[Cite as DeVito v. Grange Mut. Cas. Co., 2013-Ohio-3435.]


                 Court of Appeals of Ohio
                               EIGHTH APPELLATE DISTRICT
                                  COUNTY OF CUYAHOGA


                              JOURNAL ENTRY AND OPINION
                                       No. 99393




                               KATHLEEN R. DEVITO
                                                            PLAINTIFF-APPELLEE

                                                    vs.

           GRANGE MUTUAL CASUALTY CO., ET AL.
                                                            DEFENDANTS-APPELLANTS




                                   JUDGMENT:
                             REVERSED AND REMANDED



                                     Civil Appeal from the
                            Cuyahoga County Court of Common Pleas
                                     Case No. CV-790538

        BEFORE: S. Gallagher, J., Jones, P.J., and McCormack, J.

        RELEASED AND JOURNALIZED: August 8, 2013
ATTORNEYS FOR APPELLANTS

Brian Borla
Frank G. Mazgaj
Hanna, Campbell & Powell, L.L.P.
3737 Embassy Pkwy., Suite 100
Akron, OH 44333


ATTORNEY FOR APPELLEE

Christopher M. DeVito
Morganstern, MacAdams & DeVito Co., L.P.A.
623 West St. Clair Avenue
Cleveland, OH 44113
SEAN C. GALLAGHER, J.:

         {¶1} Appellants, Grange Mutual Casualty Company (“Grange”) and Zito Insurance

Agency, Inc. (“Zito”), appeal the decision of the Cuyahoga County Court of Common

Pleas that denied in part their motion to stay the bad-faith claim. For the reasons stated

herein, we reverse the decision of the trial court insofar as it denied a stay of discovery on

the bad-faith claim.

         {¶2} On August 31, 2012, appellee Kathleen R. DeVito filed a complaint against

Grange and Zito.       DeVito alleged that Grange and Zito breached their contract of

homeowners residential insurance with DeVito when they denied coverage for her claim

for rafter and roof damage to her home. DeVito further alleged that Grange and Zito

breached their covenant of good faith and their fiduciary duty to DeVito by denying her

claim.

         {¶3} Following initial proceedings, Grange and Zito filed a motion to bifurcate the

bad-faith claim from the contract claim and motion to stay the bad-faith claim. The trial

court granted the motion in part and denied the motion in part and ordered that “trial of

the bad faith claim shall commence, if necessary, immediately upon the conclusion of the

trial of the breach of contract claim. Discovery shall proceed on all issues.”
       {¶4} Grange and Zito have appealed the trial court’s ruling.               Their sole

assignment of error provides as follows:

       The trial court erred in allowing discovery to proceed on all issues, and not

       staying discovery of the bad faith claim until after resolution of the

       underlying breach of contract claim.

       {¶5} Initially, we must recognize that the issue in this matter is not whether DeVito

can obtain discovery from the insurance claim file on her bad-faith claim. Grange and

Zito concede that discovery of attorney-client and/or work-product documents created

prior to the denial of coverage that are related to the bad-faith claim are discoverable.

       {¶6} Indeed, in Boone v. Vanliner Ins. Co., 91 Ohio St.3d 209, 744 N.E.2d 154

(2001), the Ohio Supreme Court recognized an exception to the attorney-client privilege

with regard to communications showing an insurance company’s lack of good faith in

denying coverage. The court held as follows:

       [I]n an action alleging bad faith denial of insurance coverage, the insured is
       entitled to discover claims file materials containing attorney-client
       communications related to the issue of coverage that were created prior to
       the denial of coverage. * * * Of course if the trial court finds that the
       release of this information will inhibit the insurer’s ability to defend on the
       underlying claim, it may issue a stay of the bad faith claim and related
       production of discovery pending the outcome of the underlying claim.

Id. at 213-214.

       {¶7} In Boone, the trial court had ordered the insurance company to submit its

claims file to the court for an in camera inspection to determine which documents, if any,
were protected from discovery. Id. at 210. The Ohio Supreme Court reviewed the

documents to determine which documents were subject to disclosure. Id. at 214-215.

