Wacker-Ciocco v. Gov’t Employees Ins. Co., 439 N.J. Super. 603 (App. Div. 2015). In Procopio v. Gov’t Employees Ins. Co., 433 N.J. Super. 377 (App. Div. 2013), discussed here, the Appellate Division ruled that it was an abuse of discretion for the Law Division to order that discovery on an uninsured motorist (“UIM”) claim and a bad faith claim against the insurer should proceed simultaneously. Rather, the claims should have been severed. In today’s opinion, written by Judge Espinosa, the Law Division, in a ruling that predated Procopio, likewise had denied the motion of the defendant insurer (“GEICO”) to sever the two claims. GEICO had provided some discovery regarding the bad faith claim before it sought severance, and the Law Division relied on that fact in ruling that “the cat [was] out of the bag” and that simultaneous discovery on both issues was appropriate in those circumstances, despite Procopio.
The Appellate Division granted GEICO leave to appeal that decision and reversed the denial of severance and other Law Division orders compelling simultaneous discovery on the UIM and bad faith issues. Applying the abuse of discretion standard that governs review of decisions on motions to sever, Judge Espinosa found an abuse of discretion. “[T]he denial of GEICO’s motion to sever and stay and the orders compelling discovery pertaining to the bad faith claim were based upon a mistaken understanding of the applicable law.” Procopio had established, as a general matter and for valid policy reasons, that “proof [that] an insured is entitled to coverage as a matter of law is a necessary pre-requisite to pursuing discovery regarding a bad faith claim.” The validity and applicability of that principle was not undercut by the fact that GEICO had already provided some, but not all, of the bad faith-related discovery that plaintiffs sought.