Summary
allowing "Plaintiff to seek discovery of evidence relevant to the bad faith claim even before the coverage claim has been established"
Summary of this case from Yates v. Allstate Ins. Co.Opinion
Case No. 1:06-cv-254.
October 18, 2007
ORDER GRANTING DOCUMENT PRODUCTION
This matter comes before the Court on a discovery dispute. A discovery conference was held on September 25, 2007. Both parties have briefed this issue. (Docs. 19, 20.)
This case arises from an insurance coverage dispute. Plaintiff has sued Defendant, his insurer, alleging six causes of action, including breach of contract and bad faith denial of benefits. As it pertains to this present discovery dispute, Plaintiff originally sought discovery of the following information:
18. [T]he name and last known address of each of the 288 insureds who were among those 832 insureds who made claims for payment on their Penn Life Accident Benefit Policies (Form 1900) from 1994 to the present but were not among the 544 insureds whose claims were paid, and identify any document that summarizes this information.
19. [T]he name and last known address of each of the 194 insureds whose claims on their Penn Life Accident Benefit Policies (Form 1900) from 1994 to the present were "declined," and identify any document that summarizes this information.
(Doc. 19-3.) The groups of insureds referenced in the requests excerpted immediately above will be referred to hereafter in this Order as the "Form 1900 Insureds." During the discovery conference, the parties and the Court discussed that Plaintiff sought, as an alternative to the name and address lists, redacted copies of the claims files for the Form 1900 Insureds.
Plaintiff seeks this evidence to help prove his bad faith denial of coverage claim and his claim for punitive damages. Defendant argues that evidence regarding the Form 1900 Insureds is irrelevant, invasive of the Insureds' privacy rights, and in any event, not discoverable unless and until Plaintiff establishes that he is entitled to coverage under his insurance policy. As to the first issue, relevancy, the Court preliminarily finds that the claims information concerning the Form 1900 Insureds is relevant to establish whether Defendant had a pattern or practice of denying claims based on a particular exclusion(s) without conducting reasonable investigations. See e.g., Paolo v. Amco Ins. Co., No. 02-02367, 2003 WL 24027877, *1 (N.D. Cal. Sept. 17, 2003) (permitting discovery of other insureds to prove bad faith); First Fidelity Bancorporation v. National Union Fire Ins. Co. of Pitttsburgh, No. 90-1866, 1992 WL 6859 (E.D. Pa. Jan. 13, 1992) (permitting discovery of bad faith pattern and practice evidence); but see e.g. Adams v. Allstate Ins. Co., 189 F.R.D. 331, 333 (E.D. Pa. 1999) ("Past claims by other insureds are not relevant to the present bad faith action before the court.");Leksi, Inc. v. Federal Ins. Co., 129 F.R.D. 99 (D.N.J. 1989) (finding evidence of how insurer treated other insureds to be relevant but disproportionately burdensome in the particular circumstances). The estimated cost of the discovery here, $8,900, is substantial, but not overly burdensome.
The Court next addresses whether discovery in this action should be bifurcated such that Plaintiff is not entitled to discovery on his bad faith claim until he has established that he was entitled to coverage under the insurance policy. Defendant cites to Penton Media, Inc. v. Affliated Insurance Co., No. 06-4315, 2007 U.S. App. LEXIS 19669, *18-21 (6th Cir. Aug. 15, 2007), for the proposition that an insured must establish his right to coverage before he is entitled to discovery as to his bad faith claim or other insureds' claims. The court in Penton Media found that the district court had not erred by granting summary judgment to the insurer on the plaintiff insured's breach of contract and bad faith claims without first permitting the plaintiff to obtain discovery regarding the bad faith claim. Id. at *19-21. The court found that the insurer in Penton Media had a reasonable justification based on its interpretation of the policy to deny coverage and that the insurer was not required to conduct any additional investigation. Id. at *20. This Court does not read Penton Media as establishing an absolute rule that discovery regarding a bad faith claim always must be stayed pending resolution of the underlying insurance coverage issue. The Penton Media court chided the plaintiff therein for not providing citation to Ohio precedent supporting his request for discovery. This Court has found Ohio precedent which supports Plaintiff Poneris's discovery request here.
