (i.e. no bad faith discovery until the UIM claim was completed).

Judge Lancaster stated that, even if he decided to bifurcate the trial, he would not necessarily rule in favor of a phased discovery plan.

The court noted that phased discovery is permissible under F.R.C.P. 26(f)(3(B) if requested. In this case the parties had noted in their pre-trial submissions to the court that discovery was not anticipated to be completed in phases.

The court also found that State Farm’s stated intention in its pre-trial submissions that they planned to object to any bad faith discovery to be “inconsequential” in the face of the other agreement of the parties that discovery would not be completed in phases.

Judge Lancaster also noted that, based upon the parties’ pre-trial submissions, the court had entered a discovery order with a single deadline for discovery. It was also pointed out by the court that State Farm’s Motion to Sever and Stay, which was being viewed by the court as ‘really’ a motion for phased discovery, was filed 12 days beyond that deadline and was, therefore, untimely.

Judge Lancaster nevertheless reviewed the merits of the Motion to Sever and Stay the bad faith claim and found that it would be inappropriate to postpone discovery on the bad faith claim until the UIM claim was resolved as that would delay the entire resolution of the matter.

The court noted that, if the cases were severed and stayed, a new set of discovery deadlines after the completion of the UIM portion of the case would be required. Additionally, the court was troubled by the fact that, in such a scenario, not only would the resolution of the entire matter be delayed but the same jury that decided the UIM claim could not be used to secure an “advisory verdict” on the bad faith claim.

Judge Lancaster additionally found that proceeding as requested by State Farm would not foster the interests of judicial economy. The court also went on to reject a number of other arguments put forth by State Farm in favor of the severance of claims.

The Craker decision is contrary to state court decisions from around the Commonwealth, including decisions from Judge R. Stanton Wettick of Allegheny County on how to handle discovery in combined UIM - bad faith cases.. In his Opinion, Judge Lancaster did not cite to any state court decisions but did note that, although State Farm apparently cited to such decisions, State Farm was the party that removed the case from the court of common pleas and subjected itself to the Federal Rules of Civil Procedure.

Under the Federal Rules of court applicable to this matter, the court ultimately found that the discovery request by State Farm was too late and the bifurcation request was too early.

In denying State Farm’s motion with respect to the discovery issues, the court in Craker did note that State Farm would again have the opportunity to request a severance, or bifurcation, of the bad faith claim from the UIM claim at the time of trial.

Although I am not sure how State Farm could have been any clearer in its position, a reading of the Craker decision leads to the conclusion that the parties should be careful in how they word their agreed upon case management submissions in the Federal Court system in order that there can be no question as to which arguments should be considered to be properly preserved.

Anyone desiring a copy of the Craker v. State Farm decision may contact me at

I note that I saw this decision highlighted in The Legal Intelligencer during the last week of September.  I was also tipped off on the case by Attorney Scott Cooper of the Harrisburg law firm of Schmidt Kramer as well as Attorney Ken Goodman of the Wyomissing law firm of Rabenold, Koestel, and Scheidt.  I tip my hat to those sources in thanks.

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