February 8, 2019
Betsy E. Gallagher | September 28, 2018
HARVEY V. GEICO GEN. INS. CO., NO.S17-85 (FLA. SEPT. 20, 2018)
Summary of the Proceedings
In a 4-3 decision, authored by Justice Quince, the Florida Supreme Court reinstated a judgment for 9.2 million entered in favor of GEICO’s insured, John Harvey. It was based on a special jury verdict finding GEICO acted in bad faith in handling a wrongful death claim against Harvey. Harvey was involved in an auto accident on August 8, 2006 with 51 year-old John Potts who died as a result of the accident, leaving his wife and three children as survivors.
Plaintiff’s counsel rejected GEICO’s tender of Harvey’s $100,000 liability limits. A judgment in favor of the Estate was entered against GEICO’s insured, Harvey, for 8.7 million. Harvey subsequently pursued a bad faith action against GEICO. The bad faith action went to trial, and GEICO moved for directed verdict on the ground there was insufficient evidence to support the bad faith claim. The trial court denied the motion and entered a final judgment for 9.2 million in damages. On appeal, the Fourth District sided with GEICO and reversed the judgment, finding the trial court erred in denying GEICO’s Motion for Directed Verdict as there was insufficient evidence to support the bad faith claim. GEICO Gen. Ins. Co. v. Harvey, 208 So. 3d 810,812 (Fla. 4th DCA 2017).
The Supreme Court Opinion
On “conflict” discretionary review, the supreme court quashed the Fourth District decision on the ground that it failed to properly apply the directed verdict standard and misapplied the supreme court precedent 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) on fiduciary duties of insurance companies against their insureds. The Court also concluded that the Fourth District misapplied the supreme court’s precedent when it stated that an insurer is not liable for bad faith “where the insured’s own actions or inactions …at least in part” caused the excess judgment. The supreme court also found that the Fourth District “also relied, in part, on nonbinding federal cases that cannot be reconciled with our clear precedent.”
Summary of Opinion
A comprehensive description of the facts resulting in the 9.2 million dollar bad faith verdict reinstated by the supreme court outcome are extensively addressed below. However, in case you might want to cut to the chase, the major issue in many people’s minds is whether this case created a much lower “negligence standard” applicable to evaluate claims’ handling in bad faith claims.
The supreme court was very critical of the Fourth District’s reliance on a federal 11th Circuit Court of Appeals decision addressing Florida Bad Faith law and applied a much higher standard in proving an insurer acted in bad faith in failing to settle a claim against its insured. Specifically, the supreme court took issue with the Fourth District’s statement that “negligence alone is insufficient to prove bad faith.” In its defense of this statement the supreme court quoted from its Boston Old Colony case: “While it is true that negligence is not the standard, we made clear in Boston Old Colony that because the duty of good faith involves diligence and care in the investigation and evaluation of the claim against the insured, negligence is relevant to the question of good faith.” 386 So. 2d at 785.
Here GEICO tendered its policy limits without a demand within 9 days unconditionally. However, 4 days after the accident, an employee of the Estate, on behalf if its counsel, called the GEICO adjuster and advised that they needed a recorded statement of the insured to determine if he had any assets, if he was in the course and scope of his employment or had any other insurance. At that time, the inexperienced adjuster declined the statement without talking with the insured. After receiving the policy limits, the Estate’s attorney called the GEICO adjuster and explained what his employee already explained--that a recorded statement of the insured was needed and why. The lawyer for the Estate followed up with a letter received by the adjuster on August 31st which again contained the 3 reasons why a recorded statement was needed. The Estate’s lawyer’s letter also stated that the adjuster was unable to advise him whether the insured would give a recorded statement.
The adjuster faxed the letter that day to the insured who learned for the first time that his recorded statement had been requested. The insured was agitated because he could not meet with his accountant until August 5 and asked the adjuster how they could let the Estate’s attorney know that information. The insured wanted to make sure the Estate’s lawyer knew he was cooperating. The adjuster was instructed by his manager to let the estate’s lawyer know immediately the circumstances of the insured, but the adjuster failed to follow through. There was no additional contact with the Estate’s office. About a month after the Estate’s office first asked for a recorded statement, the Estate’s lawyer returned the check and filed the wrongful death action.
The Effect of the Opinion on Future Claims and Litigation
Technically, in our opinion, the decision did not change Florida state law on bad faith as the statements relating to negligence are quoted from the seminal Boston Old Colony case. But the opinion is definitely notice to insurers to move faster than the speed of light when they receive a serious case with low policy limits. The opinion contains significant facts showing the insurer’s failure to meet the good faith duty of handling a serious claim. In that respect the result is not surprising.
The opinion recognizes that the burden for the entry of a summary judgment in federal court is easier to meet than in state court. Nevertheless, the opinion could very well have a chilling effect and reduce the number of summary judgments entered for insurers in bad faith cases litigated in federal court. Under federal law, the federal courts apply Florida substantive law in diversity of citizenship cases. The decision makes it almost impossible to obtain a ruling as a matter of law in an insurer’s favor.
For those keenly interested in the case here is a lengthy discussion of the facts which resulted in the bad faith verdict.
Additional Discussion by the Court in the Opinion
The supreme court stated GEICO knew “this was a case of catastrophic damages” but “failed to act as if the financial exposure to Harvey was a ‘ticking financial time bomb.’” Relying on Boston Old Colony, the Court stated the evidence shows “GEICO completely dropped the ball” in failing to fulfill its obligation to Harvey to “use the same degree of care and diligence as a person of ordinary care and prudence should exercise in management of his own business.” “[H]ad GEICO acted ‘with due regard’ for Harvey’s interests, the excess judgment could have been prevented.” The supreme court was critical of and rejected the Fourth District’s reliance on a federal 11th Circuit Court of Appeals opinion addressing Florida bad faith law which applied a much higher standard in proving an insurer acted in bad faith in failing to settle a claim against its insured. While reaffirming its Berges decision--“there must be a causal connection between the damages claimed and the insurer’s bad faith, the supreme court rejected the Fourth District’s statement that an insurer cannot be found liable for bad faith where the excess judgment was caused in part by the insured. In contrast, Berges held “the 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.”
Justice Pariente, Lewis and Labarga concurred (joined in with) Justice Quince’s opinion. Two dissenting opinions were authored by Chief Judge Chief Judge Canady and Judge Polston. Judge Lawson concurred with the two dissenting opinions. Justice Quince Pariente and Lewis retire from the supreme court in January.
11 North Water Street, Suite 10290
Mobile, Alabama 36602
Baldwin | Washington | Clarke | Escambia | Covington | Geneva | Houston | Henry | Dale | Coffee | Barbour | Pike |Crenshaw | Butler | Monroe | Clarke | Choctaw | Wilcox | Bullock | Russell
In 1963, Gene Kubicki founded the firm based on dedication to excellence. The same high standards have been maintained for over five decades -- years which have seen the firm’s ranks swell to over 100 attorneys.
Our team knows return clients are the life blood of any law firm and this is why we ensure client satisfaction by an exacting attention to service and quality. Client service coupled with a spectacular work ethic, makes our team hard to beat.
In response to the growing needs of its clients, the firm began expanding in the early 1980's and today is a diverse full-service law firm providing trial, appellate, coverage, commercial and real estate transaction services.
Kubicki Draper enjoys a national reputation for expertise in the handling of complex, high stakes litigation matters, as well as, appellate, general commercial and real estate practice.