Insured is Obligated to Assist Insurer in Effecting Settlement
No plaintiffs’ lawyer with a high value case will accept policy limits from an insurer without first learning whether the insured has assets that are collectible if a judgment is entered in excess of the policy limits. When insurance exists the plaintiff’s attorney will seek information from the insured through its insurer in a sworn statement setting forth the insured’s assets.
Regardless of the intent of every insurer insurance adjusters are often overworked, given heavy caseloads, and sometimes fail to communicate as promptly as they should. Some insurance adjusters are well trained and experienced. Some are young, untrained and inexperienced. Others fit between the two extremes.
When a high value case is put in charge of a less than perfect claims person – even after presenting the policy limits to the claimant’s counsel without a demand – Even when an insurer’s handling of a claim are deficient, and an uncooperative insured causes delays, unnecessary litigation will follow when the adjuster fails to follow up on requests from a claimant for information about the assets of the insured.
In GEICO General Insurance Company v. Harvey, District Court of Appeal of Florida, — So.3d —-, 2017 WL 33659 (1/4/17) the law suit litigation resulted because a lack of communication.
On August 8, 2006, the insured, James Harvey, got into a car accident with John Potts, which resulted in Potts’ death. The insured’s vehicle was registered in both the insured’s name and his business’s name. The accident was reported to the insured’s insurer, GEICO, with which the insured had a $100,000 liability policy. The claim was then assigned to Fran Korkus, a claims adjuster.
Three days later, on August 11, 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 hire his own attorney. The insured subsequently retained his own attorney to protect his uninsured excess exposure.
At no time did the estate’s attorney provide a deadline for obtaining this statement, nor was Korkus told that the insured’s statement was a prerequisite to settling the insured’s claim. Nine days after the accident, on August 17, GEICO sent the estate a release along with a check for the $100,000 policy limits even though the estate never demanded the policy limits.
Also on August 31, pursuant to her supervisor’s instructions, Korkus contacted the estate’s attorney to find out what kind of statement he wanted. The attorney responded that he wanted to determine what other assets or coverage the insured had available to him. Korkus sent the insured a sample affidavit that had blanks where the insured could input his available assets and coverage to provide this information to the estate.
On September 13, the estate filed a wrongful death lawsuit against the insured and returned GEICO’s $100,000 check. Ultimately, the estate received an $8.47 million judgment against the insured following a jury trial in the wrongful death action.
After the judgment was entered against him, the insured brought a bad faith claim against GEICO. During the course of the bad faith trial, the insured admitted he had known about the estate’s request for a statement at least thirteen days before the estate filed suit. Nothing in the record shows why the insured could not have given his statement between the time his personal attorney became available and the date the suit was filed.
The estate’s attorney testified at trial that had he known the insured planned on giving a statement, he would have recommended delaying the filing of the wrongful death suit even though he never advised either the insured, the insured’s attorney, or GEICO that without the statement the filing of the lawsuit was imminent. 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.
GEICO contended that the insured offered insufficient evidence at trial to support his bad faith claim. The Court of Appeal noted that an insurer is obligated to (1) advise the insured of settlement opportunities; (2) advise as to the probable outcome of the litigation; (3) warn of the possibility of an excess judgment; (4) advise the insured of any steps he might take to avoid same; (5) investigate the facts; (6) give fair consideration to a settlement offer that is not unreasonable under the facts; and (7) settle, if possible, where a reasonably prudent person, faced with the prospect of paying the total recovery, would do so.
In evaluating whether an insurer has acted in bad faith, the jury must consider the totality of the circumstances. To fulfill the duty of good faith, an insurer does not have to act perfectly, prudently, or even reasonably. An insurer’s imperfect handling of a claim does not, by itself, equate to bad faith; the essence of a bad faith claim is that the insurer put its own interests before that of the insured.
Significantly, the estate did not inform GEICO that a full settlement of its claim against the insured was contingent upon providing a statement. GEICO was required to “advise as to the probable outcome of the litigation,” and warn of the possibility of an excess judgment. Here, the record reflects that GEICO promptly warned the insured as to the possibility of an excess judgment. Thus, GEICO satisfied these obligations as well.
GEICO was also obligated to advise the insured of any steps he might take to avoid an excess judgment. The record also shows that GEICO did this too, and recommended that the insured retain his own attorney, which he did, and, as stated above, informed the insured that the estate wanted a statement.
GEICO was further obligated to investigate the facts. Nothing in the record indicates GEICO was deficient in this regard. GEICO could not have given fair consideration to a settlement offer because the evidence was undisputed that the estate never made a settlement offer.
Finally, GEICO was required to settle, if possible, where a reasonably prudent person, faced with the prospect of paying the total recovery, would do so. Here, GEICO attempted to settle with the estate nine days after the accident by tendering, without limitation or even a demand, the full policy limits to the estate’s attorney. Thus, the evidence showed that GEICO also fulfilled this final obligation.
GEICO fulfilled every obligation that an insurer owes the insured. Additionally, although not dispositive to our analysis, we also note that there was no competent, substantial evidence that GEICO, having tendered the full policy limits nine days after the accident, was acting upon what it considered to be for its own interest alone.
The insurer’s bad faith must also have caused the excess judgment. Even assuming that GEICO handled the insured’s claim improperly, the insured failed to establish that GEICO’s conduct caused the excess judgment against the insured. Although, after the fact, the insured claimed he would have provided a statement had GEICO acted differently, the insured’s own inaction belied this after-the-fact assertion.
Before the estate ever filed suit, the insured knew the estate wanted a statement, knew what the estate wanted in that statement, and had the materials to produce a statement. Further, the insured never provided a statement to the estate despite having the assistance of legal counsel for several days before suit was eventually filed. Therefore, the insured failed to show that he would have provided the requested statement but for GEICO’s purported “bad faith.”
GEICO tendered the policy limits, unconditionally, nine days after the accident, and it informed the insured of the estate’s request for a statement. 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.
Neither side in this case was without fault. The plaintiff’s lawyer relied on GEICO to get financial information from the prospective defendant rather than hire a private detective to determine the assets and liabilities of the defendant. The insured defendant should have filled out the form and provided it to the plaintiff’s counsel. The GEICO adjuster should have followed up with the insured. Insurers need not be perfect with regard to every claim. Plaintiff’s lawyers should never take a case to verdict it cannot collect when a $100,000 policy is available and there are no other assets. Everyone was at fault for causing this case to go to the court of appeal.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 49 years in the insurance business.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
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