Carpenter et al v. Liberty Insurance Corporation
ORDER denying 13 Liberty Mutual Corporation's Motion to Bifurcate and Stay Discovery. Signed by Magistrate Judge Sharon L. Ovington on 12-7-17. (mcm)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON
MINDY CARPENTER, et al.,
Case No. 3:17-cv-00228
District Judge Thomas M. Rose
Magistrate Judge Sharon L. Ovington
DECISION AND ENTRY
This case concerns Defendant Liberty Insurance Corporation’s decision to deny
benefits to Plaintiffs under a homeowner’s insurance policy. Plaintiffs sought benefits
under the insurance policy because their home was significantly damaged by fire in 2016.
They assert three claims against Liberty Insurance: (1) breach of contract, (2) “bad faith,”
and (3) “severe emotional stress/inconvenience/punitive damages.” (Doc. #3).
Liberty Insurance seeks an order under Fed. R. Civ. P. 42 that bifurcates Plaintiffs’
breach-of-contract claim from their second and third claims and stays discovery on their
second and third claims. In the event Plaintiffs’ claims proceed to trial, Liberty Insurance
also seeks bifurcation such that the breach-of-contract claim is tried first, followed
immediately by the trial of the remaining claims. (Doc. #13, PageID #66). Plaintiffs
oppose bifurcation, a stay of discovery, and bifurcation at trial.
Rule 42(b) permits bifurcation “[f]or convenience, to avoid prejudice, or to
expedite and economize….” “Only one of these criteria need be met to justify
bifurcation.” Saxion v. Titan-C-Manufacturing, Inc., 86 F.3d 553, 556 (6th Cir. 1996).
Still, “[b]ifurcation is the exception to the general rule that disputes should be resolved in
a single proceeding.” Shah v. Metropolitan Life Ins. Co., 2:16cv1124, 2017 WL
3288185, at *1 (S.D. Ohio 2017) (Smith, D.J.) (citations omitted); see Wolkosky v. 21st
Century Centennial Ins. Co.., 2:10cv439, 2010 WL 2788676, *3 (S.D. Ohio 2010) (Frost,
D.J.). Consideration of whether to bifurcate “should be grounded in the facts and
circumstances of each case.” Shah, 2:16cv1124, 2017 WL 3288185, at *1 (citing Saxion,
86 F.3d at 556). The party requesting bifurcation (Liberty Insurance) bears the burden of
demonstrating that bifurcation is warranted. See Greif International Holding BV v.
Mauser USA, LLC, 2:16cv1198, 2017 WL 2177638, at *3 (S.D. Ohio 2017) (Graham,
D.J.); see also Excel Direct, Inc. v. Nautilus Insurance Co., 2:16cv446, 2017 WL 127480,
at *1 (S.D. Ohio 2017) (Jolson, M.J.).
Liberty Insurance contends that if the Court rules in its favor on Plaintiffs’ breach
of contract claim, then Plaintiffs’ bad-faith and punitive-damages claims “may be
appropriate for dismissal.” (Doc. #13, PageID #65). Liberty Insurance foresees potential
time savings for the parties and the Court if the discovery and dispositive-motion stages
of the case proceed by focusing first on Plaintiffs’ breach-of-contract claim alone.
Liberty Insurance states, “While it is true that some of the evidence relating to the breach
of contract and the bad faith claim may overlap, the discovery that does not overlap and
[that] relates only the ‘bad faith’ claim should be bifurcated.” (Doc. #16, PageID #180).
The potential time savings that Liberty Insurance sees will occur only if the Court
rules in its favor on Plaintiffs’ breach-of-contract claim. If the opposite occurs, and
Plaintiffs’ breach-of-contract claim survives the dispositive-motion stage, much delay
will result while the parties return to the discovery stage and re-focus their attention onto
Plaintiffs’ remaining claims. A second round of dispositive motions might then be
needed. Further significant delay would occur if the case proceeds to trial only on
Plaintiffs’ breach-of-contract claim and a verdict in Plaintiffs’ favor occurs. This would
create the need for a second trial on their remaining bad-faith and “severe emotional
distress” claims. At the present time, when no dispositive motions have been filed, there
is an equal likelihood that Liberty Insurance might or might not defeat Plaintiffs’ breachof-contract claim at the dispositve-motion stage or trial (if one occurs). Given this,
bifurcation might well cause inefficient, disheveled case management as the parties
lumber back-and-forth between successive rounds of discovery (including the likely need
for more depositions), dispositive motions, and trials. The risk of this occurring
outweighs the time saving and efficiency that might result if Liberty Insurance’s
proposed bifurcations are presently allowed.
