Newhouse et al v. GEICO Casualty Company
MEMORANDUM (Order to follow as separate docket entry) re: 10 MOTION to Sever and Stay Bad Faith Claim filed by GEICO Casualty Company. Signed by Honorable Matthew W. Brann on 9/18/2017. (jn)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
DAVID NEWHOUSE & his wife
GEICO CASUALTY COMPANY
September 18, 2017
Before the Court for disposition is Defendant GEICO Casualty Company’s
Motion to Sever and Stay Plaintiffs’ Bad Faith Claim. For the reasons that follow,
GEICO’s Motion is denied.
On March 29, 2017, Plaintiffs David and Patricia Newhouse filed an
amended complaint against Defendant GEICO Casualty Company (“GEICO”),
alleging breach of contract regarding GEICO’s underinsured motorist coverage
(“UIM”) settlement offer, bad faith in relation to GEICO making such an offer, and
loss of consortium on behalf of Plaintiff Patricia Newhouse.1 The three counts
against GEICO stem from the following facts.2
On March 16, 2015, Plaintiff David Newhouse (“Newhouse”) was operating
a rental vehicle, a 2014 KIA Rio.3 Newhouse accessed an on-ramp to Interstate 79
in South Strabane Township, Washington County, Pennsylvania.4 Due to a stop
sign located at the end of the on-ramp, Newhouse stopped his vehicle before
accessing Interstate 79.5 Suddenly, Joseph Haywood (“Tortfeasor”) struck
Newhouse’s stationary vehicle from behind.6 As a result of the accident, Newhouse
suffered a variety of injuries, some of which required medical treatment.7
On or about March 24, 2016, Tortfeasor’s insurance company tendered to
Newhouse fifteen thousand dollars ($15,000.00), which was the limit of
Tortfeasor’s insurance policy.8 GEICO, Newhouse’s insurance provider, consented
to the settlement with Tortfeasor’s insurance provider, and waived its subrogation
rights.9 Under the terms of the subject insurance policy, GEICO was to provide for
Amend. Compl. (ECF No. 6) at 4, 11, 15.
Because this Memorandum concerns only GEICO’s Motion to Sever and Stay Newhouse’s
bad faith claim from the breach of contract claim, Patricia Newhouse’s loss of consortium
claim need not be addressed at this time.
Amend. Compl. (ECF No. 6) ¶ 9, at 2.
Id. ¶ 11, at 3.
Id. ¶ 22, at 8-9.
Id. ¶ 23, at 9.
Def.’s Brief (ECF No. 11) at 1; Pl.’s Brief (ECF No. 13) at 2.
all rental vehicles the same coverage to that of Newhouse’s personal vehicles.10
GEICO’s policy also provided UIM coverage in the amount of one hundred
thousand dollars ($100,000.00) with stacking times two vehicles, permitting
possible UIM coverage of two hundred thousand dollars ($200,000.00) per
person.11 GEICO is entitled to a credit of fifteen thousand dollars ($15,000.00) due
to Newhouse receiving payment from Tortfeasor’s insurance provider, as noted
On March 30, 2015, Newhouse’s counsel requested from GEICO a complete
and certified copy of Patricia Newhouse’s insurance policy in effect at the time of
the accident.13 On April 6, 2015, GEICO responded by sending a fax to
Newhouse’s counsel that only contained a declaration page; GEICO did not fax a
complete and certified copy of the insurance policy.14 On April 30, 2015,
Newhouse’s counsel again requested that GEICO send a complete and certified
copy of Patricia Newhouse’s insurance policy.15 Absent a response from GEICO,
Newhouse’s counsel yet again requested that GEICO send a complete and certified
copy of the insurance policy on June 23, 2015.16 Finally, on June 26, 2015, GEICO
Amend. Compl. (ECF No. 6) ¶¶ 10 & 25, at 3 & 9.
Id. ¶ 26, at 9-10.
Id. ¶ 27, at 10.
Id. ¶ 41(a), at 12. Based on this fact, presumably, Newhouse’s insurance policy was under his
Id. ¶ 41(b), at 12.
Id. ¶ 41(c), at 13.
