Lindfors v. State Farm Mutual Automobile Insurance Company

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
CORINNE LINDFORS,
Plaintiff,
v.
STATE FARM MUTUAL
AUTOMOBILE INSURANCE
COMPANY,
Defendant.
Case No. 3:20-cv-00178-SLG
ORDER RE MOTION TO SEVER AND STAY “BAD FAITH” CLAIMS
Before the Court at Docket 22 is Defendant State Farm Mutual Automobile
Insurance Company’s (“State Farm”) Motion to Sever and Stay “Bad Faith” Claims.
Plaintiff Corinne Lindfors responded in opposition at Docket 26. Defendant replied
at Docket 29. 	Oral argument was not requested and was not necessary to the
Court’s determination.
BACKGROUND
In 2019, Plaintiff was injured in a motor vehicle collision, which Plaintiff
contends was caused by an underinsured motorist (“UIM”).1 	At the time, Plaintiff
had three automobile insurance policies from Defendant insuring three different
1 Docket 1-1 at 4–5, ¶¶ 11–13; Docket 6 at 4–5, ¶ 11 (Answer) (“State Farm admits that Plaintiff
claims the other driver involved in the collision was underinsured but lacks sufficient information
to either admit or deny if, in fact, that driver was underinsured and therefore denies the same.”).
Case 3:20-cv-00178-SLG Document 31 Filed 03/15/21 Page 1 of 11

Case No. 3:20-cv-00178-SLG, Lindfors v. State Farm
Order re Motion to Sever and Stay “Bad Faith” Claims
Page 2 of 11
vehicles.2 As part of her policies with Defendant, Plaintiff had UIM coverage with
limits of $250,000/person or $500,000/accident and “med pay” coverage in the
amount of $25,000/person.3
Unable to resolve her claims with Defendant, on June 15, 2020, Plaintiff
commenced an action against Defendant in the Superior Court for the State of
Alaska, asserting, inter alia, breach of contract and breach of fiduciary duty and of
the covenant of good faith and fair dealing, and seeking recovery of compensatory,
punitive, and consequential damages.4 On July 24, 2020, Defendant removed the
case to this Court on the basis of diversity jurisdiction.5 	On August 19, 2020, the
parties jointly filed their Report of Rule 26(f) Planning Meeting; the report indicated,
among other things, that Plaintiff opposed bifurcation and Defendant indicated they
planned to seek severance of the “bad faith” claims and stay of discovery on those
claims, or, in the alternative, a bifurcated trial.6 The Court entered the Scheduling
& Planning Order and the Trial Scheduling Order, setting the deadline for fact
discovery as September 1, 2021, and setting trial to begin on February 22, 2022.7
2 Docket 1-1 at 2, ¶¶ 5–6; Docket 6 at 2, ¶ 5.
3 Docket 1-1 at 3, ¶ 7; Docket 6 at 3, ¶ 7.
4 Docket 1-1 at 11–17.
5 Docket 1 at 2, ¶¶ 2–3.
6 Docket 10 at 5.
7 Docket 13; Docket 14.
Case 3:20-cv-00178-SLG Document 31 Filed 03/15/21 Page 2 of 11

