Opinion ID: 2206705
Heading Depth: 1
Heading Rank: 3

Heading: Motion To Sever and to Limit Discovery

Text: Imperial argued that the motion justice abused her discretion when she denied its motion to sever the bad-faith claim and to limit discovery. Imperial contended that Bartlett v. John Hancock Mutual Life Insurance Co., 538 A.2d 997 (R.I.1988) was dispositive of this issue. We agree. Bartlett unambiguously directed trial and motion justices, confronted with a bad-faith claim filed simultaneously with a breach-of-contract claim, to exercise their authority under Rule 42(b) of the Superior Court Rules of Civil Procedure to sever the two claims and allow discovery only insofar as it is relevant to the contract claim and defer discovery in the bad-faith claim until the complaining party has proven the underlying breach-of-contract claim. Bartlett, 538 A.2d at 1002. In Bartlett, we explained that a claim for bad faith arises only when a plaintiff can show the absence of a reasonable basis for denying benefits of the policy and the [insurer's] knowledge or reckless disregard of the lack of a reasonable basis for denying the claim.    If a claim is `fairly debatable,' no liability in tort will arise. Id. at 1000 (quoting Bibeault v. Hanover Insurance Co., 417 A.2d 313, 319 (R.I. 1980)). Moreover, especially pertinent to the facts of the case before us is the rationale upon which Bartlett was decided. [T]here can be no cause of action for an insurer's badfaith [ sic ] refusal to pay a claim until the insured first establishes that the insurer breached its duty under the contract of insurance.    If the insurer prevails on the breach-of-contract action, it could not, as a matter of law, have acted in bad faith in its relationship with its policyholder. There cannot be a showing of bad faith when the insurer is able to demonstrate a reasonable basis for denying benefits. Id. Although Bartlett was a breach-of-contract claim and the case at bar involves a statutory claim, a reformation claim, and an estoppel and waiver claim, the holding of Bartlett is applicable because the viability of each of the claims ultimately relies on Imperial's putative duty to indemnify Norbell for damages resulting from the accident. Although DeSantis, as a judgment creditor, may stand in the shoes of Norbell, this issue is fairly debatable. Hence, we conclude that the motion justice erred in refusing to sever the bad-faith claim from the remaining litigation. In turning to the motion justice's denial of Imperial's motion to limit discovery of the claim file and answers to interrogatories, Bartlett is again instructive. The plaintiff in Bartlett sought production of the entire claim file. 538 A.2d at 998. The insurance company argued that it was entitled to a qualified privilege in respect to materials that were prepared in anticipation of litigation, under Rule 26(b)(3) of the Superior Court Rules of Civil Procedure. [6] Bartlett, 538 A.2d at 1002. We agreed, explaining that [a]llowing full disclosure of the insurer's claim file based solely on plaintiff's allegation of bad faith would invite all plaintiffs to include a bad-faith claim with every breach-of-contract claim. Id. Although acknowledging that a plaintiff might need the information in the claim file to prove a bad-faith claim, that need, Bartlett pointed out, is outweighed first by the insurer's right to defend itself against the breach-of-contract claim and second by the fact that a bad-faith claim cannot be maintained until the plaintiff proves that the insurer breached its contract of insurance. Id. As applied to this case, DeSantis's need for information in the claim file or to certain answers to interrogatories to prove the bad-faith claim is outweighed by Imperial's need to defend itself against the statutory, reformation, and estoppel and waiver claims. Consequently, the motion justice abused her discretion in denying Imperial's motion to limit discovery of the file that was submitted under seal. The invocation of Rule 26(b)(3), however, does not bar all discovery or preclude obtaining information through interrogatories. In this case, DeSantis is entitled to limited discovery of the claim file on all issues that are not privileged, and he is entitled to answers to the interrogatories that do not invade privileged information. For example, information concerning the relationships between Imperial and Norbell and between Imperial and Bellini may be relevant to DeSantis's claims, and such information is discoverable. Moreover, there is no privilege with respect to Norbell, a defunct corporation. On the other hand, any information supporting the bad-faith claim is barred at this time. Because we are ordering severance of the bad-faith claim from the remaining issues, it is necessary that the motion justice review the file submitted under seal to remove and maintain under seal (1) privileged material prepared in anticipation of litigation or in communications between Imperial and its attorneys and (2) material pertaining to the bad-faith claim. The remaining material shall be subject to discovery by DeSantis.