The Florida Supreme Court holds a first-party insurer liable for bad faith claim handling
The Florida Supreme Court in Harvey v. GEICO Gen. Ins. Co., a divided 4-3 decision, imposed a heavy burden on insurers in the context of a bad faith claim handling case.
The case stemmed from an automobile accident involving GEICO’s insured Harvey and another motorist killed in the accident. After determining that Harvey was liable, GEICO advised Harvey that he had potential excess exposure and informed him of the right to retain his own counsel. Nine days after the accident, GEICO tendered its policy limits.
Meanwhile, counsel for the decedent’s estate contacted GEICO’s claims adjuster to request a statement from Harvey regarding his assets. The adjuster did not inform Harvey of the request until 23 days after the accident. After learning of the request, Harvey called the adjuster and informed her that he would meet with his attorney to review his financial documents and provide the information requested. The adjuster documented the call but did not relay the message to the estate’s counsel. A statement regarding Harvey’s assets was never provided.
Approximately one month after the unfulfilled request for a statement, the estate returned GEICO’s check for the amount of its limits and filed a wrongful death action against Harvey. In the wrongful death action, the jury awarded damages of $8.47 million to the decedent.
During the subsequent bad faith litigation, the attorney for the estate testified that had he known the extent of Harvey’s assets, he would not have filed suit, and would have instead advised the estate to accept the offer of policy limits.
The Florida Supreme Court focused its decision on decades-old precedent in Boston Old Colony Insurance Co. v. Gutierrez, which held that an insurer “has a duty to use the same degree of care and diligence as a person of ordinary care and prudence should exercise in the management of his own business.” The Harvey Court highlighted that:
The obligations set forth in Boston Old Colony are not a mere checklist. An insurer is not absolved of liability simply because it advises its insured of settlement opportunities, the probable outcome of the litigation, and the possibility of an excess judgment. Rather, the critical inquiry in a bad faith [ ] is whether 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 Harvey Court concluded that the finding of bad faith in the case before it was supported by competent, substantial evidence based on the adjuster’s actions, including her failure to inform the insured of the request for a statement of assets. The court reasoned that GEICO did not fulfill its duty to act in the best interests of the insured in this regard because “had GEICO been faced with paying the entire multimillion-dollar judgment returned by the jury in this case, an amount that was completely foreseeable given the clear liability and catastrophic damages [confronting Harvey], it would have done everything possible to comply with the estate’s reasonable demands.”
The Supreme Court also rejected federal court decisions that the Fourth District below relied on to conclude that the evidence only showed that GEICO was, at worst, negligent, and that was not enough to prove bad faith. The