The federal district court for the Eastern District of Pennsylvania recently denied an insurer’s request to bifurcate its insured’s bad faith claim from the breach of duty to defend claim for purposes of discovery and trial. Rohm & Haas Co. et al. v. Utica Mut. Ins. Co., No. 07-584 (E.D. Pa. June 20, 2008). In Rohm, the insured sought a declaratory judgment that its insurer, Utica Mutual Insurance Company, is obligated to provide a defense in various lawsuits commenced against the insured for exposure to contaminated air and groundwater from its manufacturing facility. The insured further alleged breach of contract and bad faith against Utica.

Utica subsequently moved to bifurcate the proceedings for the bad faith claim, pending the outcome of the duty to defend claim, arguing that bifurcation is necessary for judicial economy, to avoid undue prejudice and expense, and also because a ruling in its favor on the duty to defend claim necessarily disposes of the insured’s bad faith claim. The insured countered that the bad faith claim “does not necessarily depend on the duty to defend claim,” that bifurcation would waste time and resources, and that Utica will not be prejudiced from having the bad faith issue proceed with the duty to defend issue, and the court agreed with the insured's arguments.

Specifically, the court noted that the insured’s bad faith claim can proceed even if its duty to defend claim is not successful since it is premised on more that Utica’s failure to defend. It held that the insured’s separate allegations of improper claims investigation by Utica are sufficient to sustain its bad faith claim even absent a finding of a duty to defend. Further, the court noted that bifurcation would not be more convenient, expeditious or economical because a trial on the bad faith claim could proceed irrespective of the outcome of the duty to defend claims, especially because the discovery, including the depositions, entailed in the bad faith and breach of contract claims will overlap to a considerable extent. Thus, the court stated that “[t]rying both claims together could be more orderly and efficient under all the pertinent circumstances.”

Click here to read the decision.