Judge: Walter P. Schwarm, Case: 30-2021-01186943, Date: 2022-10-11 Tentative Ruling

Defendants’ (California General Insurance Company erroneously sued as Mercury General Insurance Company) unopposed Motion for Bifurcation of Causes of Action (Motion), filed on 5-31-22 under ROA No. 53, is GRANTED in part, and DENIED in part as set forth below.  The court’s 9-20-22 Minute Order provided Plaintiffs (Stuart Mitayas and Stephanie Atkins) an opportunity to file an opposition. Plaintiffs have not filed an opposition to this Motion.

Code of Civil Procedure section 1048, subdivision (b), provides, “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 cause of action, including a cause of action asserted in a cross-complaint, or of any separate issue or of any number of causes of action or issues, preserving the right of trial by jury required by the Constitution or a statute of this state or of the United States.”  Code of Civil Procedure section 598 states in part, “The court may, when the convenience of witnesses, the ends of justice, or the economy and efficiency of handling the litigation would be promoted thereby, on motion of a party, after notice and hearing, make an order, no later than the close of pretrial conference in cases in which such pretrial conference is to be held, or, in other cases, no later than 30 days before the trial date, that the trial of any issue or any part thereof shall precede the trial of any  other issue or any part thereof in the case, except for special defenses which may be tried first pursuant to Sections 597 and 597.5. . . .” 

Foreman & Clark Corp. v. Fallon (1971) 3 Cal. 3d 875, 888 (Foreman), states, “The major objective of bifurcated trials is to expedite and simplify the presentation of evidence. Yet this objective would be thwarted by the limitation of the scope of evidence introduced at one stage of a bifurcated trial to the issue presented at that stage. To assure that the trier of fact could consider all the evidence on each issue, the parties would be required to reintroduce every piece of evidence at each stage of the trial. Thus, in the present case, plaintiff had to show the difference between the agreed rent and the rental value of the premises to establish damages. If plaintiff's theory were applied, plaintiff would have been required to reintroduce the lease in evidence during the damages stage of the trial to show the agreed rent. The prior admission of the lease during the first stage of the trial would not suffice. Such duplication of effort is the very opposite of the purpose of bifurcated trials.” (Footnote 8 omitted.)

People v. Jones (2012) 54 Cal.4th 1, 61-62 (Jones), states, “ ‘[U]ndue prejudice is that which “uniquely tends to evoke an emotional bias against a party as an individual, while having only slight probative value with regard to the issues.” [Citations.]’ [Citation.] ‘Evidence is not ‘unduly prejudicial’ under the Evidence Code merely because it strongly implicates a defendant and casts him or her in a bad light, or merely because the defendant contests that evidence and points to allegedly contrary evidence.’ [Citation.]”

The Motion states, “Defendant brings this motion for an order bifurcating the trial so that the breach of contract action is tried before the breach of covenant of good faith and fair dealing action.  Also, Plaintiff must first establish both a cause of action for breach of contract and a cause of action for breach of the covenant of good faith and fair dealing before it can seek to recover attorneys’ fees. The Court should bifurcate punitive damages issues so as not to cause undue prejudice, pursuant to . . . Civil Code § 3295(d).” (Motion; 3:7-13.)

The Complaint, filed on 3-2-21 under ROA No. 2, alleges a cause of action for breach of contract based on an insurance agreement between Plaintiffs (Stuart Mityas and Stephanie Atkins). (Complaint, ¶¶ 38-44.)  CACI No. 2300 sets forth the elements to establish Plaintiffs’ cause of action for breach of contract.  The Complaint also alleges a cause of action breach of the implied covenant of good faith and fair dealing based on Defendant’s failure to compensate Plaintiffs for water intrusion covered by the insurance agreement. (Complaint, ¶¶ 45-51.)

