Insurance – Two Trials Or One?

The Southern District of Texas, Houston Division was presented with an issue that is not seen very often in insurance cases except cases involving uninsured motorist benefits.  The case is styled Lamar Donald, Sr. and Diane Cottrell Donald v Metropolitan Lloyds Insurance Company of Texas.

Lloyds filed a Motion to Sever and Abate.  This Court denied the motion.  Here is why.

Plaintiff’s assert that Lloyds improperly denied or paid their claim for benefits after suffering damage from Hurricane Harvey.  The Plaintiff’s sued sued for breach of the insurance contract and for extra-contractual claims based on the Texas Insurance Code.

Lloyds wants to sever the extra-contractual because they are not relevant until there is a finding that the insurance contract was breached.  That is a trier of fact does not find a breach of the insurance contract then the time and money spent on the extra-contractual claims was a waste.

Federal Rule of Civil Procedure 21 allows courts to sever any claim against any part.  This creates two separate actions or suits where previously there was but one.  Rule 21 allows courts to sever the claims in the interest of avoiding prejudice and delay, ensuring judicial economy, or safeguarding principles of fundamental fairness.  The party advocating severance has the burden to show the severance is warranted.

The Court pointed out that Lloyds has not established that discovery of on Plaintiff’s extra-contractual claims will be unduly burdensome.  In fact, discovery on the contractual claims will encompass many of the same documents and witnesses involved in the extra-contractual claims.

Lloyds appears to rely on Federal Rule of Civil Procedure 42(b), which provides “for convenience, and to avoid prejudice, or to expedite and economize, the court may order a separate trial of one or more separate issues, claims, cross-claims, counterclaims, or third-party claims.”  This same rule allows the courts to order separate trials of any claim if the interests of judicial economy, convenience, and fairness will be furthered.

Rule 42(b) should be distinguished from Rule 21.  Separate trials may occur in a single case but but usually result in one judgment, while severed claims become independent actions to be discovered and tried independently with separate judgments entered.  This decision to bifurcate is a matter totally within the sole discretion of the trial court.  The burden is on the party seeking separate trials to prove that the separation is necessary.