United States District Court, D. New Jersey
AMENDED MEMORANDUM OPINION AND ORDER
SCHNEIDER, UNITED STATES MAGISTRATE JUDGE
matter is before the Court on defendant's “Motion
to Sever Claims” [Doc. No. 16]. The Court received
plaintiff's opposition [Doc. No. 19] and held oral
argument on October 30, 2018. For the reasons to be
discussed, defendant's motion is granted in part and
denied in part.
filed her three-count complaint on May 30, 2018. The sum and
substance of plaintiff's claim is that defendant
wrongfully denied paying her the proceeds of a $1 million
life insurance policy issued to Lawrence J. Ames. Defendant
denied plaintiff's claim based on its contention the
decedent made a material misrepresentation in his answer to a
medical questionnaire. Defendant is a Texas Corporation and
at the time the subject policy was issued, the decedent was
living in Texas. Count One of plaintiff's complaint seeks
a declaratory judgment that the policy is valid, defendant
must pay benefits, and that plaintiff is the sole beneficiary
entitled to payment. Count Two alleges defendant breached its
contract and plaintiff has been damaged by defendant's
delay in payment. Count Three alleges defendant refused in
bad faith to pay benefits due plaintiff for no “fairly
motion seeks to sever “Count Three and portions of
Count Two[.]” Deft. Brief at 9. Defendant argues,
“[i]t has been constantly held by New Jersey Courts
that counts for bad faith damages arising out of claims for
breach of contract and policy benefits should be severed from
the underlying claim and any discovery thereon should be
stayed pending the outcome of the contractual dispute.”
Id. at 4.
opposition argues severance should be denied because the
discovery as to her declaratory judgment and bad faith claims
will involve the same issue, i.e., whether there was a
“fairly debatable reason” for the failure to pay
benefits. Pltf.'s Brief at 4, 5. As a result, plaintiff
argues, she will be prejudiced by severance since she may be
required to conduct duplicative discovery. Plaintiff also
points out defendant does not argue it will be prejudiced if
severance is denied.
Fed.R.Civ.P. 21, the Court, in its discretion, has the
authority to sever and stay any claim. Rodin
Properties-Shore Mall, N.V. v. Cushman & Wakefield of
Pennsylvania, Inc., 49 F.Supp.2d 709, 721 (D.N.J. 1999)
(citing Walsh v. Miehle-Goss-Dexter, Inc., 378 F.2d
409, 412 (3d Cir. 1967)). “Severing claims under Rule
21 is appropriate where the claims to be severed are
‘discrete and separate' in that one claim is
‘capable of resolution despite the outcome of the other
claim.'” Turner Const. Co. v. Brian Trematore
Plumbing & Heating, Inc., C.A. No. 07-666 (WHW),
2009 WL 3233533, at *3 (D.N.J. Oct. 5, 2009) (citation
omitted). The factors courts consider in determining whether
severance is warranted include: (1) whether the issues sought
to be tried separately are significantly different from one
another, (2) whether the separable issues require the
testimony of different witnesses and different documentary
proof, (3) whether the party opposing the severance will be
prejudiced if severance is granted, and (4) whether the party
requesting severance will be prejudiced if severance is not
granted. Picozzi v. Connor, C.A. No. 12-4102 (NLH),
2012 WL 2839820, at *6 (D.N.J. July 9, 2012).
with Count Two, defendant's request to sever is denied.
The crux of defendant's argument is that severance is
appropriate because portions of Count Two raise a bad faith
claim that will involve “potential discovery as
respects claims processing, method and manner of decision
making[.]” Deft. Brief at 8. The Court disagrees. Count
Two seeks consequential contract damages for defendant's
delay in payment, not bad faith damages arising form
defendant's claims handling practices. Although the
discovery relevant to Count Two may not be identical to what
is directed to Count One, the Court does not expect
plaintiff's damage discovery to be extensive or
complicated. No. material benefit will be achieved, or
material prejudice avoided, if portions of Count Two are
severed. Thus, the request to sever portions of Count Two is
request to sever Count Three is more problematic. It is true
that a significant body of case law exists supporting the
view that bad faith claims should ordinarily be severed in
insurance coverage cases. See Pltf.'s Brief at 4-8.
However, this Court has refused to adopt a blanket rule that
a plaintiff's bad faith claim should be severed in every
coverage case. In Beachfront North Condominium
Association, Inc. v. Lexington Insurance Co., C.A. No.
