Insurance Coverage / UIM Bad Faith & Bifurcation – Appellate Court Endorses Bifurcation of Bad Faith Claims, Affirms No Bad Faith Finding

After an auto accident, the insured recovered the tortfeasor’s $50,000 policy limits and then pursued underinsured motorist (UIM) benefits under her own $100,000 policy. The insurer valued the claim below $50,000 and, after arbitration, was ordered to pay $19,500 in UIM benefits. The insured then sued for CUIPA/CUTPA violations and breach of the implied covenant of good faith and fair dealing, focusing heavily on the company’s claims‑handling and its delay in paying the arbitration award. The trial court bifurcated the case, sending the UIM damages issue to nonbinding arbitration and staying the extra‑contractual claims and related discovery until the coverage piece was resolved. After the insured prevailed in arbitration and later tried the CUIPA/CUTPA and bad‑faith counts to the court, judgment entered for the insurer. The Appellate Court affirmed and, in doing so, endorsed bifurcation/stay as a legitimate case‑management tool in coverage/bad‑faith litigation. It held the trial court “reasonably could have concluded that bifurcation … served interests of convenience and judicial efficiency and may have negated the need to litigate certain other issues.” On the merits, the court reiterated that bad faith requires more than a mistaken or conservative valuation; there must be a dishonest purpose or sinister motive. On this record—where the insurer promptly evaluated the claim, requested additional medical records, explained its view that UIM limits were not triggered, and later delayed payment of the arbitration award based on counsel’s advice that it was not yet a “final, payable judgment”—the insured had not carried that burden. The trial court properly found that the carrier’s conduct did not amount to “a design to mislead or deceive” and that the plaintiff failed to show the insurer “acted in bad faith.” Krausman v. Liberty Mut. Ins. Co., AC 46782 (Conn. App. Ct. Oct. 28, 2025).