News Room

News Room

Geico v. Harvey Update

September 25, 2018

Via Electronic Mail
Ella Tayrien
Large Loss Casualty Specialist
Armed Forces Insurance
550 Eisenhower Road
Leavenworth, KS 66048

Re: Client Update
Supreme Court reinstates $9.2 million verdict against GEICO for bad faith
Dear Ms. Tayrien:

On Thursday, September 20, 2018, a sharply divided Florida Supreme Court reinstated a $9.2 jury million bad faith judgment against GEICO, concluding in a 4-3 decision that the national insurer improperly exposed a policyholder to an $8.47 million verdict in a wrongful death action.

The case started on August 8, 2016, when GEICO’s insured, James Harvey, was involved in an automobile collision on the Beeline Highway that instantly killed John Potts, a 51-year-old father of two, according to the Fourth District Court of Appeal decision. The accident was reported to GEICO, with which the insured had a $100,000 liability policy. The claim was then assigned to Fran Korkus (“Korkus”), a GEICO claims adjuster with over nineteen years of experience.

Three days later after the accident, GEICO advised its insured in writing that the claim by the decedent’s estate could exceed the insured’s policy limits and that the insured had the right to retain personal counsel. Mr. Harvey subsequently hired personal counsel to protect his uninsured excess exposure.

On August 14, a paralegal for the law firm retained by the decedent’s estate contacted Korkus and advised of their representation of the estate. According to the paralegal, she asked Korkus to arrange for a statement from the insured regarding the insured’s personal and business assets, whether the insured was acting within the course and scope of his business at the time of the accident, and other potential insurance coverage for the claim. Notably, the estate’s counsel did not provide deadline or any other timeline for obtaining this statement, nor was Korkus told that the insured’s statement was a prerequisite to settling the insured’s claim. Still, nine days after the accident, on August 17, GEICO unconditionally tendered the $100,000.00 policy limits, along with an affidavit of coverage and proposed release.

On August 23, the insured met with his personal counsel and brought documentation showing that his business had only $85,000 in its accounts. The following day, on August 24, the estate’s counsel sent a letter to Korkus in response to the $100,000 check and release. The letter indicated that Korkus had declined the estate’s request to make the insured available for a statement and renewed its request for the insured’s financial information. Korkus received this letter on August 31, faxed it to the insured, and verbally discussed its contents with him the same day. According to this insured, this was the first time he learned the estate wanted a statement.

Also on August 31, pursuant to GEICO’s in-house counsel’s instructions, Korkus contacted the estate’s counsel to obtain more information regarding the requested statement. The estate’s counsel responded that he wanted to determine additional assets or coverage the insured had available. The estate’s counsel then sent a letter to Korkus memorializing the conversation, and Korkus immediately forwarded that letter to the insured advising him of the estate’s request. Additionally, Korkus sent the insured a sample financial affidavit with blanks where the insured could input his available assets and coverage to provide this information to the estate. In renewing its request for a statement from the insured, the estate again failed to provide a deadline or other timeframe within which the insured’s statement was to be obtained.

The next day, the insured contacted Korkus and informed her that his personal counsel was not available until September 5, and requested Korkus advise the estate’s counsel that he was working on preparing the financial statement. GEICO’s in-house counsel also instructed Korkus to relay the insured’s message to the estate’s counsel. For unknown reasons, Korkus failed to do so. Still, notwithstanding the return of the insured’s counsel, and despite the insured’s knowledge that the estate wanted a statement, neither the insured nor his counsel ever took any further action to provide the estate with a statement.

The estate later filed a wrongful death lawsuit against the insured and returned GEICO’s $100,000 check. Ultimately, a jury awarded $8.47 million in a judgment against GEICO’s insured for the fatal collision.

After the judgment was entered against him, the insured brought a bad faith claim against GEICO accusing it of acting in bad faith by failing to cooperate with the estate’s counsel with respect to financial information that was requested before the lawsuit was filed. During the course of the bad faith trial, the insured admitted he knew about the estate’s request for a statement at least thirteen days before the estate filed suit. The insured also admitted that, despite GEICO informing him of the estate’s request for a statement and having collected the financial documentation necessary to provide a statement, he failed to provide this statement to the estate before the lawsuit was filed. Still, the insured claimed that had he known about the estate’s request before August 31, he would have provided the statement. The record is absent any information as to why the insured did not provide his statement between the time his counsel became available and the date the suit was filed.

