Wide-Ranging Discovery Allowed in Breach of Contract and Bad Faith Claim on a Homeowner's Policy

Senior Judge Carmen D. Minora of the Lackawanna County Court of Common Pleas recently issued a notable discovery decision in the property damage homeowner's insurance breach of contract and bad faith case of Czaykowski v. Travelers Home and Marine Ins. Co., No. 19-CV-2928 (C.P. Lacka. Co. May 29, 2020 Minora, J.).

The Opinion addresses a Motion for a Protective Order filed by the carrier against a Plaintiff's request for institutional discovery from the carrier related to Pennsylvania matters and matters from other states.

The Plaintiff's wide-ranging discovery requests included demands for the production of policy manuals used by the carrier, personnel files of claims representatives, bonus incentive program documents, performance reviews, record retention and destruction policies of the carrier, as well as the production of copies of any complaints filed with the Insurance Commissioner against the carrier, any disciplinary proceedings against the carrier in any state, and any similar property damage breach of contract lawsuits. 

The carrier asserted that it would cost $1 million dollars to undertake the efforts to respond to the above discovery requests.

The Plaintiffs also requested the production of reserves information relative to the case at hand.

Judge Minora was not convinced by the carrier's assertions of undue burden and denied the motion in large part. However, he limited his allowance of the Plaintiff's discovery requests to only cover information for a four year period, which was selected as that is the statute of limitations for a breach of contract action. The Judge allowed the Plaintiff to pick the beginning and end date for the four years of discovery they desired.

The Court also limited the scope of the Plaintiff's discovery requests to Pennsylvania matters and decided that the carrier did not have to produce documents from other states that might be responsive.

Anyone wishing to review a copy of this decision may click this LINK.

Motion to Sever and Stay Bad Faith Claim Denied by Federal Western District Court

In the case of Walls v. American Modern Select Ins. Co., No. 3:19-cv-80 (W.D. Pa. Feb. 6, 2020 Gibson, J.), the court refused to strike the carrier’s affirmative defense of fraud and also denied the carrier’s Motion to Sever and Stay the insured’s bad faith claim.

According to the Opinion, this case arose out of a homeowners’ fire loss claim.

After the carrier refused to pay on the basis that the insured made material misrepresentation when they applied for their policies, the insured filed suit. The carrier asserted affirmative defenses in terms of misrepresentations made by the insured during the application process.

Before the court was the insured’s Motion to Strike the affirmative defenses inadequately pled. Also before the court was the carrier’s Motion to Sever and Stay the insured’s bad faith claim.

The court denied the Plaintiff’s Motion to Strike the carrier’s affirmative defenses after finding that, under F.R.C.P. 8(c) affirmative defenses did not have to be thoroughly articulated. However, where, as here, fraud is pled, there are additional pleading requirements under F.R.C.P. 9(b) to plead such claims with particularity. Regardless, the court found that the affirmative defenses pled by the carrier in this matter were sufficiently stated.

As to the other Motion at issue, the court denied the carrier’s Motion to Sever and Stay the bad faith claims. In this regard, the court noted that the underlying issues in the two (2) claims overlapped in terms of the breach of contract and bad faith counts.

The court also felt that trying the claim together would not unduly prejudice the carrier. The court also noted that keeping the cases together would also promote judicial economy.

Anyone wishing to review a copy of this decision may click this LINK.

I send thanks to Attorney Lee Applebaum, he writer of the excellent Pennsylvania and New Jersey Insurance Bad Faith Case Law blog, and who is with the Philadelphia law firm of Fineman, Krekstein & Harris, for bringing this case to my attention.

Scope of Allowable Bad Faith Discovery Limited by Western District Federal Court of Pennsylvania

In the case of Horvath v. Globe Life & Accident Ins. Co., No. 3:18-CV-84 (W.D. Pa. Feb. 28, 2019 Gibson, J.), the court denied a Plaintiff’s Motion to Compel a Defendant carrier in a bad faith claim to identify all bad faith suits in which it was involved over the preceding ten (10) years.  

In denying this Motion to Compel by the Plaintiff, the court essentially ruled that the other, prior bad faith claims were irrelevant to the case at hand.   Judge Gibson found that there was no close “connection between other bad faith claims against Defendant and the issue of materiality here, particularly considering the myriad of potential factual differences between other claims and the present claim, including different types of policies, unique policy language, the application of different states’ law, [and] varying circumstances surrounding the bad faith allegations…..” 

Judge Gibson additionally noted that “the general rule [is] that courts in the Third Circuit ‘disfavor the discovery of similar claims evidenced in bad faith cases.’”  

The court additionally denied this Motion to Compel evidence of ten (10) years of prior bad faith actions as overbroad and unduly burdensome given that there was no geographic limit, no limit to the type of insurance policy at issue, no valid explanation as to why a ten (10) year period was required or why a shorter period would be inadequate.  

Anyone wishing to review this decision may click this LINK.  

I send thanks to Attorney Lee Applebaum of the Fineman, Krekstein & Harris law firm in Philadelphia for bringing this case to my attention.   Check out Attorney Applebaum’s excellent blog entitled Pennsylvania and New Jersey Insurance Bad Faith Case Law blog.   

Berg v. Nationwide Decision Vacated and Reargument Granted by Superior Court

In an Order handed down yesterday (May 31, 2018), the Pennsylvania Superior Court vacated its previous decision in the case of Berg v. Nationwide and granted re-argument on the issues presented. 

The Superior Court's most recent decision prior to this one erased a $21 million dollar bad faith award in favor of the Plaintiff.  Now that decision has been erased.

To review the Tort Talk entry on the decision that was vacated, click HERE

Continuing updates will be provided on this case.

$21 Million Dollar Bad Faith Award Erased by Pennsylvania Superior Court (Update: Reargument Granted and Decision Vacated on May 31, 2018)

In its decision in the case of Berg v. Nationwide Mut. Ins. Co., Inc., No. 713 MDA 2015 (Pa. Super. April 9, 2018 Ott, Stabile, J.J., and Stevens, P.J.E.) (Op. by Stabile, J.) (dissenting Op. by Stevens, P.J.E.), the Pennsylvania Superior Court vacated a $21 million dollar judgment entered by a Berks County trial court judge and remanded the case for the entry of judgment in favor of the carrier in a property damage bad faith cause of action.  

As noted in the Opinion, this case has been up and down the appellate ladder over the past two decades.  This matter arose out of a property damage claim relative to the insured’s Jeep Grand Cherokee. 

According to the Opinion, this bad faith suit initially began with the filing of a Writ of Summons back in January of 1998, over twenty (20) years ago.  

The insured's Jeep Grand Cherokee was allegedly damaged in a motor vehicle accident as a result of which there were no personal injuries.  

The Plaintiffs’ causes of action against the carrier included breach of contract, negligence, fraud, conspiracy, violations of the Unfair Trade Practices and Consumer Protection Law (UTPCPL), and insurance bad faith.  

Back in 2004, the case proceeded to a jury trial and the jury entered a verdict in favor of the Defendants on all causes of action except the catch all provision of the UTPCPL.   The jury awarded the Plaintiff $1,925.00 in damages against one Defendant and $295.00 against the carrier Defendant for the UTPCPL violation.  

