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Martinez v. State Farm Mutual Automobile Insurance Co.

United States District Court, D. New Mexico

March 27, 2017

THERESA MARTINEZ, Plaintiff,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant.

          MEMORANDUM OPINION AND ORDER DENYING DEFENDANT STATE FARM'S

         THIS MATTER comes before the Court on Defendant State Farm Mutual Automobile Insurance Company's (“State Farm”) Motion to Bifurcate and Stay, filed on February 22, 2017 (Doc. 17). Having reviewed the relevant pleadings and the applicable law, the Court finds the Motion is not well-taken, and is therefore DENIED.

         BACKGROUND

         Plaintiff Theresa Martinez claims she was injured in a rear-end vehicle accident on November 12, 2014 in Deming, New Mexico. The alleged tortfeasor, Charlene Ramos, struck Plaintiff's vehicle on the rear bumper. Ms. Ramos had automobile liability coverage with Farm Bureau Insurance Company (“Farm Bureau”) in the amount of $25, 000. Plaintiff alleges she experienced personal injuries from the accident extending beyond the limits of Ms. Ramos' Farm Bureau policy. Thus, Plaintiff made a claim against her own auto insurer, State Farm, under a policy that provided bodily injury liability coverage in the amount of $100, 000/$300, 000 and uninsured/underinsured motorist coverage limits in the amount of $25, 000/$50, 000. Plaintiff states that under the terms of the State Farm policy, State Farm is liable to pay Plaintiff's damages, because Plaintiff sustained bodily injuries as a result of Ms. Ramos' negligent driving. Plaintiff states that she made a timely and reasonable underinsured motorist (“UIM”) claim with State Farm, but State Farm has failed to honor the claim.

         Ms. Martinez filed suit against State Farm. In Count I of her Complaint, Plaintiff seeks to recover damages for Breach of Contract and Fiduciary Duties Under Contract. Count I is principally based on Plaintiff's contention that State Farm breached its policy with Plaintiff in failing to honor Plaintiff's requests for UIM coverage at limits equal to the bodily injury liability coverages in the policy and in failing to pay claims under the policy. See Compl. ¶ 18. In Count II, Plaintiff alleges Breach of the Covenant of Good Faith and Fair Dealing. The basis of this claim is that State Farm failed to act in good faith and deal honestly with Plaintiff in denying coverage to her under the policy. Id. ¶¶ 20-21. Count III alleges Violations of the New Mexico Unfair Claims and Trade Practices Act. These claims are primarily based on allegations that State Farm mishandled Plaintiff's UIM claim, breached its duty in bad faith by failing to honor Plaintiff's requests for UIM coverage, and failed to pay the UIM claim under the policy. Id. ¶¶ 27-29.

         LEGAL STANDARD

         Fed. R. Civ. P. 42 states, in pertinent part:

(b) Separate Trials. The court, in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy, may order a separate trial of any claim . . . or issue . . . .

Fed. R. Civ. P. 42(b). District courts have broad discretion in deciding whether to sever issues for trial and the exercise of that discretion will be set aside only if clearly abused. U.S. ex rel. Bahrani v. ConAgra, Inc., 624 F.3d 1275, 1283 (10th Cir. 2010) (quoting Anaeme v. Diagnostek, Inc., 164 F.3d 1275, 1285 (10th Cir. 1999)). “Bifurcation is not an abuse of discretion if such interests favor separation of issues and the issues are clearly separable.” Angelo v. Armstrong World Industries, Inc., 11 F.3d 957, 964 (10th Cir. 1993). Bifurcation is often in the interest of efficiency and judicial economy when the resolution of one claim may obviate the need to adjudicate one or more other claims. See Mandeville v. Quinstar Corp., 109 Fed.Appx. 191, 194 (10th Cir. 2004). “Regardless of efficiency and separability, however, bifurcation is an abuse of discretion if it is unfair or prejudicial to a party.” Angelo, 11 F.3d at 964.

         The party seeking bifurcation bears the burden of proving that bifurcation is proper “in light of the general principle that a single trial tends to lessen the delay, expense, and inconvenience.” Belisle v. BNSF Ry. Co., 697 F.Supp.2d 1233, 1250 (D. Kan. 2010). Bifurcation under Rule 42(b) is inappropriate where evidence to be presented against the parties is inextricably linked. Certain Underwriters at Lloyd's, London, Subscribing to Policy No. 501/NB03ACMD v. Nance, CIV-04-0937 JB/WDS, 2007 WL 1302569 (D.N.M. Apr. 23, 2007) (quoting FDIC v. Refco Grp., Ltd., 184 F.R.D. 623, 629 (D. Colo. 1999) (finding that bifurcation would have no effect on evidence offered at trial because claims and evidence were inextricably linked)).

         DISCUSSION

         State Farm seeks to bifurcate and stay Plaintiff's extra-contractual bad faith claims for both discovery and trial purposes until after a jury determines the value of Plaintiff's UIM claim. State Farm contends Plaintiff's right to recover on her extra-contractual bad faith claims is predicated on the determination of value of her UIM benefits. State Farm urges the Court to consider bifurcation to reserve judicial and attorney resources, because if it is determined that there is no coverage under the policies, the remaining claims fail. See Sloan v. State Farm Mut. Auto. Ins. Co., 2004-NMSC-004, 135 N.M. 106, 85 P.3d 230.

         First, State Farm argues that whether it acted in bad faith cannot be determined without first determining the value of Plaintiff's UIM claim. State Farm argues that disagreeing with Plaintiff's evaluation of her UIM claim and negotiating with her to resolve the claim does not constitute bad faith. To establish a claim for bad faith to settle in New Mexico, Plaintiff must prove that State Farm refused to pay or delayed in paying the claim for “reasons which are frivolous or unfounded.” See UJI 13-1702 NMRA; Sloan, 2004-NMSC-004, ¶¶ 3, 18. An insurer is not guilty of bad faith simply because the insured believes her claim is worth more than the insurer offers. State Farm states it never denied Plaintiff's claim but rather the value of her UIM claim has not yet been determined. As such, State Farm argues bifurcation is mandatory because resolution of the UIM claim is a condition precedent to Plaintiff bringing claims for bad faith. State Farm maintains it has a right to first litigate the dispute over value before any extra-contractual claims are brought. If a jury agrees with State Farm's evaluation of damages, then there cannot be any bad faith.

         Second, State Farm argues bifurcation and stay of Plaintiff's bad faith claims would promote convenience and judicial efficiency. Because a determination of value is a pre-requisite to any bad faith claim, bifurcation would best serve judicial efficiency by focusing this litigation on value first. State Farm contends that Plaintiff is using unsupportable bad faith allegations in order to serve overbroad discovery to leverage State Farm by increasing the time, aggravation, and expense of discovery in this case.

         Furthermore, State Farm contends bifurcation of Plaintiff's bad faith claims is also necessary to avoid prejudice. See Mendenhall v. Vandeventer, 1956-NMSC-064, ¶ 7, 61 N.M. 277, 299 P.2d 457 (bifurcation is appropriate when trying all issues in one trial would “create an atmosphere which will produce an unconscious influence upon the triers of fact as to … entirely disconnected and distinct issue[s]”). If Plaintiff's contractual and bad faith claims were tried together, State Farm maintains, the jury would hear evidence regarding extra-contractual claims that could taint the jury's view of the value of the underlying case. See Oulds v. Principal Mut. Life Ins. Co., 6 F.3d 1431, 1435-36 (10th Cir. 1993) (affirming district court's bifurcation of contract and bad faith claims to avoid potential prejudice to ...


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