The court indicated that the distinction between which documents should be afforded

privilege and which are undeserving of protection because they show a lack of a

good-faith effort to settle “could easily be eliminated by staying the bad faith claim until

the underlying claim has been determined.” Id. at 212.

       {¶8} The court in Boone noted that because the issue had not been raised, it would

not be deciding whether the case, which involved solely a discovery issue, met the

requirements for a final, appealable order, “in particular R.C. 2505.02(B)(4)(b).” Id. at

211, fn. 5. R.C. 2505.02(B)(4) provides that an order that grants or denies a provisional

remedy constitutes a final, appealable order if (a) “[t]he order in effect determines the

action * * * and prevents a judgment in the action in favor of the appealing party with

respect to the provisional remedy[,]” and (b) “[t]he appealing party would not be afforded

a meaningful or effective remedy by an appeal following final judgment * * *.”

       {¶9} At least one court has determined that an order with regard to the discovery of

a claims file constitutes a final, appealable order.           See Stewart v. Siciliano,

2012-Ohio-6123, 985 N.E.2d 226 (11th Dist.). That decision recognized that although

discovery issues are generally interlocutory in nature, provisional remedies ordering

discovery of privileged material are final and appealable. Id. at ¶ 42, citing Cobb v.

Shipman, 11th Dist. Trumbull No. 2011-T-0049, 2012-Ohio-1676. We agree and also
find that an order denying a stay of discovery with regard to attorney-client

communications or work-product documents relating to a bad-faith denial-of-coverage

claim meets the requirements of R.C. 2505.02(B)(4). As recognized in Boone, a stay of

disclosure may be necessary pending the outcome of the underlying claim when the court

finds that the release of this information will inhibit the insurer’s ability to defend on the

underlying claim. Boone, 91 Ohio St.3d at 214, 744 N.E.2d 154. We find that in such a

case, the appealing party would not be afforded a meaningful or effective remedy by an

appeal following final judgment. Because the requirements of R.C. 2505.02(B)(4) are

satisfied, we conclude that there is a final, appealable order in this matter.

          {¶10} Generally, a trial court’s decision in discovery matters, including whether to

stay discovery, is reviewed under an abuse of discretion standard. See State ex rel.

Keller v. Columbus, 164 Ohio App.3d 648, 2005-Ohio-6500, 843 N.E.2d 838, ¶ 39 (10th

Dist.).      To constitute an abuse of discretion, the trial court’s ruling must be

“unreasonable, arbitrary or unconscionable.” Blakemore v. Blakemore, 5 Ohio St.3d

217, 219, 450 N.E.2d 1140 (1983).

          {¶11} In this case, the trial court granted the motion to bifurcate but denied a stay

of discovery on the bad-faith claim. It is apparent that the claims in the matter are

interrelated and that allowing the discovery to proceed on the bad-faith claim would be

prejudicial to Grange’s defense on the other claims.
       {¶12} In Garg v. State Auto. Mut. Ins. Co., 155 Ohio App.3d 258,

2003-Ohio-5960, 800 N.E.2d 757 (2d Dist.), a trial court was found to have abused its

discretion where it failed to stay the discovery for a bad-faith claim until after resolution

of the breach-of-contract and unfair-practices claims. The loss arose after the insureds’

warehouse burned and their personal belongings were destroyed in the fire. Id. at ¶ 3.

The insureds filed suit after Grange failed to adjust and pay the claim. Id. at ¶ 4. The

appellate court found that failing to bifurcate the bad-faith claim for trial and to stay

discovery on the claim would be grossly prejudicial to Grange and constituted an abuse of

discretion. Id. at 29. The court stated that “[t]o require Grange to divulge its otherwise

privileged information prior to a resolution of the other claims would unquestionably

impact Grange’s ability to defend against them” and that the trial court acted

unreasonably by failing to prevent that prejudice by bifurcating trial and staying discovery

on the bad-faith claim. Id. at ¶ 29-30.