14-6706 (RBK/JS), 2015 WL 3879665, at *2 n.2 (D.N.J. 2015),
the Court made it clear that it is not ruling that in every
case a plaintiff's bad faith claim should be severed and
stayed until the first party claim is decided. Every case is
different and must be decided on its own facts.
Count Three, the Court first considers whether the issues
sought to be tried separately are significantly different
from one another. Although plaintiff argues that
plaintiff's bad faith claim does not involve any
discovery different from her breach of contract claim (Deft.
Brief at 4), her discovery requests belie this assertion.
Plaintiff requests classic “bad faith discovery”
such as information concerning defendant's claims
handling policies and procedures, and the experience and work
evaluations of its claims personnel. This discovery is
irrelevant and disproportional to plaintiff's declaratory
judgment and breach of contract claims. Plaintiff argues only
the defendant's decision to seek recession of her policy
is at issue with regard to her bad faith claim. Pltf.'s
Brief at 5. However, plaintiff's discovery demonstrates
that she does not intend to so limit her contentions.
Otherwise, plaintiff would not have served discovery requests
asking for information unrelated to the underlying merits of
defendant's decision to deny payment to plaintiff. Since
plaintiff's bad faith claim and the related requested
discovery is not limited, and is instead expansive, the Court
finds that plaintiff's breach of contract and bad faith
claims are significantly different. The crux of the case
involves whether the decedent made misrepresentations in his
application for insurance. Plaintiff's bad faith claim
focuses on a different area, i.e. defendant's claims
handling procedures and processes. In addition, the Court
finds that viewing plaintiff's claims as separate and
distinct actions “promotes judicial efficiency and
economy.” Wadeer v. New Jersey Mfrs. Ins. Co.,
2015 WL 668229, at *10 (N.J. Feb. 18, 2015); Nelson v.
State Farm Mut. Auto. Ins. Co., 988 F.Supp. 527, 530
(E.D. Pa. 1997) (bad faith claims are “separate and
distinct” from underlying contract action).
Accordingly, the first relevant factor to consider weighs in
favor of severance.
plaintiff's contract and bad faith claims require the
testimony of different witnesses and different documentary
proof. As evidenced by plaintiff's written discovery,
plaintiff seeks documents concerning defendant's claims
personnel and claims handling procedures and guidelines. This
discovery is not directly relevant to plaintiff's
first-party claim. Plaintiff's bad faith discovery
distracts from, and will undoubtedly delay, the resolution of
the primary focus of the case, i.e., whether plaintiff's
first-party claim should be paid. See Fed. Ins. Co. v.
Cont'l Cas. Co., C.A. No. 05-305, 2006 WL 1344811,
at *1 (W.D. Pa. May 16, 2006) (agreeing with the
plaintiff's argument that “it just makes good
common sense to resolve the declaratory judgment claims first
because . . .[these] are the only claims that are susceptible
to judicial resolution as a matter of law and with little or
no discovery necessary.”). As a result, the second
relevant factor to consider weighs in favor of severance.
plaintiff will not be prejudiced if her bad faith claim is
severed and stayed. If plaintiff prevails on Count One, she
will be able to promptly pursue her bad faith claim. If
pursued, the Court expects the bad faith claim to be
expeditiously resolved. The Court discounts plaintiff's
argument that duplicative discovery will take place if
defendant's motion is granted. Plaintiff's bad faith
discovery is separate and distinct form her breach of
contract discovery. Further, if plaintiff is right that her
breach of contract and bad faith discovery overlap, no
duplicative discovery will occur. Accordingly, the third
relevant factor weighs in favor of severance.
the Court considers whether defendant will be prejudiced if
severance is not granted. The Court finds that under the
facts presented here, defendant will be prejudiced if it is
forced to litigate plaintiff's bad faith claim before her
first-party claim is resolved. This is true even if defendant
did not specifically argue prejudice in its motion.
Defendant's prejudice argument is implicit in its papers.
Plaintiff has served written discovery and deposition notices
regarding her bad faith claim. If defendant has to litigate
plaintiff's bad faith claim now, defendant would suffer a
“significant expenditure of time and money, generally
rendered needless” if it prevails. Procopio v.
GEICO,433 N.J.Super. 377, 383 (App.Div. 2013). The
Court agrees with defendant that judicial economy and
efficiency will be promoted by avoiding expensive and
time-consuming discovery on plaintiff's bad faith claim.
Plaintiff's first-party ...