Woody's Restaurant, LLC et al v. Travelers Casualty Insurance Company of America

Filing 29

MEMORANDUM OPINION AND ORDER: It is ordered that Dft's 26 Motion to Bifurcate and Stay Discovery is DENIED. Signed by Judge Joseph M. Hood on 1/9/2014. (SCD)cc: COR

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION at LEXINGTON
WOODY’S RESTAURANT, LLC,
et al.

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Plaintiff,
v.
TRAVELERS CASUALTY INSURANCE
COMPANY OF AMERICA,
Defendant.

Civil Case No.
5:12-cv-92-JMH-REW
MEMORANDUM OPINION
AND ORDER

***
This matter is before the Court upon Defendant’s Motion to
Bifurcate and Stay Discovery. [D.E. 26]. Plaintiffs have filed a
Response [D.E. 27], and Defendant has filed a Reply. [D.E. 28].
This matter being fully briefed, and the Court being otherwise
sufficiently

advised,

this

matter

is

ripe

for

the

Court’s

review.
I. Procedural and Factual Background
Plaintiffs originally filed this suit in the Boyle County
Circuit Court, seeking monetary damages.

[D.E. 1-1].

Defendant

removed the action to this Court [D.E. 1] and Plaintiffs’ Motion
to Remand was denied. [D.E. 23]. Plaintiffs assert claims for
(1)

breach

of

contract;

(2)

violation

of

the

Unfair

Claims

Settlement Practices Act, KRS 304.12-230; (3) common law bad
faith; (4) a violation of KRS 304.12-235; and (5) a violation of

the Kentucky Consumer Protection Act, KRS 367.110 - .360. [D.E.
1-1].
The suit arises out of an insurance contract Plaintiffs
made with Defendant as lessee of a property located in Danville,
Kentucky. [D.E. 1-1]. On July 9, 2010, the property was damaged
due to a severe thunderstorm. Plaintiffs submitted a claim to
Defendant for the damage. It is uncontested that Defendant has
paid an amount to Plaintiffs under the policy of insurance, see
[D.E.

26-1;

27];

however,

the

parties

dispute

whether

this

payment satisfies Defendant’s obligations under the insurance
contract. Defendant claims it “denied claims for amounts that
exceeded the coverage or were not within the coverage provided.”
[D.E. 26-1 at 2]. Plaintiff believes the dispute is “about the
amount

of

damages

owed

under

a

contract

of

insurance

that

indisputably does provide coverage for the loss.” [D.E. 27 at
1].
Defendant

has

filed

a

Motion

to

Bifurcate

and

Stay

Discovery claiming that the breach of contract claim should be
bifurcated from all other claims because bifurcation will “allow
for a more efficient and expedient resolution of the claims” and
that if not bifurcated, Defendant would be prejudiced “because
it would be subjected to cumbersome and potentially unnecessary
discovery and costly litigation.” [D.E. 26-1 at 4]. Plaintiffs
argue that Defendant will not be prejudiced if the case is not
2

bifurcated

because

this

is

a

first-party

action

and

that

discovery should not be stayed because Defendant’s concerns can
be adequately addressed through a privilege log.
II. Standard of Review
“For convenience, to avoid prejudice, or to expedite and
economize, the court may order a separate trial of one or more
separate issues, claims, crossclaims, counterclaims, or thirdparty claims. When ordering a separate trial, the court must
preserve any federal right to a jury trial.” Fed. R. Civ. P.
42(b). The decision to bifurcate is discretionary, but “it is
the burden of the party seeking bifurcation to present evidence
establishing
Allstate

that

Prop.

&

separate
Cas.

trials

Ins.

Co.,

are
No.

necessary.”

Hoskins

6:06-389-DCR,

2006

v.
WL

3193435, at *2 (E.D. Ky. Nov. 2, 2006) (citations omitted). “In
determining whether separate trials are appropriate, the court
should consider several facts, including the potential prejudice
to the parties, the possible confusion of the juries, and the
resulting convenience and economy.” Brantley v. Safeco Ins. Co.
of Am., No. 1:11-cv-54-R, 2011 WL 6012554, at *1 (W.D. Ky. Dec.
1, 2011) (quoting Wilson v. Morgan, 477 F.3d 326, 339 (6th Cir.
2007) (internal quotation marks omitted). “Only one of these
criteria need be met to justify bifurcation.” Saxion v. Titan-CMfg.,

Inc.,

86

F.3d

553,

556

omitted).
3

(6th

Cir.

1996)

(citations

“Bifurcation may be appropriate where the evidence offered
on

two

different

issues

will

be

wholly

distinct,

or

where

litigation of one issue may obviate the need to try another
issue.” Athridge v. Aetna Cas. & Sur. Co., 604 F.3d 625, 635
(D.C. Cir. 2010). (quoting Vichare v. AMBAC Inc., 106 F.3d 457,
466 (2d Cir. 1996)) (internal quotation marks omitted). “[T]he
question
single

of

bifurcation

claim

would

be

centers

on

whether

dispositive

for

resolution

the

entire

of

a

case.”