The issue is whether a bad faith tort claim can be established independent of the breach of contract claim. If a plaintiff, in theory, can establish a bad faith claim even if there is no underlying coverage, then discovery on the bad faith claim need not be stayed until resolution of the coverage issue. The Ohio Supreme Court held in 1992 that a bad faith tort claim can be established in two ways:
[W]e hold that a cause of action arises for the tort of bad faith when an insurer breaches its duty of good faith by intentionally refusing to satisfy an insured's claim where there is either (1) no lawful basis for the refusal coupled with actual knowledge of that fact or (2) an intentional failure to determine whether there was any lawful basis for such refusal. Intent that caused the failure may be inferred and imputed to the insurer when there is a reckless indifference to facts or proof reasonably available to it in considering the claim.Motorists Mut. Ins. Co. v. Said, 63 Ohio St.3d 690, 699-700, 590 N.E.2d 1228 (1992). Said was overturned two years later by Zoppo v. Homestead Ins. Co., 71 Ohio St. 3d 552, 554-55, 644 N.E.2d 397, 1994-Ohio-461 (1994), insofar as the Ohio Supreme Court held that actual intent was not an element of the tort of bad faith by an insurer. Zoppo did not overturn the Said principle that two types of bad faith claims exist under Ohio law. Essad v. Cincinnati Cas. Co., No. 00 CA 199, 2002 WL 924439, ¶ 32 (Ohio App. Apr. 16, 2002). Some Ohio courts have held that an insured might be able to prove the second type of bad faith claim — based on failure to determine whether there was a lawful basis to deny coverage — even if he fails to establish the underlying coverage claim. Mid-American Fire Cas. Co. v. Broughton, 154 Ohio App. 3d 728, 798 N.E.2d 1109, ¶ 24 (2003); Essad, 2002 WL 924439, ¶¶ 32, 35; Bullet Trucking, Inc. v. Glen Falls Ins. Co., 84 Ohio App.3d 327, 333, 616 N.E.2d 1123 (Ohio App. 1992); but see Hahn's Elec. Co. v. Cochran, 2002 WL 31111850, *8 (Ohio App. 10 Dist.) (Ohio App. 2002) (bad faith claim liability is predicated on contract claim).
Turning back to the Sixth Circuit interpretation of Ohio law, the Penton Media court did not distinguish between the two types of bad faith cases. The court's conclusion in Penton Media that the bad faith claim there could not be established apart from the coverage claim is not dispositive here. In another recent Sixth Circuit case, the court recognized that a bad faith claim against an insurer was "independent of the contract of insurance." Klein v. State Farm Fire Cas. Co., No. 06-4155, 2007 WL 2913915, *5 n. 5 (6th Cir. Oct. 4, 2007) (citation omitted). The court inKlein examined the plaintiff's bad faith claim on the merits despite the fact that the breach of contract claim had been barred by the insurance policy's limitation period. Id. at *5-6. The Court finds that the Sixth Circuit has not specifically foreclosed recovery on a bad faith tort claim in circumstances where the underlying breach of contract claim failed. Accordingly, discovery need not be bifurcated in all cases.
In this case, Plaintiff has alleged that Defendant acted in bad faith by failing to investigate his claim, failing to apply provisions of this policy, and failing to interpret the policy in his favor. (Doc. 1 at 14.) This claim might implicate the second type of bad faith claim. Accordingly, under the precedents cited above, the Court will permit Plaintiff to seek discovery of evidence relevant to the bad faith claim even before the coverage claim has been established.
The parties will have the opportunity after discovery is completed to establish whether Plaintiff's bad faith claim can be established independently from the breach of contract claim.
For the foregoing reasons, the Court hereby ORDERS that Defendant is to produce claims files for the Form 1099 Insureds with the redactions necessary to protect the confidential and private identifying information of the individual Insureds. The information to be redacted includes the Insureds' names, addresses, phone numbers, and social security numbers. The Insureds' dates of birth do not need to be redacted. The Court further ORDERS that Plaintiff is prohibited from using the information produced to attempt to contact directly or indirectly any of the individual Form 1099 Insureds absent further order of the Court. The Court believes that the scope of the discovery to be produced should remedy the concerns Defendant raised regarding the privacy rights of the Form 1099 Insureds.
IT IS SO ORDERED.