United States District Court, D. Maryland
MT. HAWLEY INS. CO., Plaintiff
ADELL PLASTICS, INC., Defendant
K. Bredar, Chief Judge.
insurance coverage dispute arose after a fire demolished
several buildings at the Baltimore facility of Adell
Plastics, Inc. Adell had a commercial property insurance
policy with Mt. Hawley Insurance Co. But, in January 2017,
Mt. Hawley sued Adell, seeking a declaration that, under its
insurance policy, Mt. Hawley owed no coverage, and seeking a
recoupment of a substantial advance payment. Adell filed a
counterclaim, alleging that Mt. Hawley had breached its
insurance contract, broken promises, and acted with a lack of
good faith. Trial is now set to begin on July 8, 2019.
Pending before the Court are the parties' pretrial
motions. In this Memorandum, the Court addresses two of them:
Adell's "Motion to Set Order of Trial Presentation
and to Designate Adell as Plaintiff for Trial" and Mt.
Hawley's "Motion to Bifurcate or Otherwise Phase
Trial to Determine Coverage First." The issues have been
fully briefed. No. hearing is required. See Local
Rule 105.6 (D. Md. 2018). For the reasons set forth below,
the Court will grant both motions.
Order of Proof at Trial
courts have broad discretion to set the order of proof at
trial. Auffarth v. Nationwide Mut. Ins. Co., Civ.
No. WDQ-08-1399, 2012 WL 70637, at *2 (D. Md. Jan. 5, 2012)
(citing Anheuser-Busch, Inc. v. John Labatt, Ltd.,
89 F.3d 1339, 1344 (8th Cir. 1996)). In exercising this
discretion, courts may realign parties so that the named
plaintiff becomes the defendant and the named defendant
becomes the plaintiff.
in this circuit have realigned parties to name the party with
the burden of proof the plaintiff and, thus, to facilitate
"the most logical presentation" of evidence.
Coryn Grp. II, LLC v. O.C. Seacrets, Inc., Civ. No.
WDQ-08-2764, 2011 WL 3240456, at *4 (D. Md. July 27, 2011)
(ordering defendant and counter claimant would "proceed
as if it were the plaintiff); see also Auffarth,
2012 WL 70637, at *2 (ordering defendant and counter claimant
would present evidence first and have rebuttal because it
bore the burden of proof on the only issue to be tried);
Nat'l Union Fire Ins. Co. of Pittsburgh v. Reichhold,
Inc., Civ. No. 06-939, 2009 WL 3125483, at *9 (M.D. N.C.
Sept. 30, 2009) (granting realignment because it "would
assist in presentation of evidence and would remove
unnecessary confusion given the present alignment of the
parties"). Similarly, courts in other circuits realign
parties in light of which party has the burden of proof.
Anheuser-Busch, 89 F.3d at 1344 ("Ordinarily,
the trial court extends the privilege of opening and closing
the case to the party that has the burden of proof.");
see, e.g., Allendale Mut. Ins. Co. v. Bull Data Sys.,
Inc., Civ. No. 91-6103, 1995 WL 5895, at *3 (N.D. 111.
Jan. 4, 1995) (realigning parties because insureds, the named
defendants, had burden to establish coverage and prove
damages such that insurers were plaintiffs "in name
generally will not realign parties where the named plaintiff
retains the burden to prove at least one of its claims.
Ericsson Inc. v. Harris Corp., Civ. No. 98-2903,
1999 WL 604827, at *2 (N.D. Tex. Aug. 11, 1999); see Am.
Home Assurance Co. v. Merck & Co., 462 F.Supp.2d
435, 442 (S.D.N.Y. 2006) (holding realigning would prejudice
the named plaintiff where both parties had the burden of
proof on certain counts). But, it is not necessary for
realignment that the named defendant have the burden of proof
on every issue. See Price v. Washington, Civ. No.
10-2202, 2012 WL 2865484, at *2 (N.D. Tex. July 12, 2012)
(realigning parties where defendant had "the burden of
proof on the primary contested issues" and where
plaintiff did not establish legal prejudice); Geico Cos.