Id. ¶ 41(d), at 13.
sent to Newhouse’s counsel a complete and certified copy of the insurance policy
in effect at the time of the accident.17
On May 23, 2016, as a result of his injuries, Newhouse made a demand upon
GEICO for the full amount of the UIM coverage permitted under the insurance
policy.18 On June 10, 2016, Newhouse’s counsel received a letter from GEICO
stating that GEICO would respond to Newhouse after it finished its evaluation of
his demand.19 Before GEICO completed its evaluation, however, Newhouse sent a
letter to GEICO, notifying GEICO that Newhouse would require surgery in the
future due to his injuries sustained in the accident.20 GEICO ultimately finished its
evaluation of Newhouse’s demand, offering Newhouse ten thousand dollars
($10,000.00) for the settlement of his UIM claim.21
Believing that their injuries exceeded the settlement amount offered by
GEICO, Plaintiffs David and Patricia Newhouse commenced the underlying action
against GEICO in the Court of Common Pleas of Clinton County, Pennsylvania.22
On March 17, 2017, GEICO removed the instant action to this Court based on
diversity of citizenship of the parties and an amount in controversy in excess of
Id. ¶ 41(e), at 13.
Id. ¶ 41(f), at 13.
Id. ¶ 41(g), at 13.
Id. ¶ 41(h), at 13-14.
Id. ¶ 41(i), at 14.
Id. ¶ 41(l), at 14; see ECF No. 1, Exhibit 1.
seventy-five thousand dollars ($75,000.00).23 Three days later, GEICO filed a
Motion to Dismiss Plaintiff’s Bad Faith Claim for failure to state a claim upon
which relief can be granted.24 This Court denied GEICO’s Motion to Dismiss in
light of Plaintiffs filing an Amended Complaint on March 29, 2017.25 GEICO then
filed the instant Motion to Sever and Stay Plaintiff’s Bad Faith Claim on May 4,
2017.26 This Motion has been fully briefed by both parties, and is now ripe for
Federal Rule of Civil Procedure 42 governs bifurcation. In relevant part,
Rule 42(b) provides, “[f]or 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 third-party claims.”28 Evidenced by the
word “may,” bifurcation is wholly within the court’s discretion.29 “In exercising
this discretion, the court is required to weigh the competing interests of the parties
and attempt to maintain an even balance.”30 “In maintaining that even balance, the
See ECF No. 1.
ECF No. 4 ¶¶ 20-21, at 3-4.
ECF No. 7; see ECF No. 6.
ECF No. 10.
See ECF Nos. 11 & 13.
Fed. R. Civ. P. 42(b).
See Craker v. State Farm Mut. Auto. Ins. Co., Civ. No. 11-0225, 2012 WL 3204214, at *1
(W.D. Pa. Aug. 3, 2012).
Cooper v. Metlife Auto & Home, Civ. No. 13-687, 2013 WL 4010998, at *2 (W.D. Pa. Aug.
court must consider whether there is even a fair possibility that the stay would
work damage on another party.”31
In determining whether to sever and stay, a court “must balance
considerations including the convenience of the parties, the avoidance of prejudice
to either party, and promotion of the expeditious resolution of the litigation.”32
Specifically, a court should consider four factors:
(1) [W]hether the issues are significantly different from each other;
(2) whether they require separate witnesses and documents; (3)
whether the nonmoving party would be prejudiced by bifurcation; and
(4) whether the [moving] party would be prejudiced if bifurcation is
GEICO, as the moving party, “bears the burden of demonstrating that bifurcation is
With respect to the first factor, GEICO contends that the breach of contract
and the bad faith claim are “wholly distinct” from one another.35 GEICO argues
not only that the evidence underlying each claim is distinct, but also that
bifurcation of the two issues promotes judicial economy because “litigation of one
issue may obviate the need to try” the other.36 I disagree.
Id. at *2 (internal quotation marks omitted).
Id. (internal quotation marks omitted).
Griffith v. Allstate Ins. Co., 90 F.Supp.3d 344, 346 (M.D. Pa. 2014) (Mannion, J.).
Cooper, 2013 WL 4010998, at *2.
ECF No. 11, at 3.
The instant matter is not the first time breach of contract and bad faith
claims have been alleged together in this Court. Indeed, another case, Griffith v.
Allstate Insurance Co., contains facts strikingly similar to those here.37 In Griffith,
the plaintiff was involved in a car accident.38 The plaintiff had UIM coverage of
$25,000.00 with stacking of two vehicles, permitting coverage up to $50,000.00.39
The plaintiff settled her claims with the other motorist, and subsequently filed an
UIM claim with her insurance company because “her damages exceeded the other
driver’s policy limits.”40 The defendant insurance company, however, only offered
the plaintiff $5,000.00, an amount significantly less than the $50,000.00
demanded.41 Because of the defendant insurance company’s settlement amount, the
plaintiff brought suit, alleging breach of contract and bad faith.42 The defendant
insurance company, similar to GEICO here, moved to stay and sever the bad faith
claim from the UIM claim.43
Balancing the factors above on whether bifurcation was appropriate, the
Court in Griffith concluded that the defendant insurance company failed to satisfy
its burden in proving the two issues distinct.44 The Court found the two issues to be
See Griffith, 90 F.Supp.3d at 345.
