United States District Court, D. New Mexico
STEVE P. SHULTZABERGER, Plaintiff,
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant.
ORDER GRANTING MOTION TO BIFURCATE, BIFURCATING UIM
AND BAD FAITH CLAIMS, AND STAYING DISCOVERY EXCEPT FOR UIM
R. SWEAZEA, UNITED STATES MAGISTRATE JUDGE
MATTER comes before the Court on Defendant State
Farm Mutual Automobile Insurance Company's motion to
bifurcate Plaintiff Steve Shultzaberger's
breach-of-contract and bad-faith claims as well as stay
discovery. (Doc. 19). Shultzaberger has not responded to the
motion and ignored the Court's order directing him to
either file a response or show cause why State Farm's
motion is not ready for disposition. Although the Local Rules
permit the Court to take Shultzaberger's failure to
oppose within the time allowed as consent to grant the
motion, see D.N.M. LR-CV 7.1(b), the Court has
independently reviewed the merits of State Farm's request
to bifurcate. Having done so and with the consent of the
parties to conduct dispositive proceedings, see 28
U.S.C. § 636(c), the Court concludes bifurcation is
23, 2013, MW drove her parents Toyota into
Shultzaberger's truck while talking on her cell phone and
after rolling through a stop sign. (Doc. 1-2, Compl.,
¶¶ 4-5). The collision caused Shultzaberger's
truck to “spin on two wheels” and sustain severe
damage (Id., ¶ 6). Shultzaberger himself
suffered “grave injuries” necessitating
evaluation and treatment for chest, hip, back, and neck
injuries at the Lincoln County Medical Center (Id.,
¶¶ 6, 11). MW was cited by local police for failure
to yield the right of way. (Id., ¶9). At the
time of the accident, Shultzaberger was insured by State
Farm. (Id., ¶ 15). Despite underinsured
motorist coverage (“UIM”) in the policy for the
medical expenses he incurred as a result of the collision,
State Farm did not pay those charges, which Shultzaberger
believes is State Farm's typical business practice.
(Id., ¶¶ 15-18)
February 19, 2016, Shultzaberger sued MW through her parents
in the Twelfth Judicial District for Lincoln County, New
Mexico. (Doc. 1-2). Shultzaberger alleged MW's
negligence-and her parents' in entrusting her the
Toyota-caused his personal injuries and property damage.
(Id., ¶¶ 4-14) (captioning the causes of
action as “negligence” and “negligent
entrustment”). Shultzaberger also named State Farm for
breach of the UIM provision of the insurance policy and bad
faith. (Id., ¶¶ 15-20).
Shortly thereafter, MW's parents settled all claims
against them and MW by tendering the $25, 000 personal-injury
limits of their GEICO automobile policy. (Docs. 1-3; 1-4).
State Farm ultimately removed this action on October 12,
2017, on the basis of the Court's diversity jurisdiction.
Rule of Civil Procedure 42(b) permits the Court “[f]or
convenience, to avoid prejudice, or to expedite and
economize, ” to “order a separate trial of one or
more separate issues, [or] claims[.]” Although the
Court's discretion is broad in bifurcating claims, it is
not unfettered. See United States ex rel. Bahrani v.
ConAgra, Inc., 624 F.3d 1275, 1283 (10th Cir. 2010). On
the one hand, “[b]ifurcation is not an abuse of
discretion if such interests favor separation of issues and
the issues are clearly separable.” Angelo v
Armstrong World Indus., 11 F.3d 957, 964 (10th Cir.
1993). On the other, bifurcation is inappropriate when it
will result in unfairness or prejudice to the non-movant, and
neither shorten trial nor affect what evidence the parties
will offer. See F.D.I.C. v. Refco Group, Ltd., 184
F.R.D. 623, 629 (D. Colo. 1999). The movant bears the burden
of establishing bifurcation is warranted “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).