Thereafter, a second phase of the trial began in the form of a bench trial on the UTPCPL treble damages and bad faith.   That bench trial was in 2007 and resulted in a directed verdict in favor of the carrier.   That result was appealed and the case went to the Supreme Court before being remanded back to the trial court for another bad faith trial.  

The second bad faith bench trial took place in approximately June of 2014 before Judge Jeffrey K. Sprecher.   Judge Sprecher issued a verdict in favor of the Plaintiffs on their bad faith claim and ordered the carrier to pay $18 million in punitive damages and $3 million dollars in attorney’s fees.  

This bench trial verdict is the subject of the appeal in the above cited latest decision in the Berg case and, as stated, resulted in the Superior Court vacating that $21 million dollar bench trial verdict and entering judgment in favor of the carrier under the standard of review applicable to non-jury cases.  

In the Pennsylvania Superior Court’s detailed 61 page Opinion, the appellate court reviewed the current status of bad faith law in Pennsylvania and affirmed that clear and convincing evidence of bad faith conduct on the part of the carrier is required to support such a claim.  

The Berg court restated the basic law that “[I]n order to recover in a bad faith action, the Plaintiff must present clear and convincing evidence (1) that the insurer did not have a reasonable basis for denying benefits under the policy and (2) that the insurer knew or recklessness disregarded its lack of a reasonable basis.”  See Berg at p. 10 [citation omitted.].  

Here, the appellate court found many of the factual findings of the trial court were not supported by the record presented.  

In Berg, the basic issue raised by the Plaintiff was that the carrier allegedly acted in bad faith by repairing the Plaintiff’s Jeep rather than declaring the Jeep a total loss and compensating Plaintiffs for its value at the time of the loss.  The insured also asserted that faulty repairs were made to the Jeep and that the carrier should have been aware of such faulty repair work. 

The appellate court found that neither the Plaintiff nor the trial court had cited any legal authority supporting the conclusion that a carrier’s duty of good faith and fair dealing requires an inspection of repairs prior to returning a vehicle to an insured.  The court noted that, even if there were such a duty recognized under Pennsylvania law, the evidence in this case did not rise above a showing of negligence, and, therefore, the evidence did not support a finding of bad faith by clear and convincing evidence.  

Relative to the trial court’s findings of bad faith, the appellate court noted that it had the authority to reverse such findings when the trial court’s “critical factual findings are either unsupported by the record or do not rise to the level of bad faith.”  See Berg at p. 38 [citations omitted] .  

The Superior Court went on, at length, to describe the trial court’s findings as being devoid of merit at times and in reliance upon facts and opinions outside of the record at other times.  

The appellate court also faulted the trial court to the extent that the trial court based its findings of bad faith upon alleged discovery violations by the carrier during the course of the litigation.    The court noted that a trial court’s findings of bad faith based upon discovery violations amounted to a clear error.  See Berg at p. 48. 

The appellate court in Berg noted that, while it is true that a finding of bad faith under §8371 may be based upon an insurer’s conduct before, during, or after litigation, the courts of Pennsylvania have refused to recognize that a carrier’s discovery practices constitute grounds for a bad faith claim under §8371, absent the use of discovery to conduct an improper investigation.   Berg at p. 48-49 [citations omitted].  

 The Superior Court in Berg explained that §8371 is designed to provide a remedy for alleged bad faith conduct by a carrier in its capacity as an insurer for breach of its fiduciary duty to an insured by virtue of the parties’ insurance policy, and not as a legal adversary in a lawsuit filed against it by an insured.  Berg at p. 49.   The court went on to note that discovery violations are  to be separately governed under the exclusive provisions of the Pennsylvania Rules of Civil Procedure.   Id.  

The appellate court also rejected the trial’s findings of bad faith on the basis of allegations that the carrier allegedly hoped to overwhelm Plaintiffs with its superior resources and that the carrier had allegedly adopted a scorched earth policy towards this litigation.  Id. at 50.    The appellate court found that there was no basis in the record to support this finding by the trial court judge.   

The appellate court also found that the trial had incorrectly found that the carrier had engaged in bad faith on the basis of evidence of the extended length of this litigation.   In this regard, the Superior Court in Berg stated that “Plaintiffs had the right to prosecute their case zealously within the bounds of the law, just as [the carrier] had the right to defend itself if it believed its personnel did not act in bad faith.  We cannot arbitrarily impose a limit on the time and resources an insurer spends in defending a bad faith action.”   Berg at p. 52.  

As stated, in the end, the Superior Court in Berg vacated the judgment of the trial court primarily because of the appellate court’s finding that the record did not support many of the trial court’s critical findings of fact.   The Superior Court in Berg felt that it had no choice but to vacate the trial court’s judgment after an exhaustive review of the record before the appellate court. 

In concluding its Opinion, the majority in Berg disagreed with the dissenting judge’s assertion that the majority was improperly substituting its own findings for those of the trial court under the applicable standard of review.   The appellate court reiterated that the “trial court engaged in a limited and highly selective analysis of the facts and drew the most malignant possible inferences from the facts it chose to consider” all of which, in the eyes of the Superior Court supported a vacation of the verdict.   Berg at p. 60.  

Anyone wishing to review the Majority Opinion in Berg may click this LINK

The Dissenting Opinion can be viewed HERE.

UPDATE:  On May 31, 2018, the Pennsylvania Superior Court granted the Plaintiff's request for reargument and vacated this decision.

Judge Nealon of Lackawanna County Weighs in on Severance, Stay, and Bifurcation of Post-Koken Bad Faith Claims

In the case of Fertig v. Kelley, No. 16 - CV - 4801 (C.P. Lacka. Co. Dec. 29, 2017 Nealon, J.), Judge Terrence R. Nealon denied a UIM carrier's motion to sever and stay bad faith claims in a Post-Koken matter but held that the bad faith claims would be later bifurcated for trial.

Judge Nealon issued a thorough Opinion that outlined the current status of the splits of authority in the Pennsylvania state and federal courts on the issue of bifurcating and staying a bad faith claim in a Post-Koken lawsuit that also contains third party negligence and UIM breach of contract claims.  

Judge Terrence R. Nealon
Lackawanna County

Judge Nealon confirmed that, to date, no state appellate court has addressed this issue.

The court in Fertig cited to issues of judicial economy in deciding to deny the motion to sever and stay the bad faith claims during the discovery phase of the litigation.  The court directed that any discovery disputes on the bad faith claim could be addressed through motions practice.

In ruling that the bad faith claims would be bifurcated for purposes of trial, Judge Nealon elected to follow the procedure first espoused by Allegheny County Court of Common Pleas Judge R. Stanton Wettick in the cases of Gunn and Wutz. 

Under that procedure, the trial of the third party negligence claims and UIM claims would go first before the jury, and would then be immediately followed by a bench trial on the bad faith claims. 

Under this procedure, once the jury retires to the deliberation room on the third party and UIM claims, the UIM defendant would be required to turn over additional unredacted discoverable materials from the carrier's file that may have been properly withheld during the pendency of the UIM claim (i.e., information on the carrier's evaluation of the claims, etc.).   The Plaintiff would then have the option of proceeding directly into the bench trial on the bad faith claims or requesting a continuance to digest the information produced.

Anyone wishing to review this decision may click this LINK.



