United States: Florida Appellate Court Rejects Jury's Bad Faith Verdict

Last Updated: February 15 2017
Article by Colton M. Peterson

It feels like a black swan event: last month, in GEICO Gen. Ins. Co. v. Harvey, No. 4D15-2724 (Fla. Ct. App. Jan. 4, 2017), a Florida appellate panel unanimously overturned a jury verdict, on the ground that the plaintiff's bad faith claim was insufficient as a matter of law.  A dissection of this rara avis can yield some insight into the limits of judicial tolerance for claims against insurers.

The Fatal Accident

On August 8, 2006, James Harvey and John Potts collided while driving near West Palm Beach. Mr. Potts did not survive. Mr. Harvey's car was registered in two names—his own and that of his business—and it was insured under a GEICO automobile policy, with $100,000 in liability coverage.  Mr. Harvey promptly reported the accident to his insurer.

Three days after the collision, the insurer advised Mr. Harvey, in writing, that a claim by the decedent's estate could exceed his policy's $100,000 limit. It also informed him that he had the right to hire his own attorney.  Mr. Harvey responded to the letter by hiring a lawyer.

The following month, Mr. Potts's estate sued Mr. Harvey for wrongful death, and it eventually obtained a jury verdict of $8.47 million.  The premise of the ensuing bad faith action was that the insurer had brought about the excess judgment—by failing to give Mr. Harvey timely notice that the estate was requesting information about his finances.

Show Me The Statement

On August 14, 2006—that is, less than a week after the accident—the insurer was contacted by a representative of Mr. Potts's estate.  The representative asked that Mr. Harvey, the insured, provide a statement that would (among other things) identify both his personal and business assets and declare whether he had been using his car for business purposes at the time of the accident.  The representative's testimony conflicted with that of GEICO's adjuster on some points, but it was undisputed that the estate did not set a deadline for Mr. Harvey's statement, and that it did not make receipt of the statement a condition for settling the claim.

It appears that the insurer did not immediately convey this request for a statement to Mr. Harvey.  Instead, on August 17, it tried to settle the claim.  It sent the estate a check for the $100,000 policy limit and asked for a release in return.

The estate rejected the insurer's offer a week later, in a letter dated August 24, 2006.  The letter stated that GEICO had refused to make Mr. Harvey available (a claim that GEICO's adjuster disputed) and repeated the estate's request for financial information.  GEICO did not receive the letter until August 31, 2006—17 days after the insurer's first contact with the estate.

On that day, GEICO's adjuster faxed a copy of the estate's letter to Mr. Harvey, and she discussed it with him by telephone.  The adjuster also contacted the estate's attorney, to determine what kind of financial statement he wanted. Again, the estate did not set a deadline or timeframe within which the statement was to be provided. Before the day was over, the adjuster received a second letter from the estate's attorney, memorializing his conversation with GEICO, and forwarded it to Mr. Harvey.  She also sent Mr. Harvey a form of an affidavit with which to provide the requested information.

The next day, Mr. Harvey informed GEICO that his attorney was unavailable until September 5. He asked the adjuster to inform the estate that he was working on the financial disclosures, but she failed to relay the message—in spite of receiving instructions from her supervisor to do so.  After September 5, Mr. Harvey and his attorney both failed to take any further action respecting the requested statement.

On September 13, the estate filed a wrongful death lawsuit against Mr. Harvey and returned GEICO's check. This lawsuit culminated in a jury verdict for the plaintiff awarding $8.47 million.

If Only We'd Known

Mr. Harvey then filed a bad faith action against GEICO in a Florida state court.  In that suit, the jury learned that the adjuster who handled the claim had received negative performance reviews and had occasionally run into difficulties managing her workload.  It also heard important testimony about what the key actors would have done if the insurer had handled the claim differently.

Thus, Mr. Harvey swore that he would have provided the estate with full financial disclosure—if he had been informed of the estate's request around the time it was first made, on August 14, rather than on August 31.  He did not deny, however, that he failed to provide the statement between August 31 and September 13 (when the wrongful death suit was filed), even though he had compiled all the relevant information.