Liberty Insurance also argues that if discovery proceeds without bifurcation, it will
suffer great prejudice because Plaintiffs will gain an unfair “insiders’ look” at how
Liberty Insurance evaluated Plaintiffs’ claim for benefits. This unfair insiders’ look will
be revealed, according to Liberty Insurance, if it must produce Plaintiffs’ entire claim file
in response to Plaintiffs’ discovery requests that are related to their bad-faith claim.
Liberty Insurance must specify how it will be prejudiced by revealing its insiders’
look to Plaintiffs. Wolkosky, 2:10cv439, 2010 WL 2788676, at *4 (“[A] defendant must
make a specific showing that the discovery will prejudice its defense.”). Liberty
Insurance does not meet this specificity requirement because it does not indicate how
revealing its evaluation of Plaintiffs’ claim for benefits will hinder its ability to defend
against Plaintiffs’ breach-of-contract claim. This is all the more so where Liberty
Insurance raises an affirmative defense to Plaintiffs’ breach-of-contract claim—namely, a
coverage exclusion applies. (Doc. #7, PageID #38; Doc. #13, PageID #s 63-64). “The
insurer bears the burden of proving the applicability of an exclusion in its policy.” Retail
Ventures, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 691 F.3d 821, 832 (6th Cir.
2012) (citing Continental Ins. Co. v. Louis Marx Co., Inc., 64 Ohio St.2d 399, 401
(1980)). It therefore seems that Liberty Insurance may need to reveal their insiders’ look
as support for their affirmative defense to Plaintiffs’ breach-of-contract claim. Given
this, and without some a specific reason supporting Liberty Insurance’s conclusion that
release of its insiders’ look will cause it prejudice, Liberty Insurance has not shown it will
suffer prejudice sufficient to support bifurcation during discovery, upon dispositive
motions, or at trial. Cf. Broad v. North Pointe Ins. Co., 5:11cv2422, 2012 WL 12894227,
*2 (N.D. Ohio 2012) (Burke, M.J.) (“A court cannot ‘make an affirmative determination
of potential prejudice to Defendants, where Defendants bear the burden of proof, without
considering evidence of prejudice.’” (emphasis in original) (citation omitted)).
Liberty Insurance contends that the Ohio Supreme Court, in Boone v. Vanliner
Co., 91 Ohio St.3d 209, 214 (2001), has recognized the potential for prejudice in this type
of case by stating, “Of course, if the trial court finds that the release of information will
inhibit the insurer’s ability to defend on the underlying claim, it may issue a stay of the
bad faith claim and related production of discovery pending the outcome of the
underlying claim.” Yet, accepting (as Boone does) that potential prejudice might exist in
a given case does not show that any actual prejudice will arise from not bifurcating the
present case. And, unlike the present case, the potential for prejudice noted in Boone
arose from the possible release during discovery of attorney-client communications that
occurred before the denial of insurance coverage. See id. The Ohio Supreme Court
observed, “At that stage of the claims handling, the claims file materials will not contain
work product, i.e., things prepared in anticipation of litigation.” Id. Liberty Insurance
does not indicate that it will be prejudiced by the release of attorney-client
communications or trial-preparation materials. Boone’s concern about potential prejudice
from release of such information does not show prejudice in the present case. And, as in
Wolkosky, “Defendant can still guard against prejudice by challenging future discovery
requests that it believes seek privileged documents.” 2010 WL 2788676, *4.
IT IS THEREFORE ORDERED THAT:
Liberty Insurance Corporation’s Motion to Bifurcate and Stay Discovery
Regarding Claims Two and Three of Plaintiffs’ Complaint (Doc. #13) is DENIED.
December 7, 2017
s/Sharon L. Ovington
Sharon L. Ovington
United States Magistrate Judge
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