Commentary:  As stated, there remains a split of authority on this issue of severance (and staying) and/or bifurcation of various types of claims in Post-Koken auto accident matters.  A comprehensive list of the cases can be viewed on the Tort Talk Post-Koken Scorecard, which can always be accessed down the right hand column of the blog at www.TortTalk.com.  Here is a quick LINK to the Scorecard for your easy reference.

Judge Caputo of Federal Middle District Court Denies Motion to Sever and Stay Post-Koken Bad Faith Claim

In his recent decision in the case of Mulgrew v. GEICO, No. 3:16-cv-02217 (M.D. Pa. Oct. 11, 2017 Caputo, J.), the court denied a Defendant’s Motion to Sever and Stay the Plaintiff’s bad faith claim in a underinsured motorist matter. 

 The court referred to Federal Rule of Civil Procedure 21 which grants the Federal District Courts broad discretion in deciding whether or not to sever a case.  

Judge A. Richard Caputo
M.D. PA

Judge Caputo noted that the factors used to decide a Motion to Sever under Rule 21 are the same as utilized in deciding a Motion to Bifurcate under Rule 42(b).  

The court differentiated between the two rules by indicating that a Rule 21 severance essentially creates a separate case, the disposition of which is final and appealable, whereas Rule 42(b) does not create a new case but bifurcates issues or claims within a single case for separate trials.   A claim that is bifurcated under Rule 42(b) is not final and appealable as long as the other claims in the case remain unresolved. 

The factors to be considered in deciding such motions to sever or bifurcate in Federal Court cases includes the following:

-           Convenience of the parties

-           Avoiding prejudice, and

-           Promoting expedition and economy

In denying the Motion, Judge Caputo found that both the convenience of the parties and the judicial economy weighed against severance.   The court also rejected the Defendant’s claim that the resolution of the breach of contract action could greatly impact and potentially moot the bad faith claim.  The court noted that litigation on the bad faith claim is not contingent upon the success of the breach of contract claim in that a Plaintiff could simultaneously prevail on a bad faith claim while losing the UIM claim.   The court also found that severance would hinder judicial economy by requiring separate cases and separate trials instead of handling these claims within a single action.  

The court additionally opined that the potential prejudice to the carrier of litigating the breach of contract and bad faith claims at the same time did not outweigh the countervailing goal of judicial economy in the prompt resolution of the entire matter.  

For these reasons, Judge Caputo denied the Motion to Sever and Stay the Plaintiff’s Bad Faith Claim.  

Anyone wishing to review a copy of this decision may click this LINK.

I send thanks to Attorney Lee Applebaum, the writer of the excellent Pennsylvania and New Jersey Insurance Bad Faith Case Law Blog for bringing this case to my attention.  

Motion to Sever and Stay Post-Koken Bad Faith Claim Denied in Middle District of Pennsylvania

In his recent decision in the case of Newhouse v. GEICO, No. 4:17-CV-00477 (M.D. Pa. Sept. 18, 2017 Brann, J.), US Middle District Judge Matthew W. Brann denied GEICO’s Motion to Sever and Stay the bad faith portion of a post-Koken claim filed by a Plaintiff also asserting a UIM claim.  

The court declined to sever or bifurcate the UIM and bad faith claims after finding that the Plaintiff would utilize similar evidence and testimony for both claims.   The court also rejected the carrier’s argument that it would be prejudice by a lack of bifurcation because, relative to the bad faith action, the carrier will have to present information on how it values a claim before the jury assesses liability and damages in the UIM portion of the claim.   

Anyone wishing to review a copy of this decision may click this LINK.

 

Source:  Article “GEICO Can’t Halt Bad-Faith Claims in UIM Case, Court Says” By: PJ D’Annunizio.   The Legal Intelligencer (September 22, 2017).    

Centre County Court Confirms That Bad Faith Statute Does Not Apply to Carrier's Conduct in Litigation Process As a Legal Adversary

In the recent decision in the case of Hardy v. Erie Insurance Exchange, No. 2012-CV-2059 (C.P. Centre Co. March 7, 2017, Ruest, J.), the court addressed cross-motions for summary judgment in an automobile accident matter.   The case more specifically centered around property damage claims, medical expenses claims along with related bad faith claims.   The Plaintiff filed an action alleging breach of contract and bad faith.  

Of note, the court allowed the breach of contract action to go forward as genuine issues of material fact remained on that count.   However, the court granted summary judgment to the carrier on the Plaintiff’s claims for bad faith.  

In so ruling, the court noted that, an insurance company is not required to blindly pay each claim without investigation in order to avoid a bad faith lawsuit.  

While the Plaintiffs argued in this matter that the Defendant carrier acted in bad faith by failing to promptly and accurately investigate and handle the claim, the court found that the facts of record indicated that the carrier responded to the claim within a reasonable amount of time.   The court also found that the Defendant carrier was not liable for bad faith under the allegations of violations of the Unfair Insurance Practices Act.  

The court also rejected the Plaintiff’s claims for bad faith under 42 Pa. C.S.A. §8371 on the basis of the Defendant’s allegations during litigation.   The court noted that the appellate courts of Pennsylvania have declined to find that the broad language of §8371 covers a party’s action during discovery as a basis for a bad faith allegation.  

Rather, §8371 has been read by the Pennsylvania appellate courts to only allow for a remedy for bad faith conduct that alleged arises when a carrier is acting as an insurer, not actions by the carrier when acting as a legal adversary in the litigation process.  

Overall, the court granted summary judgment to the carrier on the bad faith claim.  

Anyone wishing to review this decision may click this LINK.

Blair County Court of Common Pleas Rules to Sever and Stay Post-Koken Bad Faith Claim

In a recent trial court decision out of the Court of Common Pleas of Blair County in the case of Raia v. Agency Insurance Company of Maryland, Inc., No. 2015- GN-3456 (C.P. Blair Co. Feb. 28, 2017 Doyle, P.J.), the court sustained an insurance company’s Preliminary Objections in a post-Koken matter seeking the severance of the bad faith claim from the breach of contract claim. The court also agreed to stay discovery in the bad faith portion to the case. 

In her Opinion, President Judge Doyle noted that the Koken v. Reliance Ins. Corp., 891 A.2d 704 (Pa. 2005) decision, in which the Pennsylvania Supreme Court held that uninsured and underinsured motorist claims may be presented in the Court of Common Pleas, “has created uncertainty on how to conduct civil actions which involve a claim on a plaintiff’s uninsured or underinsured motorist coverage as well as a claim for bad faith on the part of the insurance company."  

The Raia court also noted that this “uncertainty is further exacerbated through the lack of guidance from the appellate courts, resulting in split authority among the Common Pleas Courts and the Federal District Courts.” 

Generally reviewing decisions from around Commonwealth of Pennsylvania, this court in Raia noted that “the rulings from the State and Federal courts have run the gamut, State courts are much more willing to sever and stay proceedings in some form or fashion, while Federal courts tend to deny these motions and keep the matters consolidated.   However, this is not a hard and fast observation, and judges, both State and Federal, have come out on different sides of this issue.”  

This issue of severing and staying the bad faith portion of a Post-Koken matter appeared to be a case of first impression within Blair County.  

In this decision, the court agreed that there is a potential for substantial prejudice to the insurance company in trying both the UIM and bad faith claim in front of the same jury.  

The court found that it would be difficult to for an average jury, after having listened to issues relating to the bad faith claim and the UIM claim, to disregard evidence presented for the bad faith claim when deciding the UIM claim.   This court felt that, in reality, such evidence would play in the minds of a jury and would likely influence their verdict, even if a limiting jury instruction was provided by the court.  

