FL Sup. Ct., Bad Faith: 4-3 Opinion Redefines and Broadens Definition of What Constitutes Bad Faith

In a 4-3 decision, the Supreme Court of Florida, applying Florida law, reversed the Fourth District Court of Appeals and restored a bad faith finding against the insurer because the Fourth District misapplied Florida precedent and failed to properly apply the directed verdict standard.  The Florida Supreme Court found that the Fourth District’s bad faith analysis lacked the important inquiry as to whether the insurer used the same degree of care and diligence as a person of ordinary care and prudence should exercise in the management of that person’s own business.

James Harvey, the insured, was involved in a car accident with John Potts.  Potts died from the injuries sustained in the crash, leaving behind a wife and three children.  Harvey’s vehicle was registered in both his name and his business’s name and was covered under a $100,000 liability.  Harvey reported the accident to his insurer, GEICO General Insurance Company (“GEICO”).  The claims adjuster, Fran Korkus, evaluated liability and sent Harvey a letter explaining that Potts’ claim could exceed the policy limits and that he had the right to hire his own attorney.  That same week the office for the attorney representing Potts’ estate called Korkus and requested a statement from Harvey to determine the extent of his assets, whether he had any additional insurance, and if he was in the course and scope of his employment at the time of the accident.  Korkus did not communicate the request to Harvey and provided no information to the estate.  GEICO then tendered the full amount of the policy limits to the estate’s attorney along with a release and affidavit of coverage.  The estate attorney wrote a letter to Korkus, which was forwarded to Harvey, that acknowledged receipt of the check and Korkus’s refusal to make Harvey available for a statement.  After knowledge of GEICO’s request for a statement, Harvey hired his own attorney to assist him in responding to the statement request.  Korkus was instructed to update the estate attorney, but she did not.  About a month after the estate’s original request for a statement, the estate returned GEICO’s check and filed a wrongful death suit against Harvey.  The jury found Harvey 100% at fault and awarded the estate $8.47 million in damages.

Harvey filed a bad faith claim against GEICO based on the judgment that exceeded his policy limits of $100,000.  At trial, the attorney for the estate testified that he did not receive any communication from GEICO regarding Harvey’s willingness to provide a statement after his attorney was available and that had he known that Harvey’s only other asset was a business account worth approximately $85,000 he would not have filed suit and would have instead advised his client to accept the policy limits.  GEICO moved for a directed verdict, which the trial court denied.  In a special verdict, the jury found that GEICO acted in bad faith and judgment was entered in favor of Harvey in the amount of $9.2 million.  GEICO’s motion for a judgment notwithstanding the verdict was denied.

GEICO appealed and argued that Harvey “offered insufficient evidence at trial to support his bad faith claim.”  The Fourth District agreed with GEICO, reversed, and concluded that “the evidence was insufficient as a matter of law to show [GEICO] acted in bad faith,” and, “even if the insurer’s conduct were deficient, the insurer’s actions did not cause the excess judgment rendered against the insured.”

On appeal,  not only did the Florida Supreme Court find that there was substantial evidence to support the jury’s finding that GEICO acted in bad faith in failing to settle the estate’s claim against Harvey, but it also held that “the Fourth District misstated the law when it stated that an insurer cannot be liable for bad faith ‘where the insured’s own actions or inactions result, at least in part, in an excess judgment.’”  “[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.”

According to the Florida Supreme Court, it did not matter if Harvey’s actions contributed to the excess judgment because the critical inquiry in a bad faith dispute is whether under the “totality of the circumstances” “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.”  The court found GEICO failed to meet that standard.

According to the dissents, the Florida Supreme Court did not have jurisdiction over the case because the Fourth District opinion did not conflict with Florida law.  Moreover, one of the dissents stated that “[t]he majority’s decision to reinstate the jury verdict muddies the waters between negligence and bad faith and bolsters ‘contrived bad faith claims.’” The dissenting judges asserted that Harvey’s actions and the estate’s actions are relevant to explain why GEICO should have prevailed as a matter of law.   “Any shortcoming on the part of GEICO in this case amounts to negligent claims handling, at most.”  Harvey v. GEICO General Ins. Co., No. SC17-85 (Fla. Sept. 20, 2018).