The Chief Judge of the U.S. District Court for the Middle District of Pennsylvania has recently ruled in favor of staying all discovery in an Insurance Coverage and alleged Bad Faith case where a potentially dispositive motion would decide the Insurance Coverage issue without the need for discovery.
In Babalola v. Donegal Mutual Insurance Co. (M.D. Pa. December 18, 2008), download Babalola v. Donegal Mutual Insurance Co. (M.D. Pa. Dec. 18, 2008), the Chief Judge had already granted the Insurance Company’s motion to dismiss the original complaint. She gave leave to amend. The Plaintiff filed an amended complaint. The Defendant filed a second motion to dismiss, and this time, also filed a motion to stay all discovery because the second motion to dismiss would decide the Insurance Coverage issue and so it would decide the entire case.
The Chief Judge agreed and granted the motion to stay all discovery – and stayed the costs of discovery too of course although the costs of discovery in that case are not addressed ‘out loud’ in the opinion. First, she ruled that the decision was within her discretion. The exercise of discretion calls for a balancing test, balancing the competing interests of each party to determine the benefits and harm from staying discovery. The Federal Judge also preliminarily reviewed the motion to dismiss in that case. She agreed that deciding the second motion to dismiss in that case would decide the entire case and that no discovery on the dispositive motion was necessary. “The balance favors granting the stay where the pending motion to dismiss disposes of the entire case and where no discovery is needed to rule on such a motion.”
There are likely to be many Insurance cases in other Federal Courts, and in State Courts too perhaps, in which a stay will be requested. In a case like this new decision attached for your ease of reference, requesting a stay of all discovery at an appropriate juncture will arguably be in each party’s interest, on the whole, because a Judge is convinced by Insurance Counsel that a pending dispositive motion will decide the Insurance Coverage issue without the need for discovery.
On the authority of this new Insurance Coverage case, parties and their counsel in any similar case should seriously consider requesting a stay of all discovery and thus a stay of all the costs that go along with that discovery.
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