United States District Court, D. Nebraska
AMERITAS LIFE INSURANCE CORP., AMERITAS INVESTMENT CORP., AND AMERITAS HOLDING COMPANY, Plaintiffs,
FEDERAL INSURANCE COMPANY, Defendant.
MEMORANDUM AND ORDER
R. Zwart United States Magistrate Judge.
matter is before the court on Defendant's Motion to
Bifurcate Bad Faith Claim for separate trial and to stay
discovery on that claim, (Filing No. 46), and
Plaintiffs' related Motion to Compel, (Filing No.
69). For the following reasons, the motion to bifurcate
will be granted and the motion to compel will be denied
without prejudice to re-filing if Plaintiff prevails on the
contract action and is permitted to pursue its tort claim for
Ameritas Life Insurance Corp., Ameritas Investment Corp., and
Ameritas Holding Company (“Plaintiffs” or
“Ameritas”) are Nebraska corporations licensed to
sell insurance products and securities. Defendant Federal
Insurance Company (“Federal”) insures life
insurance companies and their agents for matters resulting
from the alleged wrongful acts of life insurance agents. At
the times relevant to Ameritas' complaint, Federal
provided a Financial Institution Bond (the
“Bond”) to Plaintiffs which, under its terms,
indemnified Ameritas for “[l]oss resulting directly
from dishonest acts . . . of any Employee . . . committed
with intent to cause [Ameritas] to sustain such loss.”
(Filing No. 1-7 at CM/ECF p. 3).
2010 to 2012, Ameritas employed Jason Muskey as an agent and
broker to solicit and sell policies and securities. Since
that time, several Ameritas customers have alleged Muskey
stole money from them (the “Muskey Claims”), and
they demand compensation from Ameritas to make them whole,
along with restoration or rescission of policies. At the time
the Complaint was filed, Ameritas had paid $2, 547, 221.50 to
resolve Muskey Claims, and at least two claims remained
provided timely notice to Federal of the Muskey Claims.
Federal issued two payments to Ameritas in the total amount
of $709, 747.18 in 2015. But Ameritas claims that under the
Bond, Federal still owes Ameritas approximately $1, 337,
474.32 plus additional costs, including the cost of any
unresolved Muskey Claims.
alleges Federal has breached the Bond by failing to properly
defend Plaintiffs' interests and by failing to fully
reimburse Ameritas for settlement amounts paid to resolve the
Muskey Claims. Federal claims it did not breach the terms of
the Bond contract; that the Ameritas payments at issue in
this lawsuit settled claims which were not covered under the
Bond. Federal states there is no Bond coverage for claims
arising from funds that customers “voluntarily provided
to Muskey . . . not the Plaintiffs.” (Filing No. 33
at CM/ECF pp. 2-3).
addition to asserting a contract claim under the Bond,
Ameritas alleges claims for unjust enrichment and bad faith.
In support of the bad faith claim, Ameritas asserts that
although Federal has reimbursed Ameritas for some losses
resulting from Muskey's “dishonest” conduct,
“Federal refuses to and continues to refuse to pay
other covered losses.” (Filing No. 1 ¶¶
38 & 39 at CM/ECF p. 6).
now seeks to bifurcate the discovery and trial of these
proceedings, alleging a failure to do so will prejudice
Defendant. Specifically, Federal seeks an order separating
the contract claims from Ameritas' remaining claims, with
the contract action proceeding first, followed by discovery
and trial on the unjust enrichment and bad faith claims if
Ameritas prevails on the contract action.
R. Civ. P. 42(b) provides:
For convenience, to avoid prejudice, or to expedite and
economize, the court may order a separate trial of one or
more separate issues, claims, crossclaims, counterclaims, or
third-party claims. When ordering a separate trial, the court
must preserve any federal right to a jury trial.
courts have great discretion in determining when to bifurcate
proceedings; the burden is on the party seeking bifurcation
to demonstrate it will be prejudiced if the claims are not
bifurcated. See Athey v. Farmers Ins.
Exchange, 234 F.3d 357, 362 (8th Cir. 2000).
In order for a court to grant bifurcation, the party seeking
bifurcation has the burden of demonstrating that judicial
economy would be served and that no party would be prejudiced
by separate trials, based on the circumstances of the
individual case. Novopharm Ltd. v. Torpharm, Inc.,181 F.R.D. 308, 310 (E.D. N.C. 1998). Thus, “even if
bifurcation might somehow promote judicial economy, courts
should not order separate trials when bifurcation would
result in unnecessary delay, additional expense, or some
other form of ...