Wilkinson et al v. Mutual of Omaha Insurance Company et al

Filing 27

MEMORANDUM OPINION & ORDER denying without prejudice defendant's 17 MOTION to Bifurcate; denying defendant's 17 MOTION to Stay. Signed by Judge Joseph R. Goodwin on 3/6/2014. (cc: attys; any unrepresented party) (tmr)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
CHARLESTON DIVISION

LYLE A. WILKINSON, et al.,
Plaintiffs,
v.

CIVIL ACTION NO. 2:13-cv-09356

MUTUAL OF OMAHA INSURANCE
COMPANY,
Defendant.

MEMORANDUM OPINION & ORDER

Pending before the court is the Defendant’s Motion to Bifurcate and Stay the Bad Faith
Action [Docket 17]. As set forth below, the motion to bifurcate is DENIED without prejudice
and the motion to stay is DENIED.
I. Background
This case involves a life insurance policy sold by Mutual of Omaha Insurance Company
(“Mutual of Omaha”) to plaintiff Lyle A. Wilkinson, in which plaintiff Susan B. Wilkinson was
the named primary beneficiary. (Compl. [Docket 1-1] ¶ 7). The plaintiffs allege that, despite Mr.
Wilkinson being qualified to receive half of the net life insurance payout pursuant to an
acceleration clause, Mutual of Omaha denied that coverage. (Id. ¶¶ 8-10). Mr. Wilkinson applied
for the benefits three separate times—and was denied each time—after his physician found that he
was “terminally ill” as defined by the insurance policy. (See Resp. in Opp. to Def.’s Mot. to
Bifurcate and Stay Bad Faith Action [Docket 23], at 3).