Case No. 3:20-cv-00178-SLG, Lindfors v. State Farm
Order re Motion to Sever and Stay “Bad Faith” Claims
Page 3 of 11
On October 9, 2020, Defendant moved to sever and stay Plaintiff’s “bad
faith” claims.8
DISCUSSION
Rule 42(b) provides that “[f]or 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.”9 	Additionally,
under Rule 21, the Court may sever “any claim against a party.”10
Defendant asks the Court to do both—to sever Plaintiff’s “bad faith” claims
from her UIM claim and to order separate trials—and asks the Court to stay
discovery on the former until the UIM claim is resolved.11 	Citing to orders from
this Court and others severing and staying “bad faith” claims from UIM claims,
Defendant contends that doing so will be economical and efficient, and will prevent
undue prejudice to Defendant.12
8 Docket 22.
9 Fed. R. Civ. P. 42.
10 Fed. R. Civ. P. 21.
11 Docket 22 at 1–2.
12 See Lashley v. Horace Mann Teachers Ins., Inc., Case No. 3:12-cv-00197-RRB (D. Alaska Apr.
10, 2013) (bifurcating breach of contract and bad faith claims and staying bad faith discovery);
Mixsooke v. Geico Casualty Co., Case No. 3:12-cv-0166-HRH (D. Alaska Dec. 4, 2012) (finding
that “[b]ecause the court perceives the plaintiff’s claims to be factually and legally independent of
one another, and because a determination of the value of plaintiff’s bodily injury claim may obviate
the necessity for litigating the plaintiff’s breach of good faith claim, this is an appropriate case for
bifurcation of those claims” and that undertaking bad faith discovery “will not be economical
because that discovery may not be necessary”); Seals v. State Farm Mut. Auto. Ins. Co., Case
Case 3:20-cv-00178-SLG Document 31 Filed 03/15/21 Page 3 of 11

Case No. 3:20-cv-00178-SLG, Lindfors v. State Farm
Order re Motion to Sever and Stay “Bad Faith” Claims
Page 4 of 11
Regarding efficiency, Defendant maintains that the discovery and evidence
required to resolve a UIM claim—details of the accident, medical reports, damages
evidence—is distinct from that required to resolve “bad faith” claims, which could
“require 	disclosure 	of 	everything 	from 	reserves 	to 	claims 	adjuster 	mental
impressions.”13 Defendant explains that should it prevail on or settle the UIM claim,
then the parties will have saved the time and expense of discovery and trial on the
“bad faith” claims.14 Indeed, Defendant predicts—based on prior experience with
similar claims—that Plaintiff may well drop the “bad faith” claims after a trial on the
UIM claim.15 	Defendant adds that even if the “bad faith” claims proceed to trial,
the additional cost of bifurcation would be limited to the time needed to pick a
second jury.16
As to prejudice, Defendant maintains that a jury would be improperly
influenced by exposure to “bad faith” claim evidence, which, by “its very nature
No. 3:14-cv-00059-JWS (D. Alaska Nov. 7, 2014) (concluding that “failure to sever the bad faith
claims from the UIM claim would substantially prejudice” the insurer); Petrick v. Geico Indem. Co.,
Case No. 4:13-cv-00006-RRB (D. Alaska Aug. 27, 2013) (bifurcating bad faith and bodily injury
claims based on the reasons defendant’s reply brief, including that a verdict on damages may be
dispositive of the bad faith claim and prejudice from “an unfair tactical advantage to the plaintiff”
that discovery would provide).
13 Docket 22 at 6–7.
14 Docket 22 at 9.
15 Docket 22 at 10.
16 Docket 22 at 10.
Case 3:20-cv-00178-SLG Document 31 Filed 03/15/21 Page 4 of 11

