4 min. read

Harvey v. GEICO Gen. Ins. Co.
2018 WL 4496566 (Fla. 2018)

Normally, the authors of this newsletter do not present cases from other jurisdictions. However, a recent Florida Supreme Court decision determining that an insurance company engaged in bad faith despite its tender of its insured’s policy limits within nine days of an accident is worth a review. In the case, Harvey was involved in an automobile accident with Potts that resulted in Potts’ death. Harvey possessed a one hundred thousand dollar ($100,000) liability policy with GEICO. After the accident, GEICO assigned the Potts Estate’s claim to Adjuster Korkus.

Two (2) days after the accident, GEICO determined that Harvey was liable for the accident. On the next day, Korkus sent a letter to Harvey explaining that the Potts Estate’s claim could exceed his policy limits and that he had the right to retain his own attorney.

Six (6) days after the accident, a paralegal for an attorney representing the Potts Estate contacted Korkus to request a recorded statement of Harvey to determine the extent of his assets. Korkus did not immediately communicate this request to Harvey. Nine (9) days after the accident, GEICO offered the full amount of the policy limits to the Potts Estate’s attorney with a proposed Release and Affidavit of Coverage. The attorney wrote Korkus, acknowledging receipt of the check and Korkus’ refusal to make Harvey available for a statement. At that time, Korkus faxed the letter to Harvey who learned for the first time that a statement had been requested of him.

On the next day, Harvey contacted Korkus to discuss the Potts Estate’s attorney letter requesting a statement of Harvey’s assets. Harvey advised Korkus that he planned to meet with his attorney to review his financial information, but because of an upcoming holiday, would not be available for an additional four (4) days. Although Korkus documented the call in her Activity Log Notes and was advised by her manager to advise the Potts Estate’s attorney, she did not do so.

Approximately one month later, after Harvey did not supply information relating to his financial claim, the Potts Estate’s attorney returned the settlement check and filed a wrongful death lawsuit against Harvey. Eventually, that wrongful death lawsuit went to trial, and a jury found Harvey one hundred percent (100%) at fault and awarded the Potts Estate $8.47 million dollars in damages. Harvey filed a bad faith claim against GEICO for recovery of the excess figure. At the conclusion of the evidence presentation, GEICO moved for a directed verdict, which the trial court denied. The jury eventually found GEICO acted in bad faith and entered a judgment in favor of Harvey in the amount $9.2 million dollars. GEICO appealed and the Court of Appeals reversed the trial court’s denial of directed verdict to GEICO finding that under Florida precedent, the evidence was insufficient, as a matter of law, to support a conclusion that GEICO acted in bad faith.

The Florida Supreme Court reversed the appellate court and reinstated the verdict. In addressing the contentions raised, the Supreme Court outlined its view of the law as follows:

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 [action] 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.

Id. The Supreme Court determined that the GEICO adjuster did not do everything to facilitate settlement, but acted as a “considerable impediment” to settlement by not informing the insured of the request for a statement regarding his assets or informing the Potts Estate’s attorney of the insured’s need to meet with his counsel.

The court also rejected a second reason offered by the Court of Appeals in reversing the verdict. The Court of Appeals also concluded that the insured’s failure to provide a statement to the Potts Estate’s attorney, when it knew one was requested, demonstrated that the insured, rather than the insurer, was responsible for the excess verdict situation. The Supreme Court rejected that analysis by indicating that a bad faith assessment focuses upon the conduct of the insurance company, not the insured.

In a dissent, the dissenting judge found that the Supreme Court majority’s opinion “muddie[d] the waters between negligence and bad faith and bolsters ‘contrived bad faith claims.’” Id. Additionally, the dissent stated that in developing bad faith case law, the court should set forth “logical, objective” rules, which:

… should not sanction the award of “limitless insurance”… in a case in which the insurer tendered the policy limits, the third party never made any time-limited demand or presented any settlement offer of its own, and the only relevant decision to be made was within the insured’s control.

Id. The dissent noted that the Supreme Court ruling created “limitless” insurance for Harvey:

The result of the majority’s decision is that an insured who caused damages that exceeded his policy limits by over 8,000 percent, who had assets that greatly exceeded his policy limits, and who at no time ever offered to provide his financial information to a third-party claimant despite knowing that the information was being requested even after the policy limits were tendered has his $100,000 converted into an $8.47 million dollar policy, while other insurance customers eventually foot the bill.

Id. The dissent further pointed out that the majority’s decision would have a bad effect upon insureds who do not acquire sufficient insurance coverage:

By adopting a negligence standard in all but name, ignoring the controlling conduct of the insured and the third-party claimant, and relying on unsupported assumptions, the majority incentivizes a rush to the courthouse steps by third-party claimants whenever they see what they think is an opportunity to convert an insured’s inadequate policy limits into a limitless policy.

The Florida Supreme Court’s decision creates standards that are not currently applicable in Indiana. While the facts show that the insurer may have committed mistakes in the handling of the claim, the Florida Supreme Court’s majority allows those mistakes to support a bad faith finding. In such a situation, a simple negligence standard, rather than Indiana’s requirement of “a culpable mental” conduct by the insurer, supported a bad faith claim. Hopefully, Indiana does not follow Florida’s significant change in the standards for pursuit of a bad faith claim.