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Superior Court Declines Opportunity to Address Problems Inherent in Simultaneous UM/UIM Bad Faith Claims

By Brian Harris

Several weeks ago, the Pennsylvania Superior court declined to examine the substantive problems sometimes created when UM/UIM claims are simultaneously litigated in the same case, choosing instead to return the case to the trial court on procedural grounds relating the ripeness of the appeal.   Hopefully, however, either in this case or another, the court will at some point address the thorny issues presented by litigating the correctness of an insurer?s claims conduct in the midst of that very conduct.

In Gunn v. Hartford Insurance, Judge R. Stanton Wettick of the Allegheny County Court of Common Pleas ruled, among other things, that in a civil case in which UM/UIM claims and bad faith claims were joined, severance of the two claims would be appropriate.  Wettick declined, however, to stay the bad faith claim, notwithstanding the defendant?s claims that certain discovery regarding the insurer?s thought processes would be discoverable in the bad faith claim but not discoverable and prejudicial in the UM/UIM claim.  Hartford sought an immediate appeal of Wettick?s order pursuant to Pa.R.A.P. 313, and the Superior Court issued an opinion and order declining the request and therefore not addressing the merits of Wettick?s denial of the stay request. 

The majority opinion, written by Judge Cheryl Lynn Allen and joined by Judges Kate Ford-Elliott and Maureen Lally-Green contained a thorough analysis of whether or not it should agree to accept Hartford?s request for interlocutory appeal.  In so doing, the court analyzed each element required to justify such an appeal under Pa.R.A.P. 313 and found that the appeal lacked an issue of sufficient importance to justify immediate consideration.

Both insurers and insureds might not take the same view of the relative importance of the problems presented when litigating contractual and extracontractual insurance claims at the same time.   The Superior Court recognized the risk of harm a defendant faced without a stay and implicitly agreed that certain discovery regarding the insurer?s though processes on a claim would be discoverable in a bad faith case, but in no way discoverable in breach of contract case. 

The court held, however, the defendant did not sufficiently and specifically identify any documents that, if so disclosed, would cause harm if the work product protection applicable in the contract action were invaded. This seems to leave the door fairly wide open for the court to consider the imposition of a stay not only later in this case, but in other cases in which the defendant does sufficiently identify documents protected by the work product privilege in a breach of contract action which would be discoverable in a bad faith action.   This is also a fair warning to those seeking the stay of a bad faith case to specifically identify documents which are only discoverable in one of the two claims, how the discovery of those documents would be prejudicial, and how that prejudice would be remedied by a stay

There are public policy arguments in favor of interlocutory appeal as well.  First, without a stay, Pennsylvania courts risk putting in the hands enterprising bad faith plaintiffs attorneys a tool for obtaining unfair leverage in a UM/UIM action by attempting to gain access to most, if not all of the insurance company?s claims file, including materials which would never be discoverable in a breach of contact action.  This danger was recognized in a brief dissenting opinion by Lally-Green in Gunn.  Beyond that, however, the invasion of a legitimate protection in discovery, i.e., work product privilege, is a potential infringement the rights of a defendant exposed to punitive damages to present every available defense in a case where it faces punitive damages.  This right has been recognized by the U.S. Supreme Court in Philip Morris v. Williams as a procedural due process right under the Fourteenth Amendment to the U.S. Constitution. That very possibility might some day convince an appeals court panel that such a threat in a simultaneous UM/UIM and bad faith case is one of sufficient importance to warrant review on an interlocutory basis.

Charles Haddick
Dickie McCamey & Chilcote
http://www.dmclaw.com/

Full post as published by The Legal Intelligencer Blog on May 27, 2009 (boomark / email).