Court determines that bifurcation is warranted under the
circumstances. In New Mexico, a plaintiff must prove breach
of the UIM provision of the insurance policy as a condition
precedent to recovery on a claim of bad faith. See Aragon
v. Allstate Ins. Co., 185 F.Supp.3d 1281, 1283-84
(D.N.M. 2016) (synthesizing New Mexico law on bad faith/UIM
claims). To satisfy this threshold, typically the insured
must establish the underlying tortfeasor's
negligence-“duty, breach, proximate cause, and loss or
damages” that exceed the tortfeasor's policy
limits. State Farm Mut. Auto. Ins. Co. v. Barker, 96
P.3d 336, 339 (N.M. Ct. App. 2004). Underlying liability in
this case is not a foregone conclusion. State Farm claims
Shultzaberger's post-accident presentation is largely the
same as before-he had many preexisting injuries and underwent
back surgery months before the accident. Thus, if true,
Shultzaberger would not satisfy the causation and damages
elements of the alleged UIM violation, rendering the
bad-faith claim moot.
causes of action consist of different elements. As explained
above, a UIM claim involves proof of traditional negligence
plus damages above policy limits. By contrast, bad faith in
New Mexico premised upon an insurance company's failure
to pay a claim requires the plaintiff to establish that
insurance company's reasons for denial were frivolous or
unfounded. See Sloan v. State Farm Mut. Auto. Ins.
Co., 85 P.3d 230, 236 (N.M. 2004).
“Frivolous” or “unfounded” is not
synonymous with a breach of contract; rather, these terms
mean “an utter or total lack of foundation for an
assertion of nonliability.” Id. (citation and
quotation omitted). Thus, evidentiary and discovery needs are
different for the two types of claims. This consideration of
judicial economy favors bifurcation.
Farm makes a colorable argument that it would suffer
prejudice aside from the cost of potentially unnecessary
discovery and the prospect of ending the defense of the case
by showing no breach of the policy. For example, a trial
involving evidence on both types of claims could confuse
jurors. Although the Court believes carefully crafted
instructions could assist in this regard, evidence of State
Farm's bad faith could well be taken as proof of the
underlying UIM violation. Combined with the potentially
dispositive nature of the UIM claim, the different proof and
discovery needs of the two causes of action, and some modicum
of prejudice, bifurcation is appropriate.
without any response from Shultzaberger, there is no
presentation of any countervailing interests or prejudice
that would require a different result. The Court also notes
that the complaint lacks basic clarity. While Shultzaberger
appears to allege that State Farm failed to act fairly or
promptly in handling his insurance claim, the only factual
support is that State Farm did not pay his medical expenses.
(Doc. 1-2, Compl.). Had Shultzaberger pleaded facts and
otherwise developed his cause of action for unlawful
“trade practices & fraud act & insurance code
[violations], ” a meritorious argument might be made
that this count should go forward regardless of whether
Shultzaberger prevails on breach of the UIM provision.
Cf. Martinez v. State Farm Mut. Auto. Ins. Co., 2017
U.S. Dist. LEXIS 44277, *11 (D.N.M. Mar. 27, 2017) (noting
that a claim under the New Mexico Unfair Trade Practices Act
“is not contingent upon the value of Plaintiff's
UIM claim”). Shultzaberger did not support any such
claim, however, and even reading his complaint to state a
plausible cause of action for breach of contract and bad
faith, as State Farm has done here, is beyond what the
Federal Rules would require. See Robbins v. Okla. ex rel.
Dep't of Human Servs., 519 F.3d 1242, 1247 (10th
Cir. 2008) (examining Fed.R.Civ.P. 8 and 12(b)(6) and
explaining “[t]he burden is on the plaintiff to frame a
complaint with enough factual matter (taken as true) to
suggest that he or she is entitled to relief[.]”)
(Citation and internal punctuation omitted). The Court
therefore cannot discern any prejudice to Shultzaberger or
interest that would militate against bifurcation.
reasons stated above, the Court determines that the UIM claim
should be bifurcated from any extra-contractual cause of
action including Shultzaberger's assertion of bad faith
insurance practices. Discovery on all extra-contractual
claims likewise should be stayed pending resolution of
underlying alleged UIM ...