Brantley, 2011 WL 6012554, at *2 (citing Smith v. Allstate Ins.
Co., 403 F.3d 401, 407 (6th Cir. 2005)).
Similarly,
inherent

power

“[t]rial
to

stay

courts
discovery

have

broad

until

discretion

preliminary

and

questions

that may dispose of the case are determined.” Gettings v. Bldg.
Laborers Local 310 Fringe Benefits Fund, 349 F.3d 300, 304 (6th
Cir. 2003) (quoting Hahn v. Star Bank, 190 F.3d 708, 719 (6th
Cir.

1999)).

necessarily

However,
require

“bifurcation

bifurcation

of

of

the

trial

discovery.”

does

Honican

not
v.

Stonebridge Life Ins. Co., No. 05-cv-73-DLB, 2005 WL 2614904, at
*2 (E.D. Ky. Oct. 13, 2005) (quoting Cook v. U.S. Auto. Ass’n,
169 F.R.D. 359, 362 (D. Nev. 1996)). “One of the purposes of
bifurcation under Rule 42(b) is to defer costly discovery and
trial preparation costs pending the resolution of preliminary
liability

issues.”

Id.

(quoting

Novopharm

Ltd.

v.

Torpharm,

Inc., 181 F.R.D. 308, 312 (E.D.N.C. 1998)). “Stay is appropriate
4

where claims may be dismissed based on legal determinations that
could not have been altered by any further discovery.” Pollard
v. Wood, No. 5:05-cv-444-JMH, 2006 WL 782739, at *2 (E.D. Ky.
Mar. 27, 2006) (quoting Gettings v. Bldg. Laborers Local 310
Fringe

Benefits

Fund,

349

F.3d

300,

304

(6th

Cir.

2003))

(internal quotation marks omitted).
III. Analysis
The

circumstances

bifurcation.

It

is

of

this

undisputed

action
that

do

not

Kentucky

law

warrant
favors

bifurcation in a third-party case.
A bifurcated procedure was the proper way to try the
present [third-party] case. This procedure better
protects the rights of the two different defendants
because it keeps out of the first trial evidence which
was relevant to the issue of bad faith but unnecessary
and possibly prejudicial . . . in the trial of the
preliminary question of liability.
Wittmer v. Jones, 864 S.W.2d 885, 891 (Ky. 1993) (citations
omitted) (internal quotation marks omitted). However, in this
action the claims brought by Plaintiffs are against a single
defendant.

Thus,

this

concerns

addressed

evidence

against

in

one

is

a

first-party

Wittmer

regarding

defendant

which

action
the

may

be

where

“[t]he

presentation

of

prejudicial

to

another, simply are not present.” Lively v. USAA Cas. Ins. Co.,
No. 08-cv-422-JMH, 2009 WL 1116327, at *1 (E.D. Ky. Apr. 24,
2009); see also Tharpe v. Ill. Nat’l Ins. Co., 199 F.R.D. 213,
214 (W.D. Ky. 2001) (“This is a first-party action. . . . Thus,
5

the concerns regarding relevancy and prejudice discussed in the
Whittmer case take on different contours.”).
Plaintiffs’ claim of bad faith, the claim under the Unfair
Settlement

Practices

Act,

and

the

alleged

violation

of

the

Kentucky Consumer Protection Act all require the same factual
showing by Plaintiffs.
[Plaintiff’s] claim of bad faith implicates Kentucky’s
Unfair Claims Settlement Practices Act, KRS 304.12230, Kentucky’s Consumer Protection Act, KRS 367.110,
et seq., and the common law claim of bad faith failure
to pay or settle claims. Any of these three bases may
support an insured’s private tort claim against an
insurer upon proof of bad faith failure to pay claims
clearly due and payable. In Wittmer, the Supreme Court
of Kentucky stated that a claim for bad faith refusal
to pay or settle claims requires: (1) the insurer must
be obligated to pay the claim under the terms of the
policy; (2) the insurer must lack a reasonable basis
in law or fact for denying the claim; and (3) it must
be shown that the insurer either knew there was no
reasonable basis for denying the claim or acted with
reckless disregard for whether such a basis existed.
Cowan v. Paul Revere Life Ins. Co., 30 F. App’x 384, 387 (6th
Cir. 2002) (quoting Wittmer v. Jones, 864 S.W.2d 885, 886, 890
(Ky. 1993)).
The
under

issues

the

of

insurance

whether

Defendant

contract

and

owed

additional

whether

Defendant

monies
had

a

reasonable basis for refusing to pay the additional amounts are
inextricably intertwined. See Lively, 2009 WL 1116327, at *2
(“[T]he issues of whether [defendant] was obligated under the
terms of the Policy to pay Plaintiffs’ claim and whether USAA

