United States District Court, N.D. California, San Jose Division
ORDER GRANTING MOTION TO BIFURCATE AND STAY, RE:
J. DAVILA UNITED STATES DISTRICT JUDGE.
action between liability insurers, Plaintiff Zenith Insurance
Company seeks a declaration fully or partially
absolving it of responsibility for the payment of a
settlement arising out of a state-court action for injuries
sustained in an automobile accident. Zenith and Defendant Old
Republic Insurance Company (“Old Republic”) both
participated in the defense of the state court action and
equally paid a portion of the $3 million settlement proceeds
based on potential coverage under their respective policies.
But Zenith claims that the Old Republic policy qualifies as
“primary insurance” for the accident by virtue of
California Insurance Code § 11580.9(d), and that Old
Republic should consequently reimburse Zenith for the
settlement funds it paid. For its part, Old Republic contends
in counter and third-party claims that Zenith is responsible
for the settlement payment due to a contractual arrangement
between their respective insureds.
jurisdiction arises pursuant to 28 U.S.C. § 1332.
Presently before the court is a motion by Zenith and Third
Party Defendant Ramirez Harvest Company, Inc. to (1)
bifurcate the question of whether Insurance Code §
11580.9(d) controls the priority of the Zenith and Old
Republic policies from all other issues in the case, and (2)
stay discovery on issues other than the application of
Insurance Code § 11580.9(d) until the court rules on
that section's impact on the parties' claims. Dkt.
No. Old Republic opposes the motion.
this matter is suitable for decision without oral argument,
the hearing scheduled for July 6, 2017, is VACATED. As to
Zenith's motion, the court finds, concludes and orders as
Zenith's bifurcation request is governed by Federal Rule
of Civil Procedure 42(b), which permits the separate trial of
one or more issues “[f]or convenience, to avoid
prejudice, or to expedite and economize.” The rule
“confers broad discretion upon the district court to
bifurcate a trial, thereby deferring costly and possibly
unnecessary proceedings pending resolution of potentially
dispositive preliminary issues.” Zivkovic v. S.
Cal. Edison Co., 302 F.3d 1080, 1088 (9th Cir. 2002). It
also implicitly confers on the district court the
“power to limit discovery to the segregated
issues.” Ellingson Timber Co. v. Great N. Ry.
Co., 424 F.2d 497, 499 (9th Cir. 1970).
Factors relevant to the issue of bifurcation include, but are
not limited to: “complexity of issues, factual proof,
risk of jury confusion, difference between the separated
issues, the chance that separation will lead to economy in
discovery, and the possibility that the first trial may be
dispositive of the case.” MySpace, Inc. v. Graphon
Corp., 732 F.Supp.2d 915, 917 (N.D. Cal. 2010).
“Bifurcation should be ordered only when it will result
in judicial economy and will not unduly prejudice any
Insurance Code § 11580.9(d) was enacted to sort out
disputes that arise “where the same person is insured
by several insurers separately in respect to the same subject
and interest, ” a situation known as “double
insurance.” Mission Ins. Co. v. Hartford Ins.
Co., 155 Cal.App.3d 1199, (1984) (citing Cal. Ins. Code
§ 590). Indeed, “[t]he statute, where applicable,
makes a definitive imposition of primary and/or excess
liability on insurers in given situations.”
Hartford Accident & Indem. Co. v. Sequoia Ins.
Co., 211 Cal.App.3d 1285, 1296-97 (1989). It provides,
in relevant part, that:
[W]here two or more policies affording valid and collectible
liability insurance apply to the same motor vehicle or
vehicles in an occurrence out of which a liability loss shall
arise, it shall be conclusively presumed that the insurance
afforded by that policy in which the motor vehicle is
described or rated as an owned automobile shall be primary
and the insurance afforded by any other policy or policies
shall be excess.
Zenith argues that bifurcating the issue of whether §
11580.9(d) applies to the Old Republic policy and staying
discovery related to all other matters would satisfy the
requirements of Rule 42(b). To that end, Zenith contends a
bifurcation could obviate the need to try the other issues in
the case - including those related to Old Republic's
counter and third-party claims -thereby promoting a
potentially expeditious resolution and conserving judicial
resources. Zenith also states the amount of discovery
necessary to litigate the bifurcated issue would be minimal
and may simply involve production of the Old Republic policy
declarations, production of the underwriting file, and a
deposition of Old Republic's designated corporate
opposition, Old Republic makes three arguments. First, it
argues bifurcation is unnecessary because § 11580.9(d)
is inapplicable, as the automobile involved in the accident
is not “described or rated” in the relevant
policy. See Ohio Cas. Ins. Co. v. Aetna Ins. Co., 85
Cal.App.3d 521, 524 (1978) (holding the “commensense
understanding” of “described or rated” is a
“particularization of the vehicle.”). Second, Old
Republic contends a bifurcation would not resolve the
indemnity issues raised by its contract-based claims, which
it believes will still need to be tried since they are not
governed by § 11580.9(d). Third, Old Republic suggests a
bifurcation will unnecessarily prolong the case and impair
its ability to gather evidence in support of its indemnity
Having considered the parties' respective positions in
light of the applicable legal standard, the court is
persuaded by Zenith's argument. The limited issue of
§ 11580.9(d)'s effect on this action, if any, is
legally and factually distinct from the indemnity issues
raised by Old Republic's claims and is therefore easily
separated out. It is also an issue, as Zenith recognizes,
that will require a minimal factual investigation and can be
presented and decided with minimal delay. And the court is
not convinced that staying discovery on other issues will
unduly prejudice Old Republic or prevent it from obtaining
relevant information since such a stay will be temporary.
Notably, Old Republic has not cited any specific evidence it
believes will be lost if it cannot undertake discovery
related to other issues now.
Furthermore, the parties' disagreement over the
application of § 11580.9(d) to the Old Republic policy
is not one that can be sorted out in a motion such as this
one, though the court appreciates the preview of the
arguments. Important, however, is observing that while Old
Republic's opinion on the matter appears to have some
legal support, Zenith's does as well. Moreover, this
contested issue appears pivotal enough to determining
responsibility for the proceeds paid to conclude the state
court action that its early resolution presents a significant
opportunity to defer further litigation costs if it either
proves dispositive or increases the potential for settlement.
having found the relief requested promotes efficiency and
economy and does not unduly prejudice Old Republic,
Zenith's motion is GRANTED.
question of whether § 11580.9(d) controls the priority
of the Zenith and Old Republic policies will be bifurcated
from all other issues in the case. In conjunction with the
bifurcation, discovery is stayed on all issues other than the