United States District Court, M.D. Pennsylvania
McFARLAND, LP, SPRING VILLAGE APARTMENTS, LLC, and SPRING VILLAGE, LP, Plaintiffs
HARFORD MUTUAL INSURANCE COMPANIES and FIRSTLINE NATIONAL INSURANCE COMPANY, Defendants
Christopher C. Conner, Chief Judge.
case involves an insurance dispute over property damage
caused by the collapse of a retaining wall. Plaintiffs
McFarland, LP; Spring Village Apartments, LLC; and Spring
Village, LP (collectively, “McFarland”) sued
defendants Harford Mutual Insurance Company
(“Harford”) and Firstline National Insurance
Company (“Firstline”), alleging, inter
alia, breach of contract and bad faith. Firstline moves
to sever and to stay the bad faith claim, (Doc. 12), and
seeks a protective order and to quash an attorney deposition,
(Doc. 16). The court will deny Firstline's motion to
sever, but we will permit bifurcation. We will also
conditionally grant Firstline's motion for a protective
order and to quash the notice of deposition for its attorney.
Factual Background & Procedural
owns real property in Harrisburg, Pennsylvania (“the
Property”) that includes two apartment buildings-a
larger building with 41 apartments and a smaller, 8-unit
building. (Doc. 1-4 ¶ 22). The Property is insured for
liability and property damage by a business owners policy
with defendant Firstline. (Id. ¶¶ 31-33;
Doc. 1-4, Ex. B at 3, 19). On May 5, 2016, a retaining wall
unexpectedly collapsed, damaging McFarland's smaller
apartment building, its parking lot, and several other
property owners' buildings adjacent to the Property.
(Doc. 1-4 ¶¶ 24-26, 28-29). The significant damage
from the retaining wall collapse caused the City of
Harrisburg to declare the smaller apartment building unsafe
for occupancy and the parking lot structurally unfit for
parking. (Id. ¶¶ 27, 29).
denied first-party coverage for damage to the Property.
(Id. ¶ 43; Doc. 1-4, Ex. E). Firstline agreed,
however, to provide liability coverage under the policy-up to
policy limits-for damage caused to other properties not owned
by McFarland. (Doc. 1-4, Ex. D; Docs. 4, 5). McFarland filed
suit against Harford, Firstline, and numerous other
defendants in the Court of Common Pleas for Dauphin County,
Pennsylvania, and the action was subsequently removed to this
court. In its complaint, McFarland asserts three causes of
action: breach of contract for denial of first-party coverage
(Count I); declaratory judgment regarding liability coverage
(Count II); and insurance bad faith pursuant to 42 Pa. Cons.
Stat. § 8371 (Count III). The parties later dismissed
Count II by stipulation. The stipulation also dismissed the
other named defendants, leaving only Harford and Firstline.
moves to sever and to stay the bad faith claim. Firstline
raises concerns that certain discovery requests regarding the
bad faith claim implicate attorney-client privilege and the
work product doctrine, as well as potential disqualification
of Firstline's counsel, Attorney Peter J. Speaker
(“Attorney Speaker”). Relatedly, Firstline moves
to quash the notice of deposition of Attorney Speaker and
seeks a protective order. The motions are fully briefed and
ripe for disposition.
motions are inextricably interwoven. If the motion to sever
and to stay the bad faith claim is granted, approval of the
motion to quash the deposition notice of Attorney Speaker and
for a protective order likely follows, at least as it relates
to the breach of contract claim. The converse is likewise
true. Accordingly, as a threshold matter, we will address the
motion to sever and to stay.
Motion to Sever and Stay Bad Faith Claim
Rule of Civil Procedure 21 permits severance of claims. The
rule states, in pertinent part, that the court may
“sever any claim against a party.” Fed.R.Civ.P.
21. Courts and litigants routinely conflate severance with
bifurcation, which is governed by Federal Rule of Civil
Procedure 42(b). See 9A Charles Alan Wright et al.,
Federal Practice and Procedure § 2387 (3d ed. 2015).
Unlike bifurcation of claims under Rule 42(b), severance
under Rule 21 creates independent actions resulting in
separate judgments. White v. ABCO Eng'g Corp.,
199 F.3d 140, 145 n.6 (3d Cir. 1999); 9A Wright & Miller,
supra, § 2387.
is appropriate when the claims are “discrete and
separate, ” each capable of resolution without
dependence or effect on the other. See Gaffney v.
Riverboat Servs. of Ind., Inc., 451 F.3d 424, 442 (7th
Cir. 2006) (citations omitted). The Third Circuit Court of
Appeals has not established specific parameters for deciding
a motion to sever claims. District courts often consider (1)
whether the issues sought to be severed are significantly
different from one another and would require distinct
evidentiary proof; (2) whether severance would promote
judicial economy; and (3) whether either party will be unduly
prejudiced by severance or its absence. See Official
Comm. of Unsecured Creditors v. Shapiro, 190 F.R.D. 352,
355 (E.D. Pa. 2000) (citation omitted). These same
considerations are frequently utilized when examining a
motion to bifurcate claims under Rule 42(b). See,
e.g., Griffith v. Allstate Ins. Co., 90
F.Supp.3d 344, 346 (M.D. Pa. 2014); Goldstein v. Am.
States Ins. Co., No. 18-CV-3163, 2018 WL 6198463, at
*1-2 (E.D. Pa. Nov. 28, 2018) (citing Shapiro, 190
F.R.D. at 355).
motion to sever and to stay the bad faith claim from the
underlying coverage claim is hardly novel. Such motions have
been litigated extensively in both state and federal courts,
with inconsistent results. See, e.g.,
Eizen Fineburg & McCarthy, P.C. v. Ironshore
Speciality Ins. Co., 319 F.R.D. 209, 212 n.4 (E.D. Pa.
2017) (collecting cases refusing to sever or bifurcate);
(Doc. 15 at 11-12, 13-14 & n.1 (same); Doc. 14 at 6-7
& n.1 (collecting cases granting severance or
bifurcation)). Firstline's arguments in support of
severance are also largely identical to those raised by
insurers in other cases: irreparable prejudice from premature
and potentially unnecessary disclosure of otherwise
privileged information, inefficiency in litigating a
secondary claim of bad faith that may be mooted by resolution
of the coverage claim, and jury confusion and the potential
loss of Firstline's chosen counsel if the claims proceed
together. We examine each of these arguments through the
prism of the factors applicable to a motion to sever claims.
Distinct Claims and Evidence
asserts that the breach of contract claim is fundamentally
distinct from the bad faith claim and will require different
evidence. The breach of contract dispute, Firstline posits,
involves simple issues like the cause and extent of property
damage for which first-party coverage is claimed. The bad
faith claim, per contra, “turns on the
knowledge, motives, and actions of insurance personnel”
in investigating, evaluating, and handling the claim. (Doc.
14 at 11). Firstline likewise asserts that most of the
evidence related to the bad faith ...