6

acted

in

bad

faith

by

refusing

payment

are

‘inextricably

intertwined.’”); Tharpe, 199 F.R.D. at 215 (finding that the
issues

were

inextricably

intertwined

because

defendant

would

present the same evidence to defeat both of plaintiff’s claims;
thus, bifurcation served “no purpose”). Much like in Lively and
Tharpe, the evidence tending to show there was no obligation to
perform under the contract will also show that Defendant had a
reasonable basis for denying the claim. Thus, similar evidence
will apply to the contract claims and the non-contractual claims
of bad faith, the claim under the Unfair Settlement Practices
Act,

and

Protection

the

alleged

Act.

violation

Based

on

these

of

the

facts,

Kentucky
bifurcation

Consumer
is

not

warranted.
The Court also finds that Plaintiffs’ final claim, that
Defendant violated KRS 304.12-235 by not making a good faith
attempt to settle the claim within 30 days of being provided
notice of the claim and by denying full payment of the claim
without reasonable foundation, does not warrant bifurcation. If
Defendant

had

a

reasonable

basis

for

denying

the

claim,

Defendant could not have violated 304.12-235 for failing to make
a

good

faith

attempt

to

settle

within

30

days

because

KRS

304.12-235 requires some showing of bad faith to prevail. See
Dunn v. Ky. Farm Bureau Mut. Ins. Co., No. 2008-CA-718-MR, 2009
WL

792746,

at

*2

(Ky.

Ct.

App.
7

Mar.

27,

2009)

(“While

an

interesting
provision

argument,
of

completely

were

subsection

superfluous

we

(2)

and

to

accept

[of

the

KRS

statute

it,

the

304.12-135]
would

bad

faith

would

have

the

be
same

effect as it would if it provided that interest is payable any
time the claim is not paid within 30 days of submission of proof
of loss.”).
Defendant argues it will be prejudiced if the claims are
not

bifurcated

because

“[t]rying

the

claims

together

would

unavoidably ‘interject the issue of bad faith into the possibly
dispositive

dispute

of

insurance

coverage,

thus

complicating

discovery and the trial,’ whereas bifurcation would reduce the
risk of juror confusion by simplifying the issues. [D.E. 26-1 at
5] (quoting Mass. Mut. Life v. Watson, Nos. 12-cv-19-KKC, 12-cv151-KKC,

2013

WL

142431,

at

*3

(E.D.

Ky.

Jan.

11,

2013)).

However, prejudice based upon possible juror confusion can be
addressed through jury instructions, if needed. See Lively, 2009
WL 1116327, at *2 (“USAA’s concern can be addressed through
carefully drafted jury instructions, when the need arises.”).
Therefore, bifurcation of the claims is not appropriate at this
time.
A stay of discovery on the non-contractual claims is also
not

warranted

in

this

matter.

As

grounds

for

its

Motion,

Defendant asserts that not staying discovery “will unnecessarily
create discovery disputes and ensuing motion practice.” [D.E.
8

26-1 at 5]. Defendant further claims that not bifurcating the
claims

would

lead

to

prejudice

because

Defendant

“would

be

subjected to cumbersome and potentially unnecessary discovery
and costly litigation.” [D.E. 26-1 at 4].
In this case, like in Tharpe v. Illinois National Insurance
Company, the facts relating to the coverage issue are similar to
those involving the bad faith claim. 199 F.R.D. 213, 215 (W.D.
Ky.

2001).

The

decision

to

deny

the

claim

will

be

centered

around Defendant’s determination that the policy limits had been
met or that the policy did not cover the claimed damage. More
importantly, given the Court’s decision that the claims should
not

be

bifurcated,

staying

discovery

on

the

non-contractual

claims would not be prudent at this time.
Defendant claims that the discovery sought is “privileged”
and

“confidential.”

[D.E.

28

at

4].

These

concerns

can

be

adequately addressed through a privilege log. Privilege logs are
routinely used to prevent an opposing party from discovering
privileged information and Defendant has presented no argument
that

it

cannot

be

adequately

protected

by

the

use

of

this

discovery device. Therefore, a stay of discovery on the noncontractual claims is inappropriate at this time.
The Court notes that the parties are not precluded from
moving for bifurcation at a time closer to trial, if discovery
has

revealed

new

information

tending
9

to

show

bifurcation

is

appropriate. See Colvin v. Am. Bankers Ins. Co., No. 1:05-CV150-R, 2006 U.S. Dist. LEXIS 19189, at *3 (W.D. Ky. Apr. 11,
2006) (“If, however, the discovery process reveals information
that presents an issue of prejudice which Defendant believes
would merit bifurcation of the trial, Defendant may re-file the
motion at that time.”).
IV. Conclusion
Accordingly, for the foregoing reasons, IT IS ORDERED that
Defendant’s Motion to Bifurcate and Stay Discovery [D.E. 26] be,
and the same hereby is, DENIED.
This the 9th day of January, 2014.

10