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Auto Insurer Can’t Put the Brakes on Bad-Faith Case

October 31, 2017

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In <a href="">Newhouse v. Geico Casualty Company</a>, the court denied an insurer's motion to sever and stay the bad faith portion of a claim filed by its insured for uninsured motorist benefits.
In March 2015, plaintiff was driving a rental car when he was struck from behind while stopped at a stop sign . As a result of the accident, plaintiff suffered a variety of injuries, some of which required medical treatment.  Following payment of the tortfeasor’s policy limits, plaintiff sought UIM benefits from his auto insurer.  Plaintiff claimed he was owed the full amount of the UIM coverage offered by the policy, $100,000. The insurer evaluated the claim and offered $10,000.  Newhouse believed his injuries exceeded the offer, and filed suit alleging breach of contract regarding the offer, bad faith in relation to making such an offer, and loss of consortium on behalf of plaintiff's wife.
In denying the insurer's motion to sever and stay the litigation the court examined four factors: (1) whether 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 not granted. While the insurer argued the issues were distinct, and the evidence in the UIM claim differed from the bad-faith claim, the court disagreed.  The court also rejected the insurer's argument that it would be prejudiced by a lack of bifurcation because, relative to the bad faith action, the carrier would have to present information on how it valued a claim before the jury assessed liability and damages in the UIM portion of the claim.
Bifurcation is a common strategy for defending allegations of bad faith arising out of UIM claims handling. The court’s decision signals a turn away from severing cases in favor of judicial economy and is something that should be monitored.
Thanks for Hillary Ladov for her contribution to this post.

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