Accordingly, the court in Raia found that the potential prejudice in trying a UIM claim and a bad faith claim together warranted the severing of the two (2) claims.  

As for the decision to stay discovery on the bad faith claim, this court noted that allowing discovery to proceed on the bad faith claim, would permit the Plaintiff to discover material not relevant to a straightforward UIM claim.  

The court also noted that staying discovery would keep both parties on an equal footing with respect to the UIM claim until the UIM litigation is concluded.  

As such, the court stayed discovery on the bad faith claim until the conclusion of the UIM litigation.  

The court also noted that the interests of judicial economy favored this decision to stay the bad faith claim as UIM discovery was fast, fairly routine, and generally without contention as opposed to the typically contentious nature of bad faith discovery which would serve to slow down and prolong the litigation as the parties file and argue multiple discovery motions.  

Anyone wishing to read this case online may click this LINK.

I send thanks to the prevailing defense attorneys, John W. Croumer and Attorney Paul Grego of the Lancaster, Pennsylvania office of Post & Schell, P.C. for bringing this decision to my attention.  

Eastern District Federal Court Denies Motion to Sever and Stay Bad Faith Claims in Post-Koken Matter

In the case of Zinno v. GEICO¸ No. 16-792 (E.D. Pa. Nov. 21, 2016 Baylson, J.), the court denied the carrier’s Motion to Bifurcate the breach of contract and bad faith claims in this UIM case. The court also denied the carrier’s Motion for a Stay of the discovery on the bad faith side of the claim.  

The court denied the motion after finding that factors pertaining to the convenient to the parties, avoidance of prejudice, or efficiency did not warrant the bifurcation of the two (2) claims or the request for a stay of discovery.   

Anyone wishing to review this decision, may click this LINK.

I send thanks to Attorney Lee Applebaum of the law firm of Fineman Krekstein & Harris for bringing this case to my attention through his Pennsylvania and New Jersey Insurance Bad Faith Case Law blog.  

Split of Authority on Motions to Sever and Stay Post-Koken Bad Faith Claims Continues

In a recent Crawford County Court of Common Pleas decision in the Post-Koken case of Foster v. Erie Ins. Exchange, No. A.D. 2015-218 (C.P. Crawford Nov. 23, 2016 Vardaro, J.), the court issued a detailed Order covering several issues, the most notable of which was the Court's decision to grant the carrier's Motion to Sever the Bad Faith claim from the Breach of Contract claim.

The Court also stayed discovery on the Bad Faith claim pending the resolution of the Breach of Contract claim.  The Court further ruled that the Breach of Contract claim would be tried first followed by the Bad Faith claim.

Anyone wishing to review a copy of this detailed Order in the Foster case may click this LINK.

I send thanks to Attorney William C. Wagner of the Erie, PA law firm of Marnen Mioduszewski Bordonaro Wagner & Sinnott, LLC for bringing this case to my attention.

Deposition of Plaintiff's Counsel Allowed in Bad Faith Claim

In the case of Adeniyi-Jones v. State Farm Mut. Auto. Ins. Co., No. 147101 (E.D. Pa. Oct. 21, 2015), the Pennsylvania Eastern District Federal Court allowed a deposition of Plaintiff’s counsel in a UIM/bad faith claim.  

In this matter, the Plaintiff filed suit against her own automobile insurance company for UIM benefits and included a bad faith claim with respect to the negotiations on the UIM claim.  

The carrier’s counsel noticed a deposition of Plaintiff’s counsel.  Plaintiff’s counsel responded with a Motion for a Protective Order.

The carrier wished to take the Plaintiff’s counsel’s deposition with respect to discussions that attorney had with State Farm’s claims representative prior to the filing of a lawsuit.   

The allegations of bad faith in the Complaint included allegations pertaining to the failures of the carrier to request an examination under oath or an IME.  The carrier contended that an oral agreement existed between the claims representative and Plaintiff’s counsel that Plaintiff’s counsel would provide information to State Farm such that an examination under oath and an IME would not be required.   Accordingly, the existence of any oral agreement was central to a defense of the bad faith claim.

The court found that Plaintiff’s counsel had relevant information available only through her on that defense.   The court additionally ruled that communications with the claims representative were not protected by the attorney-client privilege.  

While the court allowed the defense counsel to take the deposition of the Plaintiff’s counsel, that deposition was limited to discovery of pre-litigation communications between Plaintiff’s counsel and the carrier’s claims representative.  

Anyone wishing to review a copy of this case may click this LINK

I send thanks to Attorney Thomas A. McDonnell of the Pittsburgh, Pennsylvania law firm of Summers, McDonnell, Hudock, & Guthrie for bringing this case to my attention.  

Eastern Federal District Court Addresses Addresses Motion to Stay/Discovery Issues in Post-Koken Bad Faith Context

In the case of the post-Koken case of Wagner v. Allstate Ins. Co., No. 5:14-cv-07326 (E.D. Pa. Jan. 19, 2016 Leeson, J.), Judge Joseph Leeson of the Federal Eastern District Court of Pennsylvania refused the UIM carrier’s effort to stay the Plaintiff’s bad faith claim but, in the end, rejected most of the insured’s bad faith discovery requests.  

According to the Opinion, the UIM carrier’s primary argument in favor of its request for a stay on bad faith discovery was that, to allow such bad faith discovery would require the UIM carrier to give up protection for work product that it prepared in anticipation of litigating the underlying breach of contract UIM claim.   The court rejected this argument and asserted that a “mere claim of bad faith is not shattered the work-product privilege.”  

Overall, the court found that a stay of bad faith discovery is not required to eliminate any prejudice or to promote economy.   The court observed the different terms in granted or denying stays of bad faith discovery in Pennsylvania’s state in federal courts but attributed this split in authority, in part, to the fact that bad faith is tried by a judge in the state court but by a jury in the federal courts.  

In reviewing the bad faith discovery issues as applied to work-product issues, the court found that an insurance company could not reasonably argue that the entirety of its claims file materials are accumulated in anticipation of litigation.   However, the court also stated that this did not mean that the work-product doctrine was wholly in applicable to insurers’ claims files.   The court stated that, at some point in its investigation, an insurance company’s activity shifts from mere claims evaluation to an anticipation of litigation.  

Accordingly, the court rejected the Plaintiff’s assertion that all of the insurers’ claims and investigation files were created in the ordinary course of business.  Rather, the court in Wagner found that “[w]hether Plaintiffs may be entitled to a subset of that information would hinge upon a fact-specific inquiry into the nature of the information that they seek, when [the insurer] reasonably anticipate litigation, Plaintiffs’ need for the particular information, and whether they can obtain the information through other means.”  

The court further noted that this inquiry requires very specific arguments and typically the need for an in-camera review of the documents by the court.   Here, the Plaintiffs were found to have made no such arguments as it was the Plaintiff’s primary position that there was no work-product privilege.  Accordingly, the Motion was denied, but without prejudice.  

Judge Leeson did go on to determine the date when the insured was deemed to have reasonably anticipated litigation.   The court found that that date occurred after the insured’s first demand for the policy limits because the carrier had asked for certain information to be able to evaluate the claim and the demand.   The court found that it was only after receiving that information that litigation could have reasonably been anticipated.  

