When you have been sued and face the prospect of liability for significant damages, you are extremely vulnerable to your insurer’s failure to negotiate a settlement in good faith. Since the insurer will control defense of the lawsuit, it has an affirmative duty to exercise the same degree of diligence and care as an individual of ordinary care in the management of his own business. An insured in this situation is essentially at the mercy of the insurance carrier who is handling the settlement negotiations with the plaintiff. Sometimes when insurance carriers act in bad faith in handling the settlement of a lawsuit, the insurer will try to shift the blame to another party in the litigation to avoid bad faith liability.
A recent federal court case applying Florida law rejected an insurer’s attempt to defend against an allegation of bad faith failure to settle. The trial judge focused on the conduct of the plaintiff rather than the tactics used by the insurance company. In Moore v. GEICO, Joshua Moore collided with the Krupp’s vehicle causing injury to multiple Krupp family members. Moore was insured under a GEICO policy. The insurer quickly recognized that Moore’s liability would likely exceed the personal injury limit of $20,000. When GEICO tendered policy limits, the attorney for the Krupps indicated that they would only accept the settlement offer if GEICO furnished: (1) a carefully worded release that had been prepared; and (2) affidavits from Moore confirming that he had no other applicable insurance coverage. The documents provided by GEICO did not comply with these requests, and settlement negotiations stalled.
The Krupps eventually obtained a jury verdict in the amount of $4 million and Moore brought an action for bad faith against GEICO, alleging the insurer engaged in bad faith in failing to negotiate a settlement within policy limits. The trial court ruled in favor of the insurance carrier in denying the bad faith claim based on two separate grounds. First, the court found that the insurer did not act in bad faith as a matter of law. Second, the trial judge accepted the insurer’s claim that the failure to reach a settlement within policy limits was the result of the attorney for the Krupps attempting to manufacturer a bad faith claim rather than settle the personal injury lawsuit.
The appellate court reversed the trial judge’s grant of summary judgment in favor of GEICO regarding the bad faith claim. The court noted that once a policyholder has surrendered control over handling of a claim to his or her insurance carrier, including litigation and settlement decisions, the insurer assumes a duty to exercise such control and make decisions in good faith and with due regard for the policyholder’s interest. The court enumerated these duties in more detail as requiring the following: (1) giving fair consideration to a settlement offer that is not unreasonable; (2) investigating the claim; and (3) settling the claim as a reasonably prudent person would when faced with the risk of paying the full judgment.
The appellate court ruled that there was sufficient evidence of potential bad faith in terms of GEICO’s failure to deliver the requested release and affidavits. Further, the trial court granted summary judgment on the bad faith claim despite the fact the conduct of GEICO in handling the settlement demonstrated a low level of competence. While the appellate court agreed with the trial judge that simple negligence alone did not constitute bad faith, the insurance company’s competence in handling the settlement negotiations could be considered as contributing to bad faith practices. With these facts, the issue of bad faith was a question of fact for the jury.
On appeal, the court also found that the judge improperly focused on the motivations of the Krupps’ attorney rather than the conduct of GEICO. The court pointed out that Florida bad faith law requires that courts focus on the conduct of the insurance carrier rather than the plaintiff in the underlying personal injury lawsuit. While the trial judge was wrong to focus on the motivations of the Krupps’ attorney according to the court, the request seeking the documents was reasonable. The affidavits were requested because the Krupps’ lawyer had been involved in other cases where insurance companies misrepresented available insurance. The release was intended to insure the Krupps did not waive liability claims that were unknown.
You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].