Shearer v. Stidham et al, No. 5:2012cv00188 - Document 15 (E.D. Ky. 2012)

Court Description: MEMORANDUM OPINION AND ORDER: (1) Dfts' 11 Motion to Bifurcate the underlying UIM claim from the bad faith claims is GRANTED. (2) Dfts' 11 Motion to Stay Discovery in the Pla's bad faith claims against Dfts until resolution of the primary liability claim is GRANTED. Signed by Judge Joseph M. Hood on September 20, 2012. (AWD) cc: COR

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UNITED STATES DISTRICT COURT EASTERN DIVISION OF KENTUCKY CENTRAL DIVISION at LEXINGTON HENRIETTA J. SHEARER, Plaintiff, v. OHIO CASUALTY INSURANCE CO. AND AMERICAN FIRE AND CASUALTY GROUP, Defendants. ) ) ) ) ) ) ) ) ) ) ) Civil Case No. 5:12-cv-00188-JMH MEMORANDUM OPINION & ORDER *** This matter is before the Court on Defendants Ohio Casualty Insurance Company and American Fire and Casualty Groups motion Plaintiff s bad to bifurcate faith and claims. stay (D.E. discovery 11). on Plaintiff responded in opposition, and the Defendants subsequently filed a reply. (D.E. 12, 14). Thus, this matter is now ripe for review. I. Background Plaintiff Henrietta Shearer s complaint alleges that she was involved in an automobile accident on May 3, 2007, in Lexington, Kentucky, in which an automobile driven by Ms. Jessica Stidham collided into Plaintiff s vehicle. Plaintiff has since settled her claims against Stidham. In her complaint, Plaintiff alleges that she suffered injury from the crash, causing her to incur numerous medical bills and lost wages. Plaintiff alleges she submitted these claims to Defendants, and argues that they were obligated to pay the bills as her underinsured motorist ( UIM ) carrier. Because the Defendants allegedly did not pay the full amount of Plaintiff s medical bills and lost wages, she filed suit, claiming that the denial of her claims violated Kentucky s Unfair Claims Settlement Practices Act ( USCPA ) and the Consumer Protection Act. She also claims that Defendants acted in bad faith in their alleged failure to settle Plaintiff s claims. Defendants filed this instant motion under Federal Rule of Civil Procedure 42(b) to bifurcate the underlying UIM claim from the bad faith action alleged by Plaintiff. Fed. R. Civ. P. 42(b). Additionally, Defendants move this Court to stay discovery on the bad faith claims until the resolution of liability. For the reasons which follow, Defendants motion is granted. II. Analysis Rule 42(b) of the Federal Rules of Civil Procedure provides that in order to promote convenience and economy or avoid prejudice, a district court may order a separate trial of any claim...or...any separate issue. Bath & Body Works, Inc. v. Luzier Personalized Cosmetics, Inc., 76 F.3d 2 743, 747 (6th Cir. 1996)(quoting Fed. R. Civ. P. 42(b)). The decision whether to try issues separately is within the sound discretion of the court. Id. (quoting In Re Bendectin Litig., 857 F.3d 290, 307 (6th Cir. 1988). Defendants argue that bifurcation is necessary because Plaintiff s action for bad faith cannot be viable until Plaintiff first shows that Defendants are obligated to pay the UIM claim. Defendants also argue that bifurcation will avoid prejudice to the parties by eliminating unnecessary discovery and preventing confusion of the issues. The Court agrees. It is clear under Kentucky law that Plaintiff s bad faith claims against Defendants cannot proceed until Plaintiff proves she is entitled to UIM benefits under her insurance policy. See Wittmer v. Jones, 864 S.W.2d 885, 891 (Ky. 1993)( [A]t trial, the underlying negligence claim should first be adjudicated. Only then should the direct action against the insurer be presented. ). Thus, bifurcation serves the interests of judicial economy and convenience, Plaintiff s since resolution entitlement entire matter. to UIM of the benefits single may issue resolve of the See Durbin v. State Farm Mut. Auto. Ins. Co., No. Civ.A. 3:00CV-384-S, 2001 WL 1793734, at *1 (W.D. Ky. Mar. 22, 2001)(holding in a UIM case that [b]ecause 3 the defendant s entitlement liability...depends to as yet unliquidated upon the plaintiff s damage elements...we claims and believe bifurcation is appropriate. ). Moreover, trying the liability the bad faith claims together would be prejudicial because it would unnecessarily