The court also noted that, even materials prepared after litigation was reasonably anticipated by the carrier might turn out to be discoverable if exceptions to the work-privilege could be established by the Plaintiff.  In other words, if the Plaintiffs were able to show that they have a substantial need for the particular materials and cannot, without undue hardship, obtain those materials or their substantial equivalent by other means, Plaintiffs may be permitted to obtain the discovery they seek, provided that the discovery did not include mental impressions, conclusions, opinions, or legal theories of the carrier, its attorneys, or other representatives.  

Anyone wishing to read the Wagner v. Allstate case online may click this LINK.  
Source:   Pennsylvania and New Jersey Insurance Bad Faith Case Law Block (March 15, 2016) at www.pabadfaithlaw.com

Crawford County Post-Koken Decision In Favor of Consolidaton of Negligence/UIM Claims, But Severance and Stay of Bad Faith Claim

In the case of Lamagna v. Keffer, No. A.D. 2015-630 (C.P. Crawford Co. March 1, 2016 Stevens, J.), Judge Mark D. Stevens of the Crawford County Court of Common Pleas addressed Preliminary Objections filed by all Defendants to a Plaintiff’s Complaint along with a Motion to Sever the negligence claim from UIM claims and a companion Motion to Stay and Sever the Bad Faith Claims.  

In this case, the Plaintiff sued the third party tortfeasor along with his own UIM carrier and asserted bad faith claims against the UIM carrier with respect to their handling of the UIM claim.  

Judge Stevens noted that he was faced with two (2) issues. First, whether the breach of contract action (UIM action) should be severed from the negligence claim.  

The second issue was whether the breach of contract action (UIM action) and/or the third party negligence claim should be severed from the bad faith claim and whether the bad faith claims should then be stayed.  

The court reviewed the first issue, i.e., whether the UIM claim should be severed from the negligence claim, under Pa. R.C.P. 2229(b) which pertains to joinder of actions that arise out of the same transaction, occurrence, or series of transactions or occurrences.   If any common questions or law or fact affecting the liabilities of all such persons would arise in the action.  

Judge Stevens noted that the Pennsylvania Courts of Common Pleas are split on this issue and that he was unaware of any binding authority within the Crawford County Court of Common Pleas that matched the facts of this case.  

To date, there have been no appellate court decision on this issue.  

After comparing and contrasting the Plaintiff’s UIM claim against the third party negligence claims against the alleged tortfeasor, the court declined to sever the UIM claims from the negligence claims during the course of discovery.   The court found no meritorious basis that the Defendants would be prejudice by the claims proceeding together.  

Judge Stevens noted that, should the UIM carrier raise additional defenses in the UIM claim that were contractual in nature and unrelated to the negligence issues against the Defendant driver, the court would reconsider the possibility of a future severance at a later time.  

Judge Stevens also noted that, with this decision in favor of a consolidation of claims, “[t]he question becomes whether the Court can effectively manage the insurance issue before the jury by appropriately grafting the instructions and a verdict slip and controlling the proceedings in a way that does not prejudice any of the parties but allows the fact finder to make the appropriate, fundamental decisions necessary to dispose of the common questions of liability and damages.”  

The court found that, at this early stage of the matter, it appeared that discovery could be effectively managed by allowing the third party and contract claims to proceed together as no prejudice existed on the service with respect to the discovery phase of the matter.   Judge Stevens was careful to note in his Opinion that he would address the issue of how to proceed at trial, including whether or not the case should be tried in a consolidated fashion, at a later time, if necessary.  

On the separate issue of whether the bad faith claims should be severed from the UIM claim in the underlying negligence claims, Judge Stevens granted the defense Motion to Sever and Stay.   In so ruling, Judge Stevens pointed to his prior decision in the case of Rucci v. Erie Insurance Exchange, No. 2014-803 (C.P. Crawford Co. Feb. 5, 2015, Stevens, J.).   In Rucci, Judge Stevens had severed the Plaintiffs’ bad faith claim from their breach of contract claim and stayed discovery on the bad faith claim.  

Judge Stevens felt that the logic of the Rucci decision applied in a more compelling fashion in this matter where the Plaintiff was additionally asserting negligence claim along with the bad faith claim.   In this regard, the court reasoned, as follows:
 

“Here, the Plaintiff alleges negligence along with the bad

faith claim.   [The UIM carrier] owes the Plaintiff a
fiduciary duty of good faith and fair dealing pursuant to
its insurance contract.    However, provided that a factual
basis exists, [the UIM carrier] has the right to argue that
it is not contractually obligated to pay the claim.  In this
case, that contractual obligation seems to turn, at least at
this stage, on the question of who was the responsible
driver at the time of the motor vehicle accident.   In the
event that the Plaintiff was in fact the responsible driver,
which is a defense that [the UIM carrier] suggests that it
has a legitimate basis to assert, and [the UIM carrier] would
not be contractually obligated to provide UIM benefits
under most typical policies of automobile insurance.  To
require [the UIM carrier] to simultaneously attempt to
balance a pending bad faith claim subject to discovery
while asserting that no contractual obligation exists creates
an unfair and prejudicial circumstance.  This circumstance
is compounded even more by the fact that there exists at
third party claim where the decedent Defendant appears
prepared to defend on grounds that the Plaintiff was the
driver.   While arguably the applicable standard for the
Defendant in the third party claim to assert that the
Plaintiff was the driver is different than [the UIM
carrier’s] standard for asserting such under the breach
contract claim, the reality is that the factual question is
still the same.
 
Regardless of the pendency of the bad faith claim,
[the UIM carrier] must always conduct itself in
conformity with its obligations to act appropriately
towards its insured.  However, the posture of that
situation changes dramatically if there is ongoing,
active bad faith litigation.”

The court went on to note that, if a jury ultimately concluded that the Plaintiff was the operator of the motor vehicle at the time of the accident, a successful bad faith claim would obviously be difficult, if not impossible.  

 

Judge Stevens also stated that, even if the court determined that the Defendant was the driver of the vehicle, the Plaintiff’s bad faith claim would not be established by the mere fact that the carrier contested the issue of who was driving during the subject accident.   The court noted that typically, when a bad faith claim is filed, the allegations of bad faith have already substantially occurred.   In the case before the court, Judge Stevens felt that it appeared almost certain that, as the underlying UIM claim progressed, the allegations of bad faith the theories of and facts upon which the bad faith claim would be asserted, would likely develop and change.  

 

Accordingly, the court ruled that, even assuming for arguments sake that bad faith conduct had occurred at this early stage of the litigation, severing and/or staying the bad faith action would not in any way harm the Plaintiff nor would it serve to excuse any bad faith conduct of the carrier.   Judge Stevens felt that, as this UIM claim developed, especially where it appeared that the UIM carrier was prepared to vigorously defend under the contract as to who the responsible driver was, it was almost certain that the bad faith claims would become more complex as the case proceeded.  

 

Accordingly, Judge Stevens held that “[t]o force [the UIM carrier] to assert its contractual defenses pursuant to the policy while simultaneously defending itself on a bad faith claim appears to create an obvious and immediate prejudice.”

 

Judge Stevens also noted that “[c]onversely, assuming arguendo that the cases proceeded simultaneously, the only benefit to the insured, besides some minor, if not illusory, efficiencies, is the leverage the Plaintiff could use to attempt to prevent [the UIM carrier] from vigorously asserting its contractual defenses for fear of the open, pending bad faith claim.” 