Co. v. Beauford, Civ. No. 05-697, 2007 WL 2446552, at *l
(M.D. Fl. Aug. 23, 2007) (realigning parties where named
plaintiff retained burden of proof on its declaratory
judgment claim but named defendants' claims would
predominate the trial). Realignment is appropriate where the
case has evolved such that the ultimate burden has shifted
from the plaintiff to defendant. Ericsson, 1999 WL
604827, at *2.
has the burden of proof on "the primary contested
issues." See Price, 2012 WL 2865484, at *2.
First, Adell has the burden of establishing that Mt.
Hawley's insurance policy covers Adell. See Taylor v.
NationsBank N.A., 116 A.2d 645, 651 (Md. 2001)
(concluding party seeking relief for breach of contract bears
burden of establishing (1) a valid contractual obligation and
(2) the other party's breach of that obligation). To
establish coverage, Adell must prove that it complied with
the insurance contract's Protective Safeguard Endorsement
by keeping its sprinklers in "complete working
order." (Memo. Op. at 10, ECF No. 134.) After
establishing coverage, or the validity of the contractual
obligation, Adell has the burden of showing Mt. Hawley
breached it. Id. Next, Adell has the burden of
establishing that Mt. Hawley acted with a lack of good faith.
See Md. Code Ann. Ins. § 27-1001. If Adell
cannot meet its burden on the first question of insurance
coverage, Adell necessarily cannot establish breach or lack
of good faith. See Taylor, 116 A.2d at 651; St
Paul Mercury Ins. Co. v. Am. Bank Holdings, Inc., 819
F.3d 728, 739 (4th Cir. 2016) (affirming summary judgment on
lack of good faith where insured could not show that coverage
existed). These issues, on which Adell has the burden of
proof, will likely predominate at trial. Allowing Adell to
proceed as plaintiff would create the most logical
presentation of evidence and avoid confusing the jury.
opposition, Mt. Hawley argues that it is the proper plaintiff
and that realignment is not warranted. Mt. Hawley argues
that, as the party that filed suit, it is the plaintiff,
citing several cases in which district courts declined to
realign parties. (ECF No. 158 at 8-9.) But, these cases do
not hold that named plaintiffs must proceed as the plaintiff
at trial. See Anheuser-Busch, 89 F.3d at 1344
(holding district court did not abuse its discretion in
declining to realign where the parties split the burden of
proof on several issues); Travelers Lloyds Ins. Co. v.
Cruz Contracting of Tex., Civ. No. 16-759, 2017 U.S.
Dist. LEXIS 215264, at *2O (W. D. Tex. Mar. 17, 2017)
(declining to realign where plaintiff had burden to prove
declaratory judgment regardless of the outcome of
defendants' counterclaims); Fresenius Med, Care
Holdings, Inc. v. Baxter Int'l, Inc., Civ. No.
03-1431, 2006 U.S. Dist. LEXIS 42159, at *2l (N.D. Cal. June
12, 2006) (declining to realign where plaintiff and defendant
both had the burden of proof on different claims). Mt. Hawley
also quotes, "It is elemental that the party who files a
lawsuit is designated as the plaintiff. This designation is
based on the party's burden to prove the claims initially
asserted in the lawsuit." (ECF No. 158 at 9 (quoting
Ericsson, 1999 WL 604827, at *2).) Rather than
supporting Mt. Hawley's argument that the named plaintiff
should proceed as the plaintiff at trial, this quotation
explains that the reason the named plaintiff generally
proceeds first is because the named plaintiff generally has
the burden of proof.
Hawley argues that, even as a declaratory judgment plaintiff,
one that is typically in the role of defendant, Mt. Hawley is
still the proper plaintiff. Mt. Hawley points out that courts
have rejected motions to realign where a party sues on
declaratory judgment. (ECF No. 158 at 10.) See Am. Home
Assurance, 462 F.Supp.2d at 442 (declining to realign
where plaintiff sought declaration of its rights and that
question was "still very much the central dispute in
th[e] action"); L-3 Comm 'ns Corp. v. OSI
Sys., 418 F.Supp.2d 380, 383 (S.D.N.Y.2005) (concluding,
in general, the party with burden of proof opens and closes
the case, but, where both parties have burden of proof on
some counts, the court "has good grounds" to let
the party who filed first proceed as declaratory judgment
plaintiff); Rowan Cos, v. Ainsworth, 50 F.Supp.2d
588, 590-91 (W.D. La. 1999) (concluding declaratory judgment
plaintiff-even though it was a traditional defendant- had the
burden of proving no liability because it chose to bring the
action). That Mt. Hawley is a declaratory judgment plaintiff
is not determinative here. As these cases confirm, the
district court should look to where the weight of the burden
of proof lies. Mt. Hawley's declaratory judgment claim
depends on whether Adell shows that it kept its sprinklers in
"complete working order" and, thus, that insurance
coverage existed. Although some declaratory judgment
plaintiffs have the burden of proof, Mt. Hawley does not.