Case No. 3:20-cv-00178-SLG, Lindfors v. State Farm
Order re Motion to Sever and Stay “Bad Faith” Claims
Page 5 of 11
would prejudice the outcome of a trial on the UIM claim.”17 	Moreover, Defendant
maintains that it would be “fundamentally unfair” to require “an insurer to disclose
how it is evaluating a UIM claim, as well as its reserve information, before the UIM
claim is even resolved.”18 	Indeed, Defendant contends that Plaintiff brought the
“bad faith” claims for the very purpose of obtaining irrelevant discovery to influence
the outcome of the UIM claim.19 	Defendant maintains that severing and staying
the “bad faith” claims will alleviate its concerns while still allowing Plaintiff to bring
the “bad faith” claims, should she wish to do so.20
In 	response, 	Plaintiff 	maintains 	that 	bifurcation 	would 	not 	be 	efficient
because the UIM trial will not be dispositive of the “bad faith” claim, as part of the
“bad faith” claim is based on Defendant’s inaction.21 	Plaintiff also asserts that
Defendant will not face prejudice in the discovery process because Defendant has
already disclosed its reserve information, as well as its claims adjuster’s mental
impressions.22 	Plaintiff also contends that requiring an insurer to disclose how it
is evaluating a UIM claim is not fundamentally unfair because, as Plaintiff’s insurer,
17 Docket 22 at 7.
18 Docket 22 at 7.
19 Docket 22 at 8.
20 Docket 22 at 8.
21 Docket 26 at 17 (citing Ferguson v. State Farm Mut. Auto. Ins. Co., Case No. 3:11-cv-00081
JWS, 2011 WL 4946349, at *1 (D. Alaska Oct. 18, 2011)).
22 Docket 26 at 3–4, 6.
Case 3:20-cv-00178-SLG Document 31 Filed 03/15/21 Page 5 of 11

Case No. 3:20-cv-00178-SLG, Lindfors v. State Farm
Order re Motion to Sever and Stay “Bad Faith” Claims
Page 6 of 11
Defendant owes a fiduciary duty and stands in a “special relationship” to Plaintiff
and “must do nothing to interfere with the benefit of her bargain involving her
purchase of first-party coverage.”23 	Plaintiff maintains that alternatively, it would
be premature to sever the “bad faith” claims at this juncture.24
In reply, Defendant cites to Basargin v. State Farm Mutual Automobile
Insurance Co.25 In Basargin, the court entered an order bifurcating the UIM claim
and bad faith claims at trial, but denying the defendant’s request to sever and stay
the claims as to discovery.26 According to Defendant, “the jury returned a verdict
on the UIM claim . . . where the jury found that [the plaintiff’s] damages were less
than the sums she had already recovered,” leading the plaintiff to promptly dismiss
her bad faith claims.27 	Thus, “the parties incurred significant cost and expense
pursuing discovery on an issue that ultimately was mooted by virtue of the jury’s
decision on the UIM claim.”28 However, the court in Basargin acknowledged at the
time of its order that “[w]hile it might turn out to be more convenient and economical
to bifurcate and stay discovery on the bad faith claims, it might also turn out to be
23 Docket 26 at 5.
24 Docket 26 at 19.
25 Case No. 3:16-cv-0041-HRH, 2016 WL 11045601 (D. Alaska June 3, 2016).
26 Basargin, 2016 WL 11045601, at *4.
27 Docket 29 at 3 (citing 29-1 (Colbo Aff.)).
28 Docket 29 at 3.
Case 3:20-cv-00178-SLG Document 31 Filed 03/15/21 Page 6 of 11

Case No. 3:20-cv-00178-SLG, Lindfors v. State Farm
Order re Motion to Sever and Stay “Bad Faith” Claims
Page 7 of 11
more expensive.”29 	The fact that the denial of the motion to sever and stay as to
discovery in Basargin was ultimately inefficient is not dispositive in this case.
On the other hand, Plaintiff cites Ferguson v. State Farm Mutual Automobile
Insurance Co., in which the court determined that bifurcation would not promote
judicial economy.30 	The court reasoned that “even if a jury determined that [the
defendant] was not liable on [the plaintiff’s] breach-of-contract claim, plaintiff’s
claim for breach of the covenant of good faith and fair dealing would go forward . .
. because [the plaintiff’s] bad faith claims are largely based on [the defendant’s]
inaction.”31 Here, while Plaintiff includes allegations that Defendant ignored a UMI
policy limit demand, Plaintiff also alleges that Defendant breached its duty of good
faith and fair dealing when it provided a “total claim value” without a reasonable
basis, 	offered 	a 	UIM 	amount 	insufficient 	to 	cover 	outstanding 	liens, 	and
unreasonably 	discounted 	Plaintiff’s 	shoulder 	injury.32 	These 	are 	bases 	for
Plaintiff’s bad faith claims that could potentially be resolved by a jury decision on
Plaintiff’s UIM claim.
The 	Court 	acknowledges 	that 	the 	parties present 	competing plausible
scenarios as to the efficiency of bifurcation; however, as noted by Plaintiff, the
29 Basargin, 2016 WL 11045601, at *3.
30 Docket 26 at 17 (citing No. 3:11-cv-00081 JWS, 2011 WL 4946349 (D. Alaska Oct. 18, 2011)).
31 Id. at *1.
32 Docket 1-1 at 7–8 ¶¶ 20(a), (e), (g).
Case 3:20-cv-00178-SLG Document 31 Filed 03/15/21 Page 7 of 11