       {¶13} In Libbey, Inc. v. Factory Mut. Ins. Co., N.D.Ohio No. 3:06 CV 2412, 2007

U.S. Dist. LEXIS 45160 (June 21, 2007), a case involving a single occurrence and a

single customer, the court found that bifurcation and a stay of discovery on a bad-faith

claim was warranted. The court found as follows:

       Here, Factory Mutual asserts * * * that the breach of contract claims and the
       bad faith claims are closely interrelated because the denial of coverage is
       central to both types of claims. * * * [T]his case is a more typical coverage
       dispute with a bad faith denial, a fact pattern more akin to the cases of
       Boone and Garg where the courts found a stay and bifurcation appropriate.
       There are no unusual circumstances or extended litigation schedules to
       cause considerations of judicial economy to weigh more heavily in favor of
       Libbey.

              While the Court recognizes a stay and bifurcation may extend the
       length of litigation, and perhaps cause some duplication and extra expense,
       the Court finds the potential prejudice to Factory Mutual outweighs any
       decrease in judicial economy or efficiency. Furthermore, the Court’s past
       practice is to minimize any inconvenience by scheduling a thirty-day
       discovery period and trial for the bad faith claims immediately following
       the trial of the breach of contract claim.             The attorney-client
       communications Libbey would discover if this Motion is denied may be
       relevant to determine whether Factory Mutual acted in bad faith; however,
       they may also be highly relevant to Factory Mutual’s defense of the breach
       of contract claim.

Libbey at *29-30.

       {¶14} Likewise, in Ferro Corp. v. Continental Cas. Co., N.D.Ohio No.

1:06CV1955, 2008 U.S. Dist. LEXIS 108010 (Jan. 7, 2008), the court granted the

insurers’ motion to bifurcate and to stay discovery on the bad-faith claims pending a

determination of the coverage issues. With regard to the stay of discovery, the court

found as follows:

       While the Court is sensitive to Plaintiff’s concerns regarding efficient
       allocation of resources and judicial economy, the Court finds that such
       concerns clearly are outweighed by the danger of unfair prejudice to
       Defendants. Furthermore, the Court finds that bifurcation would be
       ineffective to prevent prejudice to Defendants if not coupled with a stay of
       discovery on the bad faith issues. Because of the facts of this case and the
       manner in which these claims were handled by the parties, it is clear, as
       explained previously, that any of Defendants’ attorney-client
       communications relating to the bad faith issue are interrelated with
       coverage issues. * * * Failure to impose a stay would result in manifest
       prejudice to Defendants’ ability to defend the coverage issues.

Id. at *22-23.
      {¶15} We recognize that this matter is before an experienced and well-respected

trial judge, and we do not take lightly that there may be instances where judicial economy

may outweigh possible prejudice to an insurance company.                Nevertheless, the

circumstances in this matter are akin to those presented in the cases discussed above.

This action relates to a single claim and involves a single homeowner; the claims are

straightforward and interrelated, and resolution of the breach-of-contract claim may

dispose of the bad-faith claim. Further, allowing discovery to proceed on the bad-faith

claim will inhibit the insurer’s ability to defend on the underlying claims and will be

highly prejudicial to Grange and Zito. For these reasons, we find that the trial court

acted unreasonably in denying a stay of discovery on the bad-faith claim.

      {¶16} We note once the underlying claims are decided, and provided the bad-faith

claim remains unresolved, discovery may proceed on the bad-faith claim in as rapid a

manner as the trial court deems appropriate. In this regard, courts have determined that

an in camera review of the claims file is appropriate to determine which materials in the

claims file are relevant to the bad-faith claim. See Stewart, 2012-Ohio-6123, 985 N.E.2d

226, at ¶ 55-56 (11th Dist.); Unklesbay v. Fenwick, 167 Ohio App.3d 408,

2006-Ohio-2630, 855 N.E.2d 516, ¶ 21 (2d Dist.) (trial court abused its discretion in

failing to conduct an in camera review of the claims file because a bad-faith claim does

not entitle disclosure of everything in a claims file). “[T]he critical issue in evaluating

the discoverability of otherwise privileged materials is * * * whether they may cast light
on bad faith on the part of the insurer.” Garg, 155 Ohio App.3d 258, 2003-Ohio-5960,

800 N.E.2d 757, at ¶ 20.

       {¶17} Accordingly, we sustain the assigned error. Upon remand, the trial court

shall enter an order staying discovery on the bad-faith claim, pending resolution of the

other claims.