 

As such, the court granted the Defendant’s Motion to Sever and Stay the Bad Faith Claim.   The court stated that the bad faith claim would be allowed to proceed only upon further Order of the Court.  

Anyone desiring a copy of this Lamagna  decision by Judge Stevens of Crawford County may contact me at dancummins@comcast.net.

 

I send thanks to Attorney Joseph Hudock of the Pittsburgh, PA law office of Summers, McDonnell, Hudock & Guthrie for bringing this decision to my attention.

                         

Judge Minora of Lackawanna County Addresses Bad Faith Discovery and Severance Requests in a Non-Post-Koken Case

In the case of Custom Designs and Manufacturing Company, Inc. v. Atlantic States Insurance Company, No. 2006-CV-2790 (C.P. Lacka. Co. Dec. 4, 2015 Minora, J.), Judge Carmen D. Minora of the Lackawanna County Court of Common Pleas denied a Defendant’s Motion for a Protective Order and granted in part and denied in part a Defendant’s Motion to Sever and Stay the Plaintiff’s Bad Faith Claim.

This matter arose out of a fire loss. The Plaintiff’s factory was destroyed during a fire that occurred in November of 2002. At the time of the loss, the Plaintiff carried an insurance policy with the Defendant carrier.

The Plaintiff filed a bad faith and breach of contract litigation against the carrier relative to the handling of the claim. During the course of that litigation, the Defendant carrier filed the Motion for Protective Order and Motion to Sever and Stay Plaintiff’s Bad Faith Claim.

In support of their motion, the Defendants asserted that the Plaintiffs were seeking nondiscoverable information and further argued that allowing the Plaintiffs to proceed with their bad faith claim at this early stage of the litigation would prevent and impede the expeditious and judicially and economical conclusion of the entire case as engaging in discovery on both the breach of contract claim and the bad faith claim would unnecessarily delay adjudication of the underlying contractual claim. The Defendants more specifically argued that allowing the combined discovery efforts would result in a large volume of time consuming objections and motions practice, much to the detriment of the concerns of judicial economy and efficiency. As such, the defense requested that the Plaintiff’s bad faith claim be severed and stayed pending the resolution of the breach of contract claim.

After conducting a thorough review of the applicable Rules of Civil Procedure, and in particular, Rules 4011 and 4012, the court found that the Defendants were not entitled to the requested protective order. 

I

Judge Carmen D. Minora
Lackawanna County

n this regard, Judge Minora found that the Defendants failed to show that the scope of the Plaintiff’s bad faith discovery requested information or documents protected by the attorney-client privilege or the attorney work product doctrine. The court also found that the defense failed to show how responding to the Plaintiff’s discovery requests would cause them unreasonable burden or expense. 

Accordingly, the Defendant’s Motion for Protective Order was denied without prejudice to the defense right to revisit this issue in the event that the Plaintiff did not conduct discovery in a legally responsible manner.

On the request for a severance and stay of the bad faith claim, Judge Minora noted that he had the power and discretion to grant this request under Pa. R.C.P. 213, if appropriate. Relying, in part, on the Monroe Court of Common Pleas decision in the Post-Koken case of Hakim v. Erie Insurance Exchange, 6241-CV-2013 (C.P. Monroe Co. 2015 Williamson, J.), Judge Minora found that the Defendants may be prejudiced by allowing the bad faith claim to be joined with the breach of contract claim during the course of a trial.  The court found that there may be information relevant to the bad faith claim that was not relevant to the breach of contract claim and which may prejudice the Defendants in the eyes of the jury and/or may possibly confuse the jury in its efforts to reach a verdict.

In balancing all of the issues presented, including the issues of judicial economy and possible prejudice to the Defendants, Judge Minora exercised his broad discretion and granted the Defendant’s Motion to Sever the Bad Faith Claim pending the resolution of the Plaintiff’s breach of contract claim.

However, Judge Minora refused to stay discovery on the bad faith claim as doing so would cause an unnecessary delay of the matter. The court also found that there are more efficient measures to protect the Defendants from prejudice as opposed to ordering a "blanket freeze" on all discovery with respect to the bad faith claims.

Anyone wishing to review this decision may click this LINK.