In addition to a claim for improper denial of coverage, the plaintiffs bring claims against
Mutual of Omaha for common law bad faith (see Compl. [Docket 1-1] ¶¶ 36-38), violations of
West Virginia’s Unfair Trade Practice Act (see id. ¶¶ 24-35), and negligent and intentional
infliction of emotional distress (see id. ¶¶ 39-46).
In the instant motion, Mutual of Omaha asks that I bifurcate and stay (1) the common law
bad faith claim, (2) the Unfair Trade Practices Act claim, and (3) the negligent and intentional
infliction of emotional distress claims (collectively the “Bad Faith Claims”) until there is a
determination that the plaintiffs are indeed entitled to coverage under the life insurance policy (the
“Coverage Claim”). According to Mutual of Omaha, staying the Bad Faith Claims pending
resolution of the Coverage Claim is in the best interest of judicial economy and efficiency, and it
would prevent unfair prejudice. Mutual of Omaha argues that under Federal Rule of Civil
Procedure 42(b), I should bifurcate the Bad Faith Claims from the Coverage Claims and conduct
separate trials for each of them.
II. Analysis
Mutual of Omaha asks for two separate forms of relief. First, Mutual of Omaha asks that I
bifurcate trial between the Coverage Claims and the Bad Faith Claims. Second, Mutual of Omaha
asks that I stay discovery of the Bad Faith Claims until there is a determination, either at trial or by
the court, that the plaintiffs qualify for coverage under the insurance policy. I address these issues
separately.
A. Bifurcation for Trial
Bifurcation of a first-party bad faith insurance action is not mandatory, and is left to the
judge’s discretion. See Syl. Pt. 2, Light v. Allstate Ins. Co., 506 S.E.2d 64, 65 (W. Va. 1998); see
also Fed. R. Civ. P. 42(b) (“For convenience, to avoid prejudice, or to expedite and economize, the
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court may order a separate trial of one or more separate issues, claims, crossclaims, counterclaims,
or third-party claims.”).
In this case, discovery remains ongoing. District judges in several recent cases have found
it premature to move for bifurcation of bad faith insurance claims before the close of discovery.
See, e.g., Paull Assocs. Realty, LLC v. Lexington Ins. Co., No. 5:13-cv-80, 2013 WL 5777280, at
*8 (N.D. W. Va. Oct. 25, 2013); Chaffin v. Watford, No. 3:08-cv-0791, 2009 WL 772916, at *2
(S.D. W. Va. Mar. 18, 2009) (Chambers, J.); Tustin v. Motorists Mut. Ins. Co., No. 5:08-cv-111,
2008 WL 5377835, at *2 (N.D. W. Va. Dec. 22, 2008). I see no reason to decide otherwise. I
therefore DENY without prejudice the motion to bifurcate. Mutual of Omaha may renew this
motion at the close of discovery.
B. Stay of Discovery on the Bad Faith Claims
Although I decline to bifurcate the trial at this time, I must still determine whether to stay
discovery on the plaintiff’s bad faith claims. “One of the purposes of [Federal Rule of Civil
Procedure 42(b)] is to permit deferral of costly and possibly unnecessary discovery proceedings
pending resolution of potentially dispositive preliminary issues.” Ellingson Timber Co. v. Great N.
Ry. Co., 424 F.2d 497, 499 (9th Cir. 1970); see also Brennan v. Local Union No. 639, Int’l Bhd. of
Teamsters, Chauffeurs, Warehousemen & Helpers of Am., 494 F.2d 1092, 1100 (D.C. Cir. 1974)
(affirming district court’s protective order prohibiting further discovery until five days after entry
of summary judgment opinion). “On the other hand, if the transactions involved are so interrelated
that a limitation to specific matters would frustrate the inquiry or lead to wasted effort by requiring
two depositions to be taken of the same witness a court is well justified in refusing a limitation.”
8A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2040 (3d ed.
2010).
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Light v. Allstate Ins. Co. is instructive. There, the court held that “[t]rial courts have
discretion in determining whether to stay discovery in a first-party bad faith claim against an
insurer that has been bifurcated and stayed.” Syl. Pt. 3, Light, 506 S.E.2d at 65. The court
enunciated factors that trial courts should consider: “(1) the number of parties in the case, (2) the
complexity of the underlying case against the insurer, (3) whether undue prejudice would result to
the insured if discovery is stayed, (4) whether a single jury will ultimately hear both bifurcated
cases, (5) whether partial discovery is feasible on the bad faith claim and (6) the burden placed on
the trial court by imposing a stay on discovery.” Id.
Although these factors literally apply only “when bifurcation has been ordered,” id., they
are still appropriate for determining whether to stay discovery. First, the parties to the Coverage
Claim are the same as the parties to the Bad Faith Claims. Thus, the number of parties does not
weigh in favor of staying discovery on the Bad Faith Claims. Second, this does not appear to be a
particularly complex case because the central issue is interpretation of policy language. Although
Mutual of Omaha argues that the Bad Faith Claims are more complex than the underlying
Coverage Claim, that complexity did not concern other federal courts considering this issue. See,
e.g., Paull Assocs. Realty, LLC v. Lexington Ins. Co., No. 5:13-cv-80, 2013 WL 5777280, at *9
(N.D. W. Va. Oct. 25, 2013); Chaffin v. Watford, No. 3:08-cv-0791, 2009 WL 772916, at *2 (S.D.
W. Va. Mar. 18, 2009) (Chambers, J.); Tustin v. Motorists Mut. Ins. Co., No. 5:08-cv-111, 2008
WL 5377835, at *3 (N.D. W. Va. Dec. 22, 2008).

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Third, prejudice would result to the plaintiffs if discovery is partially stayed. 1 As the
plaintiffs note, partially staying discovery could result in depositions being taken twice. Thus, the
third factor weighs in favor of unitary discovery proceedings.
The fourth factor—whether a single jury will hear the case—is unclear at this point
because I have not decided whether to bifurcate the trial. On the fifth factor, I agree with Mutual of
Omaha’s contention that partial discovery is feasible. Even so, it would be more practical to allow
unitary discovery in order to prevent deposing witnesses twice. Finally, on the sixth factor—the
burden imposed on this court from partial discovery—I find that it would be easier to oversee
unitary discovery and to receive dispositive motions on all of the evidence at once.
Therefore, the Light factors weigh in favor of allowing discovery to proceed on all claims.
Accordingly, Mutual of Omaha’s motion to stay discovery on the Bad Faith Claims is DENIED.
III. Conclusion
As set forth above, the motion to bifurcate is DENIED without prejudice and the motion
to stay is DENIED. The court DIRECTS the Clerk to send a copy of this Order to counsel of
record and any unrepresented party.
ENTER:

1

March 6, 2014

I note that Mutual of Omaha misstated the third Light factor as “Whether undue prejudice would result to the insurer
if discovery is stayed.” (Def. Mutual of Omaha’s Mem. of Law in Supp. of Its Mot. to Bifurcate and Stay the Bad Faith
Claims) (emphasis added).

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