Hawley argues that it does have the burden of proof on some
issues, and, as such, realignment is not
warranted.Mt. Hawley asserts that the cases that were
realigned in this district, Auffarth, 2012 WL 70637,
at *2, and Coryn, 2011 WL 3240456, at *4, were
realigned because the defendant had the burden of proof on
the only remaining issues. That is essentially true here.
Adell has the burden of establishing insurance coverage,
breach, and lack of good faith. These issues make up the
structural framework of the case. Mt. Hawley asserts that it
has the burden to prove its affirmative defenses-limitations
and exclusions to coverage-and its money damages claim. (ECF
No. 158 at 14-16.) That Mt. Hawley has the burden to prove
its affirmative defenses against coverage reinforces its
position as a traditional defendant. That Mt. Hawley is
pursuing restitution does not shake that conclusion either
because the court has already decided the restitution issue.
(Memo. Op. at 19-20, ECF No. 134 ("If, at trial, the
Court finds that Adell failed to comply with the Endorsement
and is not entitled to coverage, Mt. Hawley can recover the
$1 million advance payment under principles of
restitution.").) The Court does not see the situation
here as one in which the burden of proof is split between
Adell and Mt. Hawley; rather, Adell has the burden to prove
each claim, and Mt. Hawley has the burden to establish its
to make the most logical presentation of the evidence at
trial, the Court realigns the parties and designates Adell as
Bifurcation or Phasing of Trial Issues
courts have discretion to order separate trials of one or
more separate issues "[f]or convenience, to avoid
prejudice, or to expedite and economize." Fed.R.Civ.P.
42(b). In civil cases, bifurcation is the exception, not the
rule. Cherdak v. Stride Rite Corp., 396 F.Supp.2d
602, 604 (D. Md. 2005). The court's discretion should be
guided foremost by the consideration of "which procedure
is more likely to result in a just and expeditious final
disposition of the litigation." See 9A Charles
Allen Wright & Arthur R. Miller, Federal Practice and
Procedure § 2388 (3rd ed. 2010). "The burden
of proving that bifurcation is warranted rests with the
moving party." Morgan v. Prince George's
Cty., Civ. No. AW-09-1584, 2010 WL 64405, at *2 (D. Md.
Jan. 5, 2010). Insurers, like Mt. Hawley, often move for
bifurcation and are largely successful. See Steven
Plitt, et al, Practice & Procedure in Ins.
Litig., 17 Couch on Ins. § 246:5 (3d. ed. 2018)
("[Bifurcation of bad-faith claims has been deemed
proper when the action also involved disputes as to whether
there was, in fact, coverage for the particular claim, or
such 'consequential' claims as breach of duty to pay
or to settle."). Mt. Hawley argues that bifurcation
would serve judicial economy and efficiency; the contested
issues are distinct; and, bifurcation would avoid prejudice.
The Court agrees that bifurcating the issues and phasing them
at trial is appropriate.
efficiency is particularly relevant here because the
resolution of the first issue might vitiate the need to
address the other issues. See Amato v. City of Saratoga
Springs,170 F.2d 311, 316 (2d. Cir. 1999)
("[B]ifurcation may be appropriate where, for example,
the litigation of the first issue might eliminate the need to
litigate the second issue."); Equitable Life
Assurance Soc 'y v. Berry,260 Cal.Rptr. 819, 822
(6th Dist. 1989) (severing coverage from bad faith because
coverage issue was scheduled to consume two days, the bad
faith issue was scheduled to consume several weeks, and
judgment in favor of insurer on coverage would end the
lawsuit). Adell includes a list of witnesses to show that
some witnesses will testify as to both coverage and lack of
good faith. (ECF No. 177 at 16-18.) This list demonstrates
the large amount of evidence that is irrelevant to the first
question of coverage: whether the sprinklers were in
"complete working order." That some witnesses may
have to testify twice does not justify the confusion that
would be ...