ARTICLE: Ending Post-Koken Wars of Attrition

This article of mine appeared in last week's November 10, 2015 edition of the Pennsylvania Law Weekly and is republished here with permission. Civil Litigation Ending Post-'Koken' Wars of Attrition by   Daniel E. Cummins, The Legal Intelligencer      November 10, 2015    Discovery issues continue to burden the trial courts in post-Koken auto accident lawsuits where uninsured and underinsured motorist breach of contract claims are combined with bad-faith claims. Despite the high burden of proof attendant with showing bad faith, plaintiffs often include such claims as a "hammer" in an effort to pressure on the UM/UIM carrier to settle the underlying claims, only to then drop the bad-faith claim when the UM/UIM claim is settled. Defendant insurance companies typically strike back by hiring additional big-city defense counsel to fight bad-faith discovery efforts at all costs. In such cases, the courts are often presented with a motion filed by the defendant insurance company seeking to sever the UM/UIM claims and bad-faith claims into two separate matters. These defense motions are typically combined with a request for a stay of any and all discovery on the bad-faith claims until a settlement or verdict on the separate UM/UIM claim is reached. Until recently, the trend in the trial courts was to follow a procedural framework advocated by Allegheny County Court of Common Pleas Judge R. Stanton Wettick by severing the UM/UIM claims from the bad-faith claims for purposes of the later trial of the matter, but still allowing discovery to proceed on all claims, even the bad-faith claim, in the meantime. These courts have indicated that any discovery issues, if they happen to arise, could always be addressed by way of discovery motions. As these cases thereafter proceeded beyond the pleadings stage, the norm has become that these post-Koken matters being bogged down in bad-faith discovery disputes so hotly contested that they have been described by Monroe County Court of Common Pleas Judge David J. Williamson as amounting to a "war of attrition." In two recent decisions, Williamson has bucked the trend and ruled, in the interest of judicial economy, that bad-faith discovery should instead be precluded until the conclusion of the companion UM/UIM claim so as to allow these types of cases to proceed more efficiently. The practical effect of these rulings is that the bad-faith discovery war of attrition is delayed, if not prevented altogether. Wettick's Way In the initial trend of bad-faith discovery decisions in post-Koken matters, a number of trial courts simply followed the guidance offered on this issue by Wettick in the seminal case of Gunn v. Automobile Insurance Co. of Hartford, PICS Case No. 08-1266 (C.P. Allegheny July 25, 2008). In Gunn, the court ruled that since the trial of the UM claim would be by jury and the trial of the bad-faith claim would be by a bench trial under Pennsylvania state law, there is a severance of the claims for trial purposes by operation of law. However, Wettick went on to refuse the request to stay bad-faith discovery, suggesting that issues and objections raised in that regard could be addressed by way of discovery motions. In Gunn, and again in Wutz v. Smith and State Farm, No. GD07-021766 (Alleg. Co. Sept. 9, 2009, Wettick, J.), Wettick addressed such discovery motions and noted that bad-faith discovery of the defendant UM/UIM carrier's settlement evaluation information would not be permitted during the pendency of the UIM claim. The court accepted the argument that to rule otherwise would be akin to requiring the defense in a football game to furnish its defensive formation for the upcoming play to the plaintiff before the plaintiff selected the play that it would call. Accordingly, the end result was that the most important information for the bad-faith claim could not be accessed by a plaintiff during the pendency of the UM or UIM claim. Rather, only limited, piecemeal discovery would be allowed while the UM/UIM claim is pending. Wettick's framework is set up such that, once the jury came back with its verdict on the UM or UIM claim, the defendant insurance company would then be required to immediately dump all of its now discoverable bad-faith information and documentation from its UM/UIM file upon the plaintiff's attorney. The Gunn/Wutz framework also requires that the bad-faith trial would then begin immediately with the same judge presiding. Wettick did suggest that, if the plaintiff's counsel required a continuance to review the newly produced discovery, then the court should consider delaying the start of the bad-faith trial. While clean and straightforward in theory, the procedural framework set up in the Gunn and Wutz cases for combined UM/UIM and bad-faith cases is impractical and almost impossible to follow in reality. Although excellent litigators, rare will be the plaintiffs attorney ready to digest and analyze reams of records produced by the carrier on the bad-faith claim and then immediately dive headlong into another trial on the complexities of the bad-faith claim after an exhausting trial on the UM/UIM personal injury claim. Perhaps even more importantly, the Gunn/Wutz framework of a bad-faith trial commencing immediately upon the verdict of the UIM claim does not allow for the plaintiff's completion of full depositions of the defendant insurance company's claims representatives and managers relative to bad-faith issues prior to the start of an immediate bad-faith trial. The parties may also need an opportunity and time to submit the discoverable materials to expert witnesses relative to the bad-faith claim. Moreover, it is highly unlikely in any event that a defendant carrier would simply turn over the requested bad-faith discovery without another fight or motion for a protective order. Similarly, once a plaintiff's attorney secures some initial information from the carrier on the bad-faith claim, additional requests for more discovery or motions to compel additional bad-faith discovery would most likely be required. Overall, there remains an ongoing split among the trial courts on whether or not to stay bad-faith discovery during the pendency of the UM/UIM claims. As it becomes more apparent that allowing bad-faith discovery to proceed during the UM/UIM claim results in real discovery wars of attrition that unnecessarily overburden both the courts and the litigants and drastically slow the movement of such matters through the court system, there may be a shift in thinking developing among trial court judges on this issue. Williamson's Way That shift in thinking was recently evidenced by Williamson reconsidering his own rulings on this regard in a post-Koken case that came before him. In his initial March 18 decision in the case of Hakim v. Erie Insurance Exchange, No. 6241-Civil-2013 (C.P. Monroe Co. March 18, 2015), Williamson followed the trending Gunn/Wutz procedural framework by severing the UIM and bad-faith claims but denying a request for a stay of bad-faith discovery. In his more recent May 8 decision in the same Hakim case, Williamson noted that bad-faith discovery disputes had arisen in the matter and found that such disputes often rose to a "war of attrition" that only served to burden already overburdened court systems. Williamson then took a step back, looked at the big picture, and stated, "We have reexamined our opinion concerning the denial of the stay requested by the defendant of the bad-faith claim, while the breach of contract claim is pending. Upon further reflection, we determine that a stay of the bad-faith claim should be entered until such time as the breach of contract action is concluded." Williamson supported his reversal of his prior decision by noting that evidence of the handling of claims, while relevant in the bad-faith claim, was not relevant to the merit of the actual injury claim and that the release of the claims information would be prejudicial. The court also noted that this is particularly so where it was certainly possible that the bad-faith claims would never even come to fruition pending the results of the UIM claim—if the bad-faith claim was dropped after a settlement or verdict was reached on the UIM claim. The court also reasoned that the release of the carrier's thoughts and analysis prior to the UIM claim being fully litigated could be improperly utilized by plaintiffs as a bargaining chip in settlement negotiation. Returning to the notion of the "war of attrition," the court additionally noted that allowing bad-faith discovery to proceed during the pendency of UM/UIM claims would likely lead to more discovery requests, more motions to compel, more motions for protective orders, and more court hearings, all of which would serve to unnecessarily delay the resolution or trial of the UM/UIM claims. This, the court found, would not only be a burden on the court's resources, but would also serve to prejudice each litigant and delay the resolution of the matter. Accordingly, Williamson entered an order vacating his prior decision in Hakim and staying all discovery in the bad-faith claim pending the resolution of the UIM claim. Williamson would go on to rule in the same fashion in his more recent Oct. 1 decision in Brands v. Erie Insurance Exchange, No. 2604-CIVIL-2015 (C.P. Monroe Oct. 1, 2015). In Brands, Williamson severed a bad-faith claim from a UIM claim, but this time issued a stay order against any bad-faith discovery pending the resolution of the UIM claim. In so ruling, Williamson reiterated the same detailed rationale set forth in the Hakim decision as support for the stay of bad-faith discovery. In Brands, the court also went on to address a plaintiff's concern for a prompt and fair disposition of the bad-faith claims following the resolution of the UIM claims. Williamson stated that such concerns could be addressed by the court's control of discovery efforts and trial scheduling following the conclusion of the UIM case. Détente for the War of Attrition Whether Williamson's decisions amount to the beginning of a shift in the pendulum toward the more practical approach of both severing and staying bad-faith claims in post-Koken matters remains to be seen. Surely, staying bad-faith discovery during the pendency of the UM/UIM claims is more practical since full discovery on the bad-faith allegations is not allowed in any event until the UM/UIM claim is resolved. More importantly, a trial court order staying bad-faith discovery pending the resolution of the companion UIM claim will delay, if not prevent altogether, a discovery war of attrition and thereby further the overriding interests of judicial economy for all involved. Daniel E. Cummins is a partner and civil litigator with the Scranton law firm of Foley Comerford & Cummins. His civil litigation blog, Tort Talk, can be viewed at www.TortTalk.com.

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Copyright 2015. ALM Media Properties, LLC. All rights reserved.

Judge Williamson of Monroe County Again Rules in Favor of Severance and Stay of Bad Faith Post-Koken Claims

In his October 1, 2015 decision in the case of Brands v. Erie Ins. Exchange, No. 2604-CIVIL-2015 (C.P. Monroe Oct. 1, 2015 Willamson, J.), Judge Williamson issued another Opinion severing a Bad Faith claim from a UIM claim in a Post-Koken case, and also issued a stay order against any bad faith discovery pending the resolution of the UIM claim.

In severing the claims for trial, Judge Williamson reasoned, in part, that the UIM trial is a jury trial, while a bad faith trial is required to be a bench trial in state court. 

He also noted that severance for trial purposes is required as it would be confusing to the jury and prejudicial to the UIM carrier for bad faith testimony to be allowed during the UIM trial.  Judge Williamson stated that, if the cases were tried together, "[a] jury would hear evidence unrelated to what they will be deciding, and may be swayed by evidence the court considers in the bad faith claim."  Op. at p. 2.

Overall, Judge Williamson found "no compelling reason to hear these cases together."  Id.

In granting the motion to stay bad faith discovery, Judge Williamson followed his previous reasoning in the Hakim v. Erie Ins. Opinion, but did not cite to that decision.  Click this LINK to view the Tort Talk blog post on the Hakim case, which contains a Link to that Opinion as well.

