United States District Court, E.D. Pennsylvania
case concerns an insurance coverage dispute between Plaintiff
Eizen Fineburg & McCarthy, P.C. (“the Firm”),
its insurer, Defendant Ironshore Specialty Insurance Company
(“Ironshore”). Plaintiff alleges that Ironshore
failed to honor the terms of the Firm's professional
liability insurance contract, and exhibited bad faith in its
handling of the Firm's claim in violation of 42 Pa.
Const. Stat. Ann. § 8371 and the common law. (Doc. No. 1
at 13-30.) Presently before the Court is Ironshore's
Motion to Bifurcate. (Doc. No. 13.) Ironshore requests that
the Court sever the breach of contract claim from the bad
faith claims and stay the latter. (Id.) For reasons
discussed below, Ironshore's Motion will be denied.
January 30, 2011, Plaintiff Eizen Fineburg & McCarthy,
P.C., now known as Fineburg Law Associates, P.C. (“the
Firm”), purchased a policy of insurance from Defendant
Ironshore Specialty Insurance Company
(“Ironshore”). (Doc. No. 1 at 14.) The policy was
issued for a one-year term, starting on January 30, 2011 and
ending on January 30, 2012. (Id. at 15.) It
contained a limit of liability of $5, 000, 000 per
this term, the Firm made two requests to Ironshore seeking
insurance coverage in separate, but related actions.
(Id.) First, on July 8, 2011, Ironshore covered the
Firm's claim relating to a bankruptcy matter in the
Northern District of Texas involving one of the Firm's
clients against the debtor, FirstPlus Financial Group, Inc.
(Id. at 15; Doc. No. 6 at 3.) Second, on December
21, 2011, Ironshore rejected the Firm's claim relating to
a criminal matter in the District of New Jersey involving one
of the Firm's attorneys, Gary McCarthy. (Doc. No. 1 at
16.) McCarthy had been indicted a few months earlier on
suspicion of committing various crimes in connection with his
representation of companies that were purchased by FirstPlus
Financial Group, Inc. (Id. at 15.) These charged
offenses included conspiracy, securities fraud, wire fraud,
and money laundering. (Id.) The Firm requested that
Ironshore pay the legal costs associated with the criminal
investigation and indictment of McCarthy, but Ironshore
refused to 42 Pa. Const. Stat. Ann. § 8371. do so.
(Id. at 15-16.) More than two years later, on July
3, 2014, a jury acquitted McCarthy of all criminal charges,
but only after the Firm incurred attorneys' fees in
excess of $1, 320, 000 to defend McCarthy in the criminal
case. (Id. at 21.)
April 26, 2016, the Firm initiated this action against
Ironshore in the Court of Common Pleas of Philadelphia
County. (Id. at 1, 30.) It sought to recover the
expenses associated with defending McCarthy in the criminal
case. (Id. at 13-30.) In Count I of the Complaint,
Plaintiff alleges a breach of contract claim against
Ironshore for failing to honor the terms of the professional
liability insurance policy. (Id. at 18-20.) In Count
II, Plaintiff raises a bad faith claim against Ironshore,
alleging that Defendant violated 42 Pa. Const. Stat. Ann.
§ 8371. (Id. at 20-24.) In Count III, Plaintiff
alleges a bad faith claim against Ironshore under the common
law. (Id. at 24-27.) In particular, Plaintiff
asserts that Ironshore acted in bad faith by (1) failing
“to conduct a reasonable investigation” into
Plaintiff's request for coverage; (2) unreasonably
delaying a decision on Plaintiff's request; (3) failing
“to interpret ambiguous policy language exclusively
drafted by Defendant in Plaintiff's favor;” and (4)
failing to acknowledge and properly settle Plaintiff's
reasonable proof of loss. (Id. at 18-27.)
19, 2016, Ironshore removed the action to this Court. On
October 13, 2016, a scheduling conference was held during
which the parties discussed discovery, settlement, and trial,
among other matters. (Doc. No. 11.) On November 29, 2016,
Ironshore filed the Motion to Bifurcate and Stay the Bad
Faith Claims. (Doc. No. 13.) Plaintiff filed a Response in
Opposition to Defendant's Motion on December 12, 2016.
(Doc. Nos. 14, 15.) On December 28, 2016, Ironshore filed a
Reply. (Doc. No. 17.) The Motion is now ripe for review.
STANDARD OF REVIEW
is permitted by Federal Rule of Civil Procedure 42(b). Rule
42(b) states as follows:
For convenience, to avoid prejudice, or to expedite and
economize, the court may order a separate trial of one or
more separate issues, claims, crossclaims, counterclaims, or
third-party claims. When ordering a separate trial, the court
must preserve any federal right to a jury trial.
Fed. R. Civ. P. 42(b). The decision to bifurcate, or
separate, claims “is a matter to be decided on a
case-by-case basis and must be subject to an informed
discretion by the trial [court] in each instance.”
Lis v. Robert Packer Hosp., 579 F.2d 819, 824 (3d
Cir. 1978). A court's ruling on whether to bifurcate
“requires balancing . . . several considerations,
including the convenience of the parties, avoidance of
prejudice to either party, and promotion of the expeditious
resolution of the litigation.” Zinno v. Geico Ins.
Co., No. 16-792, 2016 WL 6901697, at *1 (E.D. Pa. Nov.
21, 2016) (citations omitted). The moving party bears the
burden of proving that bifurcation is warranted.
Yellowbird Bus Co., Inc. v. Lexington Ins. Co., No.
09-5835, 2010 WL 2766987, at *8 (E.D. Pa. July 12, 2010).
contends that Plaintiff's statutory and common law bad
faith claims set forth in Counts II and III of the Complaint
should be bifurcated from Plaintiff's breach of contract
claim in Count I for purposes of both discovery and trial.
(Doc. No. 13 at 1.) In essence, Ironshore argues that the
crux of this dispute is contractual, and that the bad faith
claims will fail if Defendant is successful in defending
itself on the breach of contract claim. (Doc. No. 13-1 at 2.)
Therefore, it would be wasteful and unnecessary to conduct
discovery on the bad faith claims at this time. (Id.
at 2-3.) Plaintiff opposes the Motion to Bifurcate, arguing
that its “bad faith claims do not rise or fall entirely
on the success of its breach of contract claim, and therefore
staying bad faith discovery would not save time or