Krett v. Allstate Insurance Company

Filing 22

ORDER denying dft's 14 Motion to Bifurcate by Judge Robert S. Lasnik.(RS)

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

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RICHARD P. KRETT,

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Plaintiff,

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CASE NO. C13-0131RSL
v.
ALLSTATE INSURANCE COMPANY,

ORDER DENYING MOTION TO
BIFURCATE PROCEEDINGS

Defendant.

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This matter comes before the Court on “Defendant Allstate Insurance Company’s

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Motion to Bifurcate.” Dkt. # 14. Having reviewed the memoranda, declarations, and

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exhibits submitted by the parties, the Court finds as follows:

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Plaintiff was involved in a car accident in April 2008. The other driver, Michael

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Ray, paid plaintiff the $50,000 limit of his automobile insurance policy. Plaintiff

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contends that this amount did not fully compensate him for injuries sustained in the

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accident and submitted a claim for underinsured motorist (“UIM”) benefits to his own

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insurer, defendant Allstate. When the parties could not reach agreement regarding the

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payment of UIM benefits, plaintiff filed this action alleging that Allstate breached the

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insurance policy and handled the UIM claim in bad faith.

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Allstate has moved to bifurcate, requesting that the Court stay discovery and trial
of the bad faith claims until the UIM claim has been resolved. Allstate argues that the

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ORDER DENYING MOTION
TO BIFURCATE PROCEEDINGS – 1

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cause and value of plaintiff’s claimed injuries can and should be resolved without

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reference to Allstate’s claim file and any privileged materials contained therein and that

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the sequential consideration of the two types of claims will promote judicial economy.

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Rule 42(b) of the Federal Rules of Civil Procedure governs bifurcation:

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Separate Trials. 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 third-party claims. . . .

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A court’s decision on bifurcation is committed to its discretion. Danjaq LLC v. Sony

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Corp., 263 F.3d 942, 962 (9th Cir. 2001). Nonetheless, separate trials are the exception,

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not the rule, and this Court will not bifurcate without a good reason. Bifurcation is

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occasionally in everyone’s interest. For example, when a first trial on relatively

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straightforward issues might (depending on the outcome) eliminate the need for a trial on

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more complex issues, bifurcation may be ordered. Karpenski v. Am. Gen. Life Cos., 916

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F. Supp.2d 1188, 1190 (W.D. Wash. 2012) (where recission claim would dispose of the

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entire case, determining whether a contract exists in the first place should be determined

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first). Similarly, where a case presents one set of issues that can be conveniently tried to

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a jury and another set that can be conveniently tried to the court, bifurcation may be

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appropriate. Tavakoli v. Allstate Property & Cas. Ins. Co., 2012 WL 1903666, at *7

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(W.D. Wash. May 25, 2012). A court can also bifurcate where the evidence necessary to

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prove one claim poses a significant threat of confusing or prejudicing the jury as it

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considers other claims. Hirst v. Gertzen, 676 F.2d 1252, 1261 (9th Cir. 1982).

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Allstate offers three justifications for bifurcation. First, it contends that the issues

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and evidence required to resolve the UIM benefitis claim are completely separate and

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distinct from that involved in litigating the bad faith claims. Second, it contends that the

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introduction of documents from Allstate’s claim file showing its determinations regarding

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causation and valuation would be unfair to Allstate and/or would prejudice the jury’s

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consideration of those issues. Finally, Allstate argues that bifurcation will promote

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ORDER DENYING MOTION
TO BIFURCATE PROCEEDINGS – 2

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judicial economy because if the first jury were to find that plaintiff’s injuries were not

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causally related to the April 2008 accident or that he had already been fully compensated

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for the injuries suffered, there would be no need for a second-phase trial on the bad faith

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issues.