In this Brands decision granting a stay of bad faith discovery, Judge Williamson noted that his decision was supported by the fact that bad faith discovery dispute would like arise, the resolution of which would be time-consuming and expensive and would delay the resolution of the UIM part of the claim.  The court also suggested that there was a chance that the bad faith claim would never come to fruition pending the results of the UIM claim.

Judge Williamson also cautioned that to allow bad faith discovery before the end of the UIM claim "could steer the negotiation process of settlement in an unfair manner."

The court also noted that a plaintiff's concern for a prompt and fair disposition of the bad faith claims following the resolution of the UIM claims could be handled by the court's control of discovery efforts and trial scheduling following the conclusion of the UIM case.

Accordingly, the court in Brands continued the trend in Monroe County of granting both requests to sever UIM and Bad Faith Post-Koken claims and staying Bad Faith discovery efforts pending the resolution of the UIM claim.

Anyone wishing to review the Brands decision by Judge Williamson may click this LINK.


I send thanks to Attorney Domenic Sbrocchi of the Bethlehem, PA law firm of King, Spry, Herman, Freund, & Faul for bringing this case to my attention.

Judge Williamson Reverses Course and Chooses to Stay Bad Faith Discovery in Post-Koken Cases

In follow-up to yesterday's post on Judge Williamson's Monroe County Post-Koken decision in Hakim v. Erie Insurance Exchange, No. 6241-Civil-2013 (C.P. Monroe Co. March 18, 2015, Williamson, J.), in which the court severed UIM and Bad Faith Claims but denied a request for a stay of bad faith discovery, it has been brought to my attention that Judge Williamson issued a discovery Order more recently in the same case on May 8, 2015 in which he reversed, in part, his prior decision.

Judge David J. Williamson
Monroe County

In his more recent May 8, 2015 decision, Judge Williamson noted that, in the previous March 18, 2015 decision he had granted the Plaintiffs' Motion to Compel but reserved ruling on the Plaintiffs' request for the production of the Erie Insurance claims manual pending an in camera review of privileged and confidential information.

The court's more recent May 8, 2015 outlines the court's review of the claims manual.

In his Opinion, Judge Williamson stated that "[t]he Erie Claims Manual is inherently a privileged and confidential document."  Op. at p. 1.

He also noted that while some sections of the Manual may be relevant to the Bad Faith portion of the claim, "[n]one of the sections appear relevant in the breach of contract claims."  Op. at p. 2.

Judge Williamson noted that, while some of the parts of the Claims Manual were relevant to the Bad Faith claims presented, the court was declining to order the release of those portions of the manual while the UIM claim was still pending.

In so ruling, Judge Williamson stated, "We have reexamined our opinion concerning the denial of the stay requested by the Defendant of the bad faith claim, while the breach of contract claim is pending.  Upon further reflection, we determine that a stay of the bad faith claim should be entered until such time as the breach of contract action is concluded."  Op. at p. 2.

Judge Williamson supported his reversal of his prior decision by noting that evidence of the handling of claims is not relevant to the merit of the actual injury claim and that the release of the Claims Manual information would be prejudicial.  The court also noted that it would be improper to allow for the release of the confidential Claims Manual information where it was certainly possible that the Bad Faith claims would never come to fruition pending the results of the breach of contract claim.

The court also supported its decision by noting that the release of confidential and proprietary information would expose the carrier's thoughts and analysis  prior to the breach of contract claim being fully litigated and could be improperly utilized as a bargaining chip in settlement negotiation.

Moreover, the court noted that allowing this discovery would likely lead to more Bad Faith discovery requests, more motions to compel, more motions for protective orders, and more court hearings, all of which would serve to unnecessarily delay the resolution or trial of the breach of contract claims.

Judge Williamson noted that he felt "confident that without this ruling [to stay the bad faith discovery], this matter will continue in the discovery stage with a war of attrition through motions, rather than proceed to court."  This, the court noted, would "be a burden on the court's resources, and will serve to prejudice both litigants."  Op. at p. 3

Accordingly, Judge Williamson entered an Order vacating his prior decision and staying all discovery and action in the Bad Faith claim pending the resolution of the Breach of Contract claim.

Anyone wishing to review this Opinion by Judge Williamson, may click this LINK.

I send thanks to Attorney Domenic Sbrocchi of the Bethlehem, PA law firm of King, Spry, Herman, Freund, & Faul for bringing this case to my attention.  I also send thanks to Attorney Pete Speaker of the Harrisburg, PA law firm of Thomas, Thomas & Hafer for alerting me to this decision as well.



NOTE:  Judge Williamson issued another Opinion along the same lines more recently on October 1, 2015 in the case of Brands v. Erie Ins. Exchange, No. 2604-CIVIL-2015 (C.P. Monroe Oct. 1, 2015 Willamson, J.).  Look for a summary of, and a Link to, that decision here on Tort Talk next week.

Judge Williamson of Monroe County Again Rules in Favor of Severing Bad Faith Claim in Post-Koken Action, But Against a Stay of Bad Faith Discovery

Below is a summary of another Post-Koken decision discovered out of Monroe County by Judge David J. Williamson.

In its decision, from back in the Spring, in the case of Hakim v. Erie Insurance Exchange, No. 6241-Civil-2013 (C.P. Monroe Co. March 18, 2015, Williamson, J.), Judge David J. Williamson granted the Defendant carrier’s Motion to Sever the bad faith and extra-contractual claims from the UIM claims, but denied the UIM carrier’s Motion to Stay Bad Faith Discovery.

In coming to his decision in this matter, which is consistent with other decisions out of Monroe County, Judge Williamson relied on Pa. R.C.P. 213(b), which provides the Court with discretion to sever cases.  

Referring to its own previous decision in the case of Orsulak v. Penn National, Judge Williamson again noted that “Evidence put forth in the bad faith claim for the court to consider would likely confuse the jury and its role in the proceedings.   Certain information disclosed for purposes of the bad faith claim could also prejudice the jury against [the Defendant].”   Citing Orsulak v. Penn National, No. 4255-CV-2011 (C.P. Monroe Co. Jan. 14, 2013, Williamson, J.). 

In this case of Hakim, Judge Williamson again ruled that he found that the UIM carrier Defendant in this case “would be prejudiced by joining the bad faith claims with the contractual claims during trial.  There may be information that is relevant to the bad faith claim that is not relevant to the contractual claims which would prejudice Defendant in the eyes of the jury.   There is no indication at this time that the need for judicial economy outweighs the prejudice.”   See Hakim at p. 11.  

As such, relying in part on his own prior decision in Orsulak, Judge Williamson granted the Motion to Sever the Bad Faith Claim.

However, as noted, Judge Williamson, relying upon the case of Gunn v. Automobile Insurance Company of Hartford, 971 A.2d 505 (Pa. Super. 2009), denied the UIM carrier’s Motion to Stay Discovery.   Judge Williamson also came to the same decision in his own previous Opinion in the case of Orsulak v. Penn National.   The Court ruled in this fashion because “staying all discovery with respect to the bad faith claim would cause unnecessary delay and there were better measures the Court could take to avoid prejudice during the discovery process once prejudice was shown.”  See Hakim at p. 12 [other citations omitted].  

Anyone wishing to review a copy of Judge Williamson's decision in Hakim may click this LINK.