Similarly, the estate's attorney (whose client would be the ultimate beneficiary of any judgment against GEICO) testified that he would have advised his client to delay the filing of the wrongful death action, if GEICO had advised him that Mr. Harvey intended to provide the requested information.  Further, he testified that he would have advised the estate not to sue at all had he known that Mr. Harvey's business had only $85,000 in assets with which to satisfy a judgment.  The estate's personal representative testified that she would have followed that advice.

At the close of the insured's case, GEICO moved for a directed verdict, but that motion was denied. After the jury entered a verdict in the insured's favor, GEICO moved for a judgment notwithstanding the verdict. The trial court denied that motion, as well, and GEICO appealed.

What Is Bad Faith?

The trial court's denial of the motion for a directed verdict was subject to de novo review.  The Fourth District Court of Appeal, citing Boston Old Colony Ins. Co. v. Gutierrez, 386 So. 2d 783 (Fla. 1980), explained that insurers have seven obligations to their insureds:

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.

An insurer's negligence in the discharge of these obligations might be evidence of bad faith, but it does not amount to bad faith:

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.

Whether the insurer has put its own interests before those of the insured must be determined on the basis of "the totality of the circumstances."

Not This Time

Applying these standards, the appellate court found that the bad faith claim should never have been submitted to the jury, because the evidence at Mr. Harvey's trial had been insufficient as a matter of law.

First, the court found that GEICO had satisfied all of its obligations under Boston Old Colony.  The plaintiff suggested that the insurer's delay in conveying the estate's request for financial information might constitute a failure to "advise the insured of settlement opportunities" (Obligation No. 1).  The court found, however, that GEICO discharged that obligation by reporting the estate's request on August 31.  It found the adjuster's delay immaterial, because the estate had not made the information a condition for settlement.

It was also arguable that the insurer had failed to give "fair consideration to a settlement offer" (Obligation No. 6), but the court found that it could not have discharged that obligation, because the estate never made an offer.

Second, the court observed that the insurer had tendered the policy limits just nine days after the accident, and that this fact negated any suggestion that GEICO was "acting upon what it consider[ed] to be for its own interest alone."  Thus, even if the adjuster neglected certain communications between the insured and the estate,

these facts merely show that GEICO could have perhaps 'improved its claims process,' not that it acted in bad faith.

Third, under Florida law, plaintiffs are required to establish that "the insurer's bad faith ... caused the excess judgment."  Perera v. U.S. Fidelity & Guar. Co., 35 So. 3d 893 (Fla. 2010).  In this case, the court found that Mr. Harvey had "failed to establish that GEICO's conduct [had] caused the excess judgment."  In particular,

GEICO did not fail to meet any deadlines or other requirements established by the estate, as a requirement for settling the claim and avoiding the filing of a lawsuit against its insured.

Furthermore, "where the insured's own actions or inactions result, at least in part, in an excess judgment, the insurer cannot be liable for bad faith."  If the fact that the estate received no statement from Mr. Harvey was, indeed, a "cause" of the excess judgment, then Mr. Harvey's inaction between August 31 (when he learned about the estate's request) and September 13 (when the wrongful death suit was filed) made him responsible— "at least in part"—for that outcome.

Finally, the court provided an observation that it did not tie directly to any of its legal arguments:

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.  ... Therefore, the insured failed to show that he would have provided the requested statement but for GEICO's purported bad faith.

What Have We Learned?

Every claim depends, to a certain extent, on the assertion of a counterfactual: finding that one event was the cause of another is as much as to say that the second event would not have occurred in the absence of the first.  In this case, however, the plaintiff's statements were clearly unconvincing. The appellate court went out of its way to state that the judges did not believe Mr. Harvey's testimony that he would have acted differently, if only the insurer had asked him for a statement 17 days sooner.

On the other hand, the court seemed impressed by the facts that the insurer had tendered the policy limit less than two weeks after the accident, and that the adjuster's lapse in response to the original request for a statement (on August 14) was not repeated when the estate asked for the second time on August 31.

It is unusual for a Florida court to find that a bad faith claim is so defective that it should never reach a jury.  But where, as in this case, the insurer has not made any effort to pay less than the full amount of the policy, the court was willing to examine the theory that the jury had accepted with a much more critical eye.  Harvey will be a useful decision for insurers to cite in support of future motions for summary judgment.  It clearly reaffirms the principle that imperfect claims handling does not equate to bad faith.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.