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The first justification is unpersuasive. The Court does not, as a matter of course,

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bifurcate into separate trials every case in which distinct claims are asserted or which

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raise successive potentially dispositive issues. In the run-of-the-mill case, the time and

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expense associated with multiple discovery periods and trials outweighs any benefits

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from bifurcation, even if the claims asserted rely on different theories and/or require

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different evidence. In this case, the line between the two types of claims is not as wide or

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bright as Allstate would have it. Although Allstate argues that its claim file is completely

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irrelevant to plaintiff’s UIM claim, there is no reason to assume that is true. If, for

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example, Allstate obtained a statement from the police officer who investigated the

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accident or plaintiff’s physician regarding plaintiff’s injuries, the statement could be

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relevant to both causation and the sufficiency of Allstate’s claims handling processes.

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Allstate’s second concern carries more weight. In the course of considering

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plaintiff’s claim, it is likley that Allstate’s employees offered their own causation and

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valuation opinions regarding plaintiff’s injuries. Those evaluations are now part of

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Allstate’s claim file, along with documentation regarding Allstate’s negotiating positions

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as it attempted to settle plaintiff’s UIM claim. What value an adjuster placed on

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plaintiff’s claim is of little or no relevance to what value the jury assigns, yet admission

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of such evidence could prejudice the jury’s consideration of the issue. If the only issue to

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be tried were plaintiff’s claim for UIM coverage, some documents in the claim file may

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be subject to a privilege, inadmissible under Fed. R. Ev. 408, and/or prejudicial. The

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same evidence would be admissible, however, if the triable issues included whether

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ORDER DENYING MOTION
TO BIFURCATE PROCEEDINGS – 3

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Allstate acted in bad faith by refusing to make a reasonable offer of compensation to its

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insured.

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Bifurcation is not the only means by which the Court can ameliorate the risk of

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prejudice or jury confusion, however. The Court routinely instructs juries to disregard

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evidence for one purpose while considering it for another. If the admission of certain

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evidence would be so confusing or prejudicial that it could not be cured by instruction,

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the Court can simply exclude the evidence and/or divide a single trial into consecutive

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phases. These alternatives are not exhaustive, but simply show that bifurcation is not

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always necessary to avoid the ills posited by defendant.

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Finally, Allstate argues that bifurcation would promote judicial efficiency. The

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Court disagrees. Even if the first jury were to find that Allstate did not breach the

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coverage provisions of the UIM policy, that would not necessarily dispose of plaintiff’s

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bad faith claims. Insurers can act in bad faith even where they properly deny coverage or

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compensation to their insureds. See Coventry Assocs. v. Am. States Ins. Co., 136 Wn.2d

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269, 277-80 (1998) (reviewing examples of bad faith liability despite proper claim

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denial). Moreover, a violation of Washington’s insurance regulations may, in some

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circumstances, constitute bad faith regardless of the coverage determination. Tank v.

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State Farm Fire & Cas. Co., 105 Wn.2d 381, 386 (1996). Allstate has not demonstrated

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that plaintiff’s bad faith claim hinges on proof of an improper denial of benefits.

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Given that a second phase would likely be necessary in any event, it is difficult to

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discern any benefit that would arise from bifurcating discovery and conducting two trials.

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The burdens of such a procedure, however, are obvious. It is much more expensive and

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time consuming to resolve an action in two separate phases, particularly where Allstate

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insists not only on separate trials, but on partitioning (or attempting to partition)

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discovery. Although the increased expenses and time required for a two-phase

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proceeding would fall on both parties, they would likely weigh more heavily on plaintiff

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ORDER DENYING MOTION
TO BIFURCATE PROCEEDINGS – 4

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given Allstate’s superior financial resources. From the Court’s perspective, overseeing

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two rounds of discovery disputes, dispositive motions, jury selection/instruction, and trial

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would be far less efficient and economical than trying all of plaintiff’s claims together.

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For all of the foregoing reasons, the Court concludes that bifurcation is not

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necessary to avoid prejudice to Allstate and that the proposed procedure would likely

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increase costs and inefficiencies for the parties and the Court. Allstate’s motion to

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bifurcate (Dkt. # 14) is therefore DENIED.

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DATED this 26th day of September, 2013.

A
Robert S. Lasnik

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United States District Judge

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ORDER DENYING MOTION
TO BIFURCATE PROCEEDINGS – 5