Rappaport-Scott v. Interinsurance Exchange of the Automobile Club (2007) 146 Cal.App.4th 831, 837 (Rappaport-Scott), states, “An insurer's obligations under the implied covenant of good faith and fair dealing with respect to first party coverage include a duty not to unreasonably withhold benefits due under the policy. [Citation.] An insurer that unreasonably delays, or fails to pay, benefits due under the policy may be held liable in tort for breach of the implied covenant. [Citations.] The withholding of benefits due under the policy may constitute a breach of contract even if the conduct was reasonable, but liability in tort arises only if the conduct was unreasonable, that is, without proper cause. [Citation.]  In a first party case, as we have here, the withholding of benefits due under the policy is not unreasonable if there was a genuine dispute between the insurer and the insured as to coverage or the amount of payment due. [Citation.]”

The Motion states, “In addition, evidence and argument to support the second cause of action for breach of the covenant of good faith and fair dealing will be unduly prejudicial to Defendant unless and until Plaintiffs can establish a breach of contract.” (8:7-9.)  For the breach of the implied covenant and good faith cause of action, Plaintiffs must prove that the withholding of benefits was unreasonable. Defendant does not explain how evidence of Plaintiff’s evidence that Defendant allegedly unreasonably withheld benefits will evoke an emotional bias by the jury against Defendant.  If there is a genuine dispute against coverage, then the withholding of benefits is not unreasonable.  Defendant will have the opportunity to present its evidence regarding the genuine dispute as to coverage.  Coverage is at issue as to both causes of action, and it appears that the parties will have to present evidence regarding coverage for both causes of action. A jury will have to consider the same evidence as to both causes of action.  Defendant has not demonstrated any efficiency from bifurcation.  Defendant has not shown why a properly instructed jury could not consider the totality of the evidence in an impartial manner.   Since Defendant has not shown the type of prejudice that would bias a jury against it, the court DENIES the Motion to bifurcate the causes of action.

As to punitive damages, Civil Code section 3295, subdivision (d), provides in part, “The court shall, on application of any defendant, preclude the admission of evidence of that defendant’s profits or financial condition until after the trier of fact returns a verdict for plaintiff awarding actual damages and finds that a defendant is guilty of malice, oppression, or fraud in accordance with Section 3294. . . .” “As an evidentiary restriction, section 3295(d) requires a court, upon application of any defendant, to bifurcate a trial so that the trier of fact is not  presented with evidence of the defendant's wealth and profits until after the issues of liability, compensatory damages, and malice, oppression, or fraud have been resolved against the defendant. Bifurcation minimizes potential prejudice by preventing jurors from learning of a defendant's ‘deep pockets’ before they determine these threshold issues. (Torres v. Automobile Club of So. Calif. (1997) 15 Cal.4th 771, 777-778 (Torres).)  Based on Torres and Civil Code section 3295, subdivision (d), the court GRANTS the Motion as to punitive damages.

As to attorneys’ fees, Brandt v. Superior Court (1985) 37 Cal.3d 813, 817 (Brandt), states, “When an insurer's tortious conduct reasonably compels the insured to retain an attorney to obtain the benefits due under a policy, it follows that the insurer should be liable in a tort action for that expense. The attorney's fees are an economic loss—damages—proximately caused by the tort. [Citation.] These fees must be distinguished from recovery of attorney's fees qua attorney's fees, such as those attributable to the bringing of the bad faith action itself. What we consider here is attorney's fees that are recoverable as damages resulting from a tort in the same way that medical fees would be part of the damages in a personal injury action.” (Italics in Brandt.)  The Motion states, “Allowing the trier of fact to hear evidence regarding attorneys' fees is unduly prejudicial to Defendant as Plaintiffs have the burden of proof to establish their claims of breach of contract and ‘bad faith.’ ” (Motion; 7:17-19.)  As to the causes of action, Defendant has not articulated prejudice in terms of an emotional bias by the jury against Defendant by hearing evidence relevant to damages.  It is not clear how a separate phase for damages relevant to attorneys’ fees will promote judicial efficiency.  Thus, the court DENIES the Motion as to bifurcating the damages issue regarding attorneys’ fees.

Based on the above, the court GRANTS Defendants’ (California General Insurance Company erroneously sued as Mercury General Insurance Company) unopposed Motion for Bifurcation of Causes of Action, filed on 5-31-22 under ROA No. 53, as to punitive damages.  The court DENIES the remainder of the Motion.

Defendant is to give notice.