Case No. 3:20-cv-00178-SLG, Lindfors v. State Farm
Order re Motion to Sever and Stay “Bad Faith” Claims
Page 8 of 11
Court finds the reasoning in Overcast v. Government Employees Insurance Co.
persuasive.33 	The Superior Court for the State of Alaska, First Judicial District,
concluded 	that 	“bifurcation 	might 	ultimately 	contravene 	the 	policy 	of 	judicial
economy . . . ‘if [the insurer] does not prevail, the Court is faced with two voir dires,
two phases of discovery and another round of seemingly endless motion filing and
responses, all in addition to two separate trials.”34 The state court concluded that
“[w]hile the potential prejudice to [the insurer] is real, it is best mitigated through
bifurcation of a single trial, before a single jury, into separate stages.”35 This Court
agrees and finds that the goal of judicial economy is best served by bifurcating
Plaintiff’s claims before a single jury. 	With discovery closing in September 2021
and trial beginning in February 2022, the parties should have ample time to
complete discovery on both issues.36
As to prejudice, Defendant relies on the Court of Appeals of Wisconsin’s
decision in Dahmen v. American Family Mutual Insurance Co. to establish that it
will be prejudiced if forced to undertake “bad faith” discovery before the UIM claim
33 Docket 26 at 2 (citing 1JU-10-00486CI (Alaska Sup. Ct. Nov. 12, 2019)).
34 Id. at 2 (quoting Light v. Allstate Ins. Co., 182 F.R.D. 210 (S.D. W. Va. 1998)).
35 Id.
36 Docket 13; Docket 14.
Case 3:20-cv-00178-SLG Document 31 Filed 03/15/21 Page 8 of 11

Case No. 3:20-cv-00178-SLG, Lindfors v. State Farm
Order re Motion to Sever and Stay “Bad Faith” Claims
Page 9 of 11
is resolved.37 	There, the Court of Appeals reversed the trial court’s denial of
bifurcation and stay of discovery on the bad faith claims, concluding that:
(1) the failure to bifurcate a claim of bad faith from an underlying claim
for UIM benefits would significantly prejudice [the defendant]; (2) the
two distinct claims present differing evidentiary requirements that
increase the complexity of the issues 	and the potential 	for jury
confusion; and (3) a separate initial trial on the claim of UIM benefits
increases the prospect of settlement and promotes economy by
narrowing the issues for the jury and potentially eliminating the need
for a later trial on the bad faith claim.38
Plaintiff 	contends 	that 	this 	court 	has 	already 	determined 	Dahmen
“inapposite,” citing Thogmartin v. State Farm Mutual Automobile Insurance Co.39
But in that case, the plaintiff had agreed to bifurcate the trial to avoid the prejudice
described in Dahmen.40 	In contrast, here Plaintiff has not agreed to bifurcate the
trial. The Court is persuaded by the reasoning in Dahmen that a separate trial on
the UIM claim will prevent undue prejudice arising from the added confusion and
complexity. 	Even if the disclosures identified by Plaintiff mooted Defendant’s
concerns about prejudice from discovery on the “bad faith” claims, Defendant has
37 Docket 22 at 13–15 (citing Dahmen v. American Family Mut. Ins. Co., 635 N.W.2d 1 (Wisc. App.
2001).
38 Dahmen, 635 N.W.2d 1, at *6.
39 Docket 26 at 2–5 (citing Case No. 3:19-cv-00252-SLG, 2020 WL 369640 (D. Alaska Jan. 22,
2020).
40 Thogmartin, 2020 WL 369640, at *2.
Case 3:20-cv-00178-SLG Document 31 Filed 03/15/21 Page 9 of 11

