KATHLEEN A. JAUDZEMIS, Magistrate Judge.
This matter is before me pursuant to 28 U.S.C. § 636 and the general order of referral on defendant's "Motion to Sever and Abate Discovery on Bad Faith Claim" (#6). Having considered the pleadings and the briefs submitted by the parties, I conclude that the motion should be denied.
This diversity case involves a medical insurance coverage dispute. Plaintiffs allege they obtained a group insurance policy from defendant which provided coverage for certain health care and medical expenses. The policy (attached as Exhibit 1 to defendant's answer) did not cover "normal pregnancies," but did cover "Complications of Pregnancy," as defined in the certificate of insurance.
In August 1997, Kristin Prill was confirmed to be pregnant with twins. Plaintiffs became concerned about possible complications associated with the pregnancy and contacted defendant to make sure there would be coverage for Kristin Prill if there were any complications. Scott Prill was informed by representatives of defendant that the health insurance policy would provide coverage for any additional costs which might arise out of or be associated with any complications of the pregnancy.
Kristin Prill became ill and was hospitalized in Holdrege, Nebraska on December 10, 1997. The next day, she was transferred via ambulance to Methodist Hospital in Omaha, Nebraska, where she was diagnosed as suffering from "pre-term labor, Polyhydramnios, and Twin Twin Transfusion Syndrome." One of the twins was stuck in the fundal area of the uterus, consistent with "Stuck Twin Syndrome." Plaintiffs were advised that the twins were at great risk and needed daily monitoring to avoid premature delivery and possible death. Kristin Prill's health was also at risk and she required hospitalization. Even with the necessary medical treatments, there was a 70 to 80 percent risk of the death of one or both of the twins.
At her physicians' advice, Kristin Prill underwent several amniocentesis procedures to remove excess amniotic fluid during the period from December 10 through December 27, 1997. She delivered the twins by Caesarean section on January 5, 1998 and remained hospitalized through January 11, 1998. The twins remained hospitalized for a longer period of time.
Defendant has denied liability for all charges incurred during Kristin Prill's hospitalization from December 10, 1997 through December 27, 1997 on the ground that those medical expenses were not covered "complications of pregnancy" under the insurance policy.
Based on these events, plaintiffs have stated causes of action based on (1) breach of contract, (2) breach of implied duty of good faith and fair dealing ("bad faith" claim), (3) negligent misrepresentation, and (4) negligent infliction of emotional distress.
Under Fed.R.Civ.P. 42(b), the trial court, in its discretion, may order a separate trial of any claim or issue "in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy." Defendant moves the court to sever trial and abate discovery on the bad faith claim.
In this case, to decide the coverage issue, the factfinder must determine whether the contested medical expenses were caused by "complications of pregnancy" under the insurance policy. In contrast, to establish a bad faith claim under Nebraska law, plaintiffs must show "an absence of a reasonable basis for denying the benefits of the insurance policy and the insurer's knowledge or reckless disregard of the lack of a reasonable basis for denying the claim." Radecki v. Mutual of Omaha Ins. Co., 255 Neb. 224, 229, 583 N.W.2d 320, 325 (1998) (citing John Markel Ford v. Auto-Owners Ins. Co., 249 Neb. 286, 543 N.W.2d 173 (1996); Ruwe v. Farmers Mut. United Ins. Co., 238 Neb. 67, 469 N.W.2d 129 (1991)). "[I]f a lawful basis for denial actually exists, the insurer, as a matter of law, cannot be held liable in an action based on the tort of bad faith." Id. Therefore, if the jury finds that Kristin Prill's medical expenses were indeed caused by "complications of pregnancy" and that defendant breached the insurance contract, the insurer may or may not be liable for bad faith, depending on the conduct involved.
In Cook v. United Servs. Auto. Ass'n, 169 F.R.D. 359, 362 (D.Nev. 1996), a case involving underinsured motorist benefits, the court granted the insurer's motion to bifurcate trial of a bad faith claim, but declined to stay discovery on the bad faith claim:
Bifurcation of the trial does not necessarily require bifurcation of discovery. . . . As with the bifurcation of trial, the decision to stay discovery is within the discretion of the trial court. . . .
The court finds that joint discovery on the contract issues and the bad faith claims is more convenient to the parties and would further judicial economy. With joint discovery, the plaintiffs will be better informed and therefore better prepared in the event of settlement negotiations or alternative dispute resolution. . . . Moreover, the court, by not staying discovery on the bad faith claims, can avoid hearing discovery disputes over which documents pertain to the contract claim and which relate to the bad faith claims. . . . Also, joint discovery may expedite resolution of the entire matter by permitting the second trial, if it is necessary, to commence immediately after the first.
(Citations omitted).
In this case, it appears that much of the discovery relevant to the bad faith claim will be relevant to plaintiffs' other claims. The court can avoid any unfair prejudice to the defendant through jury instructions and other safeguards. It does not appear to the court that severing and staying discovery on the bad faith claim would necessarily be convenient, expeditious, or economical.
IT THEREFORE IS ORDERED that defendant's "Motion to Sever and Abate Discovery on Bad Faith Claim" (#6) is denied.