See id. at 346.
“significantly intertwined” as to their underlying inquiries.45 The Court in Griffith
In the breach of contract claim, the question for the jury will be
whether the plaintiff suffered injuries from the accident that were
covered under her UIM policy and she was not otherwise properly
compensated. Similarly, the bad faith claim will require the jury to
determine whether the defendant’s investigation into those same
injuries was reasonable and, if so, whether there was a reasonable
basis supporting the defendant[ insurance company’s] offer of
Similar to the overlapping nature of the claims in Griffith, the Plaintiff’s claims
here are not so “profoundly different” from one another to warrant bifurcation.47
GEICO’s contention that litigation concerning the UIM claim might obviate
the need to litigate the bad faith claim is also without merit. Newhouse’s bad faith
claim is based on GEICO offering $10,000.00 as the UIM settlement amount and
failing “to act with reasonable promptness in evaluating and responding” to
Newhouse’s demand.48 While the two claims are grounded on similar findings of
evidence, they are nevertheless separate claims.49 Thus, litigation on the bad faith
claim is not contingent upon success of the breach of contract claim.
Id. at 346-347.
Id. at 346.
Amend. Compl. (ECF No. 6) ¶ 38, at 12.
See Consugar v. Nationwide Ins. Co. of America, No. 3:10-CV-2084, 2011 WL 2360208, at
*7 (M.D. Pa. June 9, 2011) (Munley, J.).
While each claim would utilize much of the same evidence, Newhouse could
“simultaneously prevail on a bad-faith claim and lose on a UIM claim.”50 Indeed,
bad faith can extend beyond its underlying breach of contract claim into a limited
few areas.51 One area, for example, “concerns insurers that unreasonably delay the
evaluation of their insureds’ claims, even if the insurer’s ultimate assessment of the
claim proves to be correct.”52 Thus, it would be improvident for this Court to sever
and stay discovery on bad faith until the conclusion of the breach of contract claim.
Accordingly, the first factor opposes bifurcation.
Regarding factor two, while GEICO contends that evidence for Newhouse’s
UIM claim differs from the evidence for the bad faith claim, this contention is also
without merit. In Griffith, the Court found that both claims would utilize similar
documents, such as the defendant insurance company’s claim file, relevant medical
evidence of the plaintiff, and the defendant insurance company’s settlement
Newhouse here would use similar evidence and testimony for both his
breach of contract and bad faith claims. For example, documents concerning how
Newhouse’s insurance claim was handled, documents reflecting the claims
adjuster’s determination, and how GEICO arrived at its settlement value would be
See Eizen Fineburg & McCarthy, P.C. v. Ironshore Specialty Ins. Co., 319 F.R.D. 209, 212
(E.D. Pa. 2017).
See Griffith, 90 F.Supp.3d at 347.
relevant for both claims. Contrary to GEICO’s contention, bifurcating these claims
and consequently requiring two separate discovery processes would be a waste of
both judicial resources and time.
GEICO also contends bifurcation would avoid “repeated motions for
protective orders” concerning work product.54 Specifically, GEICO argues that
certain documents available to Newhouse for the bad faith claim would be
unavailable for the underlying breach of contract claim.
To promote judicial economy, the Court will address the issue of work
product now to prevent unnecessary subsequent discussion. Known as the work
product privilege or doctrine, Federal Rule of Civil Procedure 26(b)(3)(A)
[A] party may not discover documents and tangible things that are
prepared in anticipation of litigation or for trial by or for another party
or its representative (including the other party’s attorney, consultant,
surety, indemnitor, insurer, or agent).55
Rule 26(b)(3)(B) also requires courts to protect against disclosures containing
“mental impressions, conclusions, opinions, or legal theories of a party’s attorney
or other representative concerning the litigation.”56 That said, while the “work
product doctrine may apply to documents prepared by an insurer or agents of an
ECF No. 11, at 3.
Fed. R. Civ. P. 26(b)(3)(A).