The estate’s counsel testified at trial that had he known the insured planned on giving a statement, then he would have recommended delaying the filing of the wrongful death suit (even though he never advised either the insured, the insured’s counsel, or GEICO that without the statement the filing of the lawsuit was imminent). The estate’s counsel also testified that he would have recommended not pursuing the wrongful death lawsuit had he known the insured only had $85,000 in assets available. Further, the estate’s personal representative stated she would have followed counsel’s advice and declined to file the lawsuit. Finally, the insured introduced evidence in support of its claim of bad faith by GEICO that Korkus had received some deficient performance reviews, and at times had difficulty managing her workload.

The jury entered a verdict in the insured’s favor and GEICO moved for a judgment notwithstanding the verdict. The trial court denied the motion, and GEICO appealed. The Fourth District Court of Appeal overturned the ruling and sent the case back to the trial court for a judgment in favor of GEICO, stating in pertinent part:

Although GEICO’s claims process was not without fault and could be improved, GEICO’s handling of the claim did not amount to bad faith as a matter of law. Additionally, even if GEICO’s handling of the claim were deficient, GEICO’s conduct was not proven to cause the excess judgment against the insured.” (emphasis added).

The Florida Supreme Court quashed the Fourth District’s decision, and approved the decision of the trial court. In a 4-3 ruling, Justice Peggy A. Quince, writing for the majority, emphasized the fiduciary duty owed by insurers to their insureds to act in the insured’s best interest. The insured’s obligation is “not a mere checklist,” Quince wrote and further explained:

An insurer is not absolved of liability simply because it advises its insured of settlement opportunities, the probable outcome of the litigation, and the possibility of an excess judgment. Rather, the critical inquiry in a bad faith is whether the insurer diligently, and with the same haste and precision as if it were in the insured’s shoes, worked on the insured’s behalf to avoid an excess judgment.

Quince affirmed that the damages sustained “must be caused by the insured bad faith,” but stated that “[t]he focus in a bad faith case is not on the actions of the claimant but rather on those of the insurer in fulfilling its obligations to the insured.”

Chief Justice Charles Canady penned a strongly worded dissent, concurred in by Ricky Polston and Alan Lawson, wherein he stated that “[b]ecause the Fourth District’s decision in [Harvey], does not expressly and directly conflict with this Court’s decisions in Boston Old Colony Insurance Co. v. Gutierrez, 386 So. 2d 783 (Fla. 1980), and Berges v. Infinity Insurance Co., 896 So. 2d 665 (Fla. 2004), this Court does not have the constitutional authority to review this case.” We agree with the dissent that there was no conflict between the Fourth District’s opinion in Harvey and the other appeals courts and/or the Florida Supreme Court case of Boston Old Colony.

With due respect to the majority, they appear to have contorted the Fourth District’s opinion to rationalize a conflict with the long-settled case law of Boston Old Colony and the obligations of good faith claims handling set forth thereunder. Nowhere in the Fourth District’s opinion does it even vaguely hint that the appellate court was departing from Boston Old Colony on any question of law.

Instead, the better reasoned opinion is the dissent by Canady, not only in pointing out that there was no real conflict, but also in noting that the Fourth District did what it was supposed to do and went through the enumerated requirements of Boston Old Colony finding each to be satisfied. However, with the departing three justices of the Florida Supreme Court set to retire at the end of January 2019, this appears to have been their last opportunity to undermine what they themselves reference as the “totality of the circumstances standard.” Here, the majority appears to focus exclusively on a single omission by a single adjuster, ignoring all the other attempts made by GEICO claims personnel to secure a settlement.

Strikingly, the majority’s decision makes reference to yours truly, as GEICO’s expert, stating I agreed that the estate’s counsel needed financial information regarding the insured’s personal assets and that of his corporation. However, what the majority omits is that the estate’s counsel already had run an assets check on the insured and his business and had determined that there were attachable assets above GEICO’s policy limits. It was uncontroverted that the estate’s counsel had obtained this information through a financial investigation which had been done on the insured and his business, prior to requesting his statement, supporting the contention that there is no legal causation between the omission of the adjuster and the failure to obtain a settlement. Secondly, the one and only opportunity to settle in this case was when GEICO tendered the policy limits.

The Canady dissent emphasized that the majority’s misreading of Florida case law effectively adopts a negligence standard for bad faith actions, which the Florida Supreme Court has repeatedly indicated is not the legal standard. The instant case highlights the importance of retaining specific counsel for the insurance carrier (different and distinct from defense counsel for the insured) to assist in the handling of catastrophic cases involving brain injury, loss of all or part of an extremity, wrongful death claims, and/or any other case involving catastrophic injury or time limit demand letters where liability and/or the magnitude of damages is at issue.

As always, we will continue to keep you advised regarding any pertinent appeals or decisions from the Supreme Court. Should you have any questions regarding the above, do not hesitate to contact the undersigned.

Very Truly Yours,

JOHN BOND ATKINSON
TIFFANY A. BUSTAMANTE
JBA/TAB:ae