Judge Conner of Middle District Grants Bifurcation and Stay of Bad Faith Claims in Property Insurance Case

In the case of McFarland v. Harford Mut. Ins. Co., No. 1:18-cv-1664 (M.D. Pa. July 25, 2019 Conner, J.), the court addressed a Motion to Sever and Stay a bad faith claim in an insurance dispute over property damage caused by the collapse of a retaining wall. 

Judge Conner initially noted in his Opinion that Motions to Sever re governed by Federal Rule of Civil Procedure 21 and that Motions to Bifurcate are governed by Federal Rule of Civil Procedure 42(b).  

The court noted that, unlike bifurcation of claims under Rule 42(b), severance under Rule 21 creates independent action resulting in separate judgments.   The court otherwise noted that severance is appropriate when the claims are “discrete and separate,” that is, each claim is capable of resolution without effect on the other.  

Judge Christopher C. Conner
M.D. Pa.

Judge Conner noted that, while Motions to Sever and Motions to Bifurcate in the federal court are found under separate rules, both are typically decided by reviewing the same factors including the similarity of issues, the type of evidentiary proof required by the claims presented, issues of judicial economy, and whether either party will be unduly prejudice by a separation of the claims presented.  

In his ­Opinion, Judge Conner reviewed a number of state and federal court decisions addressing a Motion to Sever and Stay a bad faith claim from an underlying coverage action.  

In the end, the court in McFarland ruled that the issues in this case underlying the coverage dispute was deemed to be separate and distinct from those issues implicated by the bad faith claim.   The court noted that the breach of contracting for property insurance coverage involved straightforward issues such as causation, damages, and contract interpretation.  

In contrast, the court noted that bad faith claims deal with more “elusive concepts” like motive, internal claims handling practices, and whether the carrier knowingly or recklessly disregard a lack of a reasonable basis for the denial of coverage.  

The court also reaffirmed that a bad faith claim requires a higher evidentiary showing of clear and convincing evidence.  

After also considering other factors, including the interest of judicial economy, the court ruled  that, in addition to agreeing to bifurcate the bad faith claim, the court also ruled to stay discovery on that claim.   The court noted that discovery in the bad faith claim would be stayed until the breach of contract dispute was resolved.  

Judge Conner stated that he was “cognizant that [his] determination runs counter to certain district court decisions in this circuit denying severance or bifurcation of insurance breach of contract and bad faith claims.”  

Nevertheless, the court in McFarland noted that the decision in this regard to order separate discovery and/or trials lies within each court’s broad discretion and must be determined on a case-by-case basis.  

Anyone wishing to review a copy of the Opinion in this decision may click this LINK.  The companion Order can be viewed at this LINK.

I send thanks to Attorney Peter J. Speaker of the Harrisburg, Pennsylvania office of Thomas Thomas & Hafer, LLP for bringing this case to my attention.