Reversing the intermediate appellate court, the Florida Supreme Court held the insurer liable for bad faith despite imperfect actions by the insured. Harvey v. GEICO Gen. Ins. Co., 2018 Fla. LEXIS 1705 (Fla. Sept. 20, 2018).

    Insured James Harvey was involved in an auto accident in which the other driver, 51 year old John Potts, was killed. Harvey's vehicle was registered in both his name and his business's name, and was covered under a $100,000 liability policy. Harvey reported the accident to his insurer, GEICO. The claim was assigned to a claims adjuster, Fran Korkus. 

    Two days after the accident, GEICO resolved the liability issue against Harvey. GEICO realized there was significant financial exposure to Harvey because Potts had died leaving a wife and children. Karkus sent Harvey a letter explaining that Potts' claim could exceed his policy limits and that he had the right to hire his own attorney.

    The law office representing Potts' estate called Korkus and requested a statement from Harvey to determine the extent of his assets, whether he had additional insurance, and if he was in the course and scope of his employment at the time of the accident. Korkus did not immediately communicate the request to Harvey and denied the law office's request.

    Three days later, GEICO tendered the full amount of the policy limits to the estate's attorney, Sean Domnick, along with a release and affidavit of coverage. Dominck wrote back to Korkus, noting that she refused to make Harvey available for a statement. Korkus faxed the letter to Harvey, who learned for the first time that a statement had been requested. Dominck wrote another letter explaining a statement from Harvey was requested to determine what other coverage or assets may be available. 

    The next day, Harvey called Korkus to discuss Domnick's letter. Harvey told Korkus that he planned to meet with his attorney, whom he had hired at Korkus's suggestion, to review his financial documents and to provide the information requested. But he advised Korkus that his attorney would not be available for a few days. Korkus entered notes in her activity log, stating the insured had hired an attorney and did not want the claimant attorney to think GEICO was not acting fast enough. The insured also asked what GEICO could do to the let the claimant's attorney know that Harvey was working on a response. Kurkus's supervisor instructed her to relay Harvey's message to Domnick, but she did not. 

    One month after the initial request for a statement from Harvey, the estate returned GEICO's check and filed a wrongful death action against Harvey. The case was tried before a jury that found Harvey 100% at fault and awarded the estate $8.47 million in damages.

    Harvey sued GEICO for bad faith based upon the judgment that exceeded his policy limits of $100,000. At the trial, Dominick testified that had he known that Harvey's only other asset was a business account worth $85,000, he would not have filed suit and would have instead advised the estate to accept the policy limits. Korkus conceded that it was reasonable for Domnick to request information about whether Harvey had other insurance coverage and the extent of his assets. Potts' widow testified that if Domnick had recommended that she settle, she would have followed his advice and accepted the policy limits offered by GEICO. 

    Harvey's expert witness testified it would have been in Harvey's best interests for Korkus to inform Domnick that he had retained an attorney, as this would have facilitated the recorded statement. The expert further explained that because GEICO was handling the claim, Harvey could not contact Domnick directly. Instead, Harvey had to use Korkus as "a go-between given his duty to cooperate with his insurer." The evidence also showed that Korkus had poor job reviews and that she had trouble managing her claims properly.

    GEICO moved for a directed verdict, which was denied. In a special verdict, the jury found that GEICO acted in bad faith and the trial court entered judgment in favor of Harvey in the amount of $9.2 million. GEICO appealed and the District Court reversed, concluding the evidence was insufficient to show GEICO acted in bad faith. 

    The Florida Supreme Court reversed the District Court. GEICO's independent investigation of the facts revealed, within days after the accident, that this was a case of clear liability and substantial damages. Not only did GEICO know that Harvey was at fault, but it knew that Potts, a husband and father of three children, died as a result. Consequently, this was a case of catastrophic damages. 

    Had GEICO acted with due regard for Harvey's interests, the excess judgment could have been prevented. Therefore, 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. 

    GEICO argued that the insurer's obligations ended by tendering the policy limits. Under Florida law, however, the insurer's duty to act in good faith in handling the defense of claims against its insured continued through the duration of the claims process. 

    The District Court held that where the insured's own actions or inactions result, at least in part, in an excess judgment, the insurer cannot be held liable for bad faith. The Supreme Court disagreed. The focus in bad faith case was not on the actions of the claimant but rather on those of the insurer in fulfilling its obligations to the insured. 

    Thanks to my Damon Key blogging colleague, Robert Thomas (here) for flagging this case.