Parrish v. State Farm Mutual Automobile Insurance Company

Filing 15

MEMORANDUM OPINION AND ORDER signed by Judge John G. Heyburn, II on 01/15/2014 re: 10 Motion to Bifurcate. IT IS HEREBY ORDERED that State Farm's motion to bifurcate the contract and bad faith claims is SUSTAINED. IT IS FURTHER ORDERED that discovery on the bad faith claim is STAYED until further order of the Court. cc: Counsel (TJD)

UNITED STATES DISTRICT COURT
FOR WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
CIVIL ACTION NO. 3:13-CV-721-H
MARK A. PARRISH, as Administrator of
the ESTATE OF KAYTRYN PARRISH

PLAINTIFF

v.
STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY

DEFENDANT

MEMORANDUM OPINION AND ORDER
Defendant, State Farm Mutual Automobile Insurance Company (“State Farm”) has
moved to bifurcate and stay discovery with respect to Plaintiff’s bad faith claims until the
underlying contract claim for underinsured motorist (“UIM”) benefits is resolved.
This case arises from an automobile collision between State Farm’s insured, Kaytryn
Parrish (“Parrish”), and Mary Roberson (“Roberson”), which resulted in Parrish’s death. After
Roberson’s liability insurer paid policy limits of $250,000, Parrish’s estate (“Plaintiff”)
submitted a claim for UIM benefits under Parrish’s State Farm policy. When State Farm denied
the claim, Plaintiff filed this breach of contract and bad faith action.
In a diversity action, the Court applies substantive Kentucky law. Himmel v. Ford Motor
Co., 342 F.3d 593, 598 (6th Cir. 2003). As a general rule, Kentucky law holds that first-party
UIM claims and bad faith claims should be tried separately. Motorist Mutual Ins. Co. v. Glass,
996 S.W.2d 437, 450 (Ky. 1999) (“If there had been a valid UIM claim in this case . . . [t]he trial
should have been bifurcated with the negligence (UIM) claim tried first, followed by the bad
faith claim.” (citing Wittmer v. Jones, 864 S.W.2d 885, 891 (Ky. 1993))); see also Durbin v.
State Farm Automobile Ins. Co., CIV.A. 3:00CV-384-S, 2001 WL 1793734, at *1 (W.D. Ky.

Mar. 22, 2001). The reasons for this are twofold. First, the evidence admissible in the bad faith
action could be unnecessary and unfairly prejudicial to an insurer in the underlying contract
action determining liability. See Wittmer, 864 S.W.2d at 891; Von Wiegen v. Shelter Mut. Ins.
Co., CIV.A. 5:13-40-DCR, 2013 WL 3771540, at *3 (E.D. Ky. July 17, 2013) (bifurcation serves
“convenience, efficiency, and economy” where plaintiff’s bad faith claim includes conduct
beyond the underlying claim).
Certainly, Plaintiff’s bad faith claims require evidence unnecessary to her contract claim.
For example, to show State Farm acted unreasonably, and thus satisfy the second element of her
bad faith claim, Plaintiff would need to introduce evidence of the relevant liability limits,
motorist Roberson’s $250,000 liability limit and State Farm’s $100,000 UIM liability limit. This
evidence would inform the jury that, if they awarded Plaintiff $250,000 or less, she would be
entitled to none of the UIM coverage, while if they jury awarded $350,000 or more, Plaintiff
would be entitled to full UIM coverage.
Secondly, the need for adjudication of Plaintiff’s bad faith claims depends upon the
outcome of the contract action. Smith v. Allstate Ins. Co., 403 F.3d 401, 407 (6th Cir. 2005)
(“Because the merits of the bad faith claim depended on” the underlying claim, “it was
reasonable for the court to resolve the [underlying] question before allowing the bad faith claim
to proceed.”) To establish a prima facie case for Plaintiff’s bad faith claim, Plaintiff must have
recovered damages that, after apportionment for comparative fault, exceed her available
$250,000 in liability limits. See Glass, 996 S.W.2d at 450; Durbin, 2001 WL 1793734, at *1. If
the damages awarded do not exceed this threshold, State Farm will not be liable, and Plaintiff
will not be able to pursue her bad faith claims as a matter of law.

2

For these reasons, the Court finds that under these circumstances, following the general
rule and bifurcating trial on the bad faith claims is appropriate.
A district court has the discretion to stay discovery of a bad faith action while a contract
action is pending. Smith v. Allstate Ins. Co., 403 F.3d 401, 407 (6th Cir. 2005). Absent a stay,
both Plaintiff and State Farm may be required to disclose information which would be
inadmissible or unfairly prejudicial in the contract action. Many courts have found that staying
discovery pertaining to a bad faith claim pending resolution of the underlying contractual dispute
would “both prevent prejudice and further judicial economy.” Nationwide Mut. Fire Ins. Co. v.
Jahic, 3:11-CV-00155, 2013 WL 98059 (W.D. Ky. Jan. 7, 2013) (collecting cases).
For these reasons, the Court finds that under these circumstances, staying discovery of
Plaintiff’s bad faith claims pending resolution of the UIM contract issue would further the
interests of judicial economy, reduce overall litigation costs, and likely avoid prejudice to one or
both parties. Plaintiff may move for relief from the stay should circumstances change.
Being otherwise sufficiently advised,
IT IS HEREBY ORDERED that State Farm’s motion to bifurcate the contract and bad
faith claims is SUSTAINED.
IT IS FURTHER ORDERED that discovery on the bad faith claim is STAYED until
further order of the Court.

January 15, 2014

cc:

Counsel of Record
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