Fed. R. Civ. P. 26(b)(3)(B).
insurer, it is equally clear that Rule 26(b)(3) was not intended to protect all
insurance claim files from discovery.”57
Insurance companies have a duty “to investigate, evaluate and make a
decision with respect to claims made on it by its insureds,” like Newhouse’s
demand at issue here.58 “Mental impressions and opinions” by GEICO’s claims
adjustor are generally not protected under the work product doctrine unless they
were prepared in anticipation of trial.59 Thus, the threshold question becomes when
GEICO anticipated litigation, which is a fact-intensive inquiry.60
GEICO, however, has only argued that the information relating to the bad
faith claim should be submitted to a jury after the conclusion of the breach of
contract litigation.61 GEICO did not argue that this information was protected by
the work-product doctrine. Absent such an objection, GEICO leads the Court to
conclude that these documents are discoverable and would have been provided had
Newhouse been successful on the underlying breach of contract claim. I find then
that GEICO has failed to allege specific documents protected under the work-
Consugar, 2011 WL 2360208, at *3 (emphasis in original).
Keefer v. Erie Ins. Exchange, Civ. No. 1:13-CV-1938, 2014 WL 901123, at *4 (M.D. Pa.
Mar. 7, 2014) (Rambo, J.).
See id. at *5.
Because the instant Motion is to sever and stay, GEICO has not yet alleged facts to
demonstrate when it reasonably anticipated litigation.
product doctrine. As such, GEICO must provide the documents that Newhouse
requests in discovery.62
If, however, GEICO believes certain documents are protected by the workproduct doctrine, it may file the appropriate motions requesting this Court conduct
an in camera review of the particular documents.63 Contrary to GEICO’s assertion
that bifurcation would alleviate the need for repeated motions, bifurcation would
generate the opposite result because both claims will use similar documents and
testimony. The second factor, therefore, weighs against bifurcation.
With respect to factor three, Newhouse again cites Griffith, but fails to
provide any argument explaining how he might be prejudiced were this Court to
grant bifurcation. While the Court will not contrive an argument on Newhouse’s
behalf, I find Griffith’s discussion regarding factor three persuasive. Bifurcation
would effectively split this case into two separate trials based on similar evidence
and testimony. Bifurcation would require two discovery periods, double the
dispositive motions, and double pre-trial motions.64
Moreover, Newhouse would prospectively have to pay his attorney for twice
the work on the same evidence and testimony. While GEICO previously argued
As the Court ordered in Keefer, GEICO is put on notice that if Newhouse requests certain
documents for discovery that GEICO believes are protected by the work-product doctrine,
GEICO has the burden to allege facts demonstrating that the documents are protected. See
Keefer, 2014 WL 901123, at * 5.
See Consugar, 2011 WL 2360208, at *2.
See Griffith, 90 F.Supp.3d at 347.
that a lack of finding on the breach of contract claim might obviate the need for
litigating the bad faith claim, such an argument would carry through were the
claims kept together.65 To bifurcate Newhouse’s claims would be an economical
injustice not only to Newhouse, but also an unnecessary waste of judicial
Chief Justice John G. Roberts, Jr. wrote in the 2015 Year-End Report from
the Federal Judiciary that there exists an “obligation of judges and lawyers to work
cooperatively in controlling the expense and time demands of litigation,” and
lawyers “have an affirmative duty to work together, and with the court, to achieve
prompt and efficient resolutions of disputes.”66 Accordingly, the third factor also
weighs against bifurcation.
Lastly, GEICO argues that, absent bifurcation of the two claims, it would be
prejudiced because it will have to present information on how it values a claim
before the jury assesses liability and damages. Furnishing such information before
the resolution of the breach of contract claim, GEICO argues, would be “highly
For the breach of contract claim, however, GEICO would have to provide
information concerning how it values an insurance claim regardless of whether the
JOHN G. ROBERTS, JR., 2015 YEAR-END REPORT ON THE FEDERAL JUDICIARY 6 (2015).
ECF No. 11, at 4.
bad faith claim was severed. Such evidence is relevant for the jury to determine
why GEICO offered only $10,000.00 to settle the UIM claim. Moreover, GEICO
can defeat a bad faith claim by proving that it had a “reasonable basis” for offering
the $10,000.00 settlement amount and expending the length of time it took to
evaluate Newhouse’s insurance claim.68 Considering the factors set forth in Griffith
in conjunction with promoting judicial economy, the Court finds that bifurcation is
Based on the above discussion, Defendant GEICO Casualty Company’s
Motion to Sever and Stay Plaintiff’s Bad Faith Claim is denied.
An appropriate Order follows.
BY THE COURT:
s/ Matthew W. Brann
Matthew W. Brann
United States District Judge
Walter v. Travelers Personal Ins. Co., Civ. No. 4:12-CV-346, slip op. at 5 (M.D. Pa. Nov.
29, 2016) (Carlson, J.).
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