Case No. 3:20-cv-00178-SLG, Lindfors v. State Farm
Order re Motion to Sever and Stay “Bad Faith” Claims
Page 10 of 11
established that it would face prejudice without a bifurcated trial due to presenting
separate and unrelated evidence to the jury.41
However, the Court is not persuaded that Defendant will face significant
prejudice unless discovery on the “bad faith” claims is severed and stayed. Plaintiff
is entitled to discovery on the “bad faith” claims so long as they remain a part of
the case. 	Moreover, as the Alaska Supreme Court has explained, there is a
“special relationship between the insured and the insurer in the insurance context”
and “bad faith” claims sounding in tort provide the “needed incentives to insurers
to 	honor 	their 	implied 	covenant 	to 	their 	insured.”42 	Thus, 	while 	Defendant
understandably does not want to disclose further information about its settlement
practices or evaluations to Plaintiff before resolving the UIM claim, such disclosure
is a natural consequence of the parties’ special relationship and of Defendant’s
reliance on courts to resolve disputed UIM claims.43 Moreover, prejudice resulting
41 Docket 22 at 8 (citing Gibson v. Geico Gen. Ins. Co., 153 P.3d 312 (Alaska 2007)). Plaintiff is
correct that Gibson did not involve “bad faith” claims; nonetheless, it supports Defendant’s
proposition that the claims require separate and unrelated proof.
42 Lockwood v. Geico Gen. Ins. Co., 323 P.3d 691, 697 (Alaska 2014) (quoting State Farm Fire &
Cas. Co. v. Nicholson, 777 P.2d 1152, 1156–57 (Alaska 1989)). 	The Court acknowledges that
due to its procedural posture, Lockwood does not compel a denial of a stay of discovery pending
resolution of Plaintiff’s UIM claim and does not rely on it for that basis. Compare Docket 26 at
18–19 with Docket 29 at 4–5.
43 Docket 22-7 at 15 (Ex. G) (State Farm policy providing that if there is no agreement on the
amount of compensatory damages, the insured “shall . . . file a lawsuit in a state or federal court
that has jurisdiction”).
Case 3:20-cv-00178-SLG Document 31 Filed 03/15/21 Page 10 of 11

Case No. 3:20-cv-00178-SLG, Lindfors v. State Farm
Order re Motion to Sever and Stay “Bad Faith” Claims
Page 11 of 11
from discovery 	on 	Plaintiff’s “bad 	faith” 	claims is 	mitigated 	by the fact that
Defendant has apparently already disclosed its reserves.44
For the above reasons, the Court grants Defendant’s request to bifurcate
Plaintiff’s UIM claim from its “bad faith” claims at trial, insofar as the parties will first
try the UIM claim, and, only upon its resolution, try the “bad faith” claims before the
same jury. The Court denies Defendant’s request to stay “bad faith” discovery.
CONCLUSION
In light of the foregoing, Defendant’s Motion to Sever and Stay “Bad Faith”
Claims at Docket 22 is GRANTED in part and DENIED in part.
DATED this 15th day of March, 2021 at Anchorage, Alaska.
/s/ Sharon L. Gleason
UNITED STATES DISTRICT JUDGE
44 Docket 26 at 3–4.
Case 3:20-cv-00178-SLG Document 31 Filed 03/15/21 Page 11 of 11