       {¶18} Judgment reversed, and cause remanded.

       It is ordered that appellants recover from appellee costs herein taxed.

       The court finds there were reasonable grounds for this appeal.

       It is ordered that a special mandate issue out of this court directing the common

pleas court to carry this judgment into execution.

       A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of

the Rules of Appellate Procedure.




SEAN C. GALLAGHER, JUDGE

TIM McCORMACK, J., CONCURS;
LARRY A. JONES, SR., P.J., DISSENTS (WITH SEPARATE OPINION)
LARRY A. JONES, SR., P.J., DISSENTING:

       {¶19} Respectfully, I dissent. This is an appeal from the trial court’s judgment

denying Grange and Zito’s motion to stay discovery on Devito’s bad-faith insurance

claim. The majority cites two Eleventh Appellate District opinions to support its finding

that a trial court’s judgment constitutes a final appealable order. But this court has held

that such an order is not final and appealable.       See Holivay v. Holivay, 8th Dist.

Cuyahoga No. 89439, 2007-Ohio-6492, ¶ 10 (“because the denial of a stay of proceedings

is not a final appealable order, we must therefore dismiss this appeal for lack of

jurisdiction”); Marks v. Morgan Stanley Dean Witter Commercial Fin. Servs., Inc., 8th

Dist. Cuyahoga No. 84209, 2004-Ohio-6419, ¶ 13 (“a stay of discovery is not a

‘provisional remedy,’ the denial of which is subject to immediate appeal pursuant to

R.C. 2505.02(B)(4)”).

       {¶20} Addressing the merits, the majority noted that the Ohio Supreme Court has

held that, in an action alleging bad-faith denial of insurance coverage, the insured is

entitled to obtain through discovery, documents in the insurer’s claim file containing

attorney-client communications and work product that may shed light on whether the

denial was made in bad faith. Boone v. Vanliner Ins. Co., 91 Ohio St.3d 209, 744

N.E.2d 154 (2001). But the majority finds that the trial court acted “unreasonably”

regarding the timing of Devito’s discovery request.
       {¶21} As correctly stated by the majority, discovery orders are reviewed for an

abuse of discretion. Acme Arsena Co., Inc. v. J. Holden Constr. Co., Ltd., 8th Dist.

Cuyahoga No. 91450, 2008-Ohio-6501, ¶ 9. Abuse of discretion is an extremely high

standard; it demands that the trial court exhibited a “perversity of will, passion, prejudice,

partiality, or moral delinquency.” Pons v. Ohio State Med. Bd., 66 Ohio St.3d 619, 621,

614 N.E.2d 748 (1993), citing State v. Jenkins, 15 Ohio St.3d 164, 222, 473 N.E.2d 264

(1984). Thus, an appellate court, in applying the abuse of discretion standard, may not

substitute its judgment for that of the trial court. Pons at id.

       {¶22} I do not think that the trial court abused its discretion by denying Zito and

Grange’s motion to stay.    The concerns cited by the majority were presented to the court

in appellants’ motion. As Boone instructs, “if the trial court finds that the release of

[claims file] information will inhibit the insurer’s ability to defend on the underlying

claim, it may issue a stay of the bad faith claim and related production of discovery

pending the outcome of the underlying claim.”      (Emphasis added.) Id. at 214.

       {¶23} The trial court did not find that appellants’ and the majority’s concerns

required that it stay discovery.    I find nothing in the record to indicate that the trial

court’s decision was an abuse of discretion.       I therefore dissent from the majority’s

opinion.
