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Living and Dying By the Sword in PA Coverage.

October 25, 2011

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The knee jerk reaction of many insurers when faced with a state court action is – remove the case to federal court. But as the case of [i]Craker v. State Farm[/i] makes clear, this decision can be perilous if not fully thought through. In [i]Craker[/i], the plaintiffs sued their insurer in Pennsylvania State court to recover $200,000 in underinsured motorist (“UIM”) coverage which State Farm had refused to pay. The complaint asked for the value of the UIM coverage and bad faith damages. State Farm removed the case to federal court. Gary Lancaster, the chief judge of the Western District of Pennsylvania, was assigned to the case.
After failing to engage in meaningful discovery and when confronted with a motion to compel discovery, State Farm filed a motion to sever and stay the bad faith claims. Relying on Pennsylvania state law, State Farm reasoned that discovery on the bad faith claim should not proceed until after the underinsured motorist claim was resolved. Judge Lancaster <a href="http://pdf.wcmlaw.com/pdf/Craker.pdf">denied</a> the motion and ruled that:
[i]To the extent State Farm relies on and seeks the benefit of favorable rulings made by state court judges in this judicial district regarding the administration of bad faith claims, State Farm committed a strategic error by removing this case. Having single-handedly selected this forum, State Farm must now abide by our rules and procedures.[/i]
The tone of the language suggests that Judge Lancaster was upset by State Farm’s less than diligent conduct of discovery, and my own personal experience is that the WDPA doesn’t really like to handle coverage litigation. But nevertheless, the reality remains – if you want the benefit of federal judges, you have to live with the dangers (e-discovery and all) that come with federal jurisdiction.
If you have any questions about this post, please contact Bob Cosgrove at <a href="mailto:rcosgrove@wcmlaw.com">rcosgrove@wcmlaw.com</a>.

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