interject the issue of bad faith into the primary dispute of liability, making discovery more difficult and complicating the issues at trial. See Pollard v. Wood, No. Civ.A. 5:05-444-JMH, 2006 WL 782739, at *2 (E.D. Ky. Mar. 27, 2006)(noting that trying liability and bad faith claims together unnecessarily interjects the issue of insurance coverage into the primary dispute of liability ); Hardy Oil Co., Inc. v. Nationwide Agribusiness Ins. Co., No. 11-75-JBC, 2011 WL 6056599, at *1 (E.D. Ky. Dec. 6, 2011)( Bifurcation serves to avoid prejudice to the parties cumbersome by eliminating discovery, by potentially narrowing unnecessary other claims, and thus reducing the time and money parties will need to expend to litigate them, and by prevent[ing] confusion to the jury by simplifying the issues. ). In no way does bifurcation prejudice the Plaintiff, as she will get the opportunity to litigate underlying her bad claim. faith claim Therefore, if the she succeeds Court on the exercises its discretion to bifurcate the Plaintiff s claims. 4 Defendants also move this Court to stay discovery on the bad faith Defendants claims argue until that liability allowing is established. discovery now would prejudice Defendants in their defense of Plaintiff s UIM claim by yielding privileged documents. Trial courts have broad discretion and inherent power to stay discovery dispose of the until case preliminary are questions determined. Gettings that v. may Bldg. Laborers Local 310 Fringe Benefits Fund, 349 F.3d 300, 304 (6th Cir. 2003)(citing Hahn v. Star Bank, 190 F.3d 708, 719 (6th Cir. 1999). Indeed, the Sixth Circuit held in Smith v. Allstate Ins. Co., 403 F.3d 401 (6th Cir. 2005) that it is well within a district court s discretion in a first-party insurance contract dispute to stay discovery on a bad faith claim since the merits of the bad faith claim depend[ ] on the merits of the underlying contract claim. Smith, 403 F.3d at 407. This Court exercises this discretion accordingly, as staying discovery of Plaintiff s bad faith claims will trying the avoiding prevent UIM case complicated prejudice and to further privilege the Defendants judicial issues while economy involved by with discovery of the claims file. Pollard, 2006 WL 782739, at *3. 5 This present Court observes action acknowledges is that a Plaintiff s first-party other argument district courts the action, insurance that and in the Sixth Circuit have found bifurcation inappropriate in first-party actions. See Tharpe v. Illinois Nat l Ins. Co., 199 F.R.D. 213, 215 (W.D. inappropriate in Ky.)(holding a first-party that bifurcation action where the was insurer denied payment to the insured, claiming her chiropractic bills were unreasonable). However, like in Durbin, a different situation is presented on the facts of this case since Plaintiff is seeking UIM benefits. Durbin, 2001 WL 1793734, at *1. Specifically in a UIM case, the defendant s exposure to the plaintiff implicated on only the to the underinsured extent motorist that the liability coverage is insufficient. Id. claim is tortfeasor s Therefore, if a jury determines that Plaintiff s damages are less than or equal to the amount paid by the underlying carrier, then she will not be entitled to UIM benefits, nor will a bad faith claim lie against Defendants. Thus, even though this is a first-party action, bifurcation is appropriate. Accordingly, the Court exercises its discretion to bifurcate the trial and stay discovery until the resolution of the liability claims. Not only will the prejudice to 6 Defendants be decreased and the resulting prejudice to Plaintiff from the delay be minimal, but judicial economy will be furthered by staying discovery because a second trial and second set of discovery will not be necessary if Plaintiff fails to succeed on liability. III. Conclusion For the foregoing reasons, IT IS ORDERED: (1) That Defendants motion to bifurcate the underlying UIM claim from the bad faith claims (D.E. 11) be, and the same hereby is, GRANTED. (2) That Defendants motion to stay discovery in the Plaintiff s bad faith claims against Defendants until resolution of the primary liability claim (D.E. 11) be, and the same hereby is, GRANTED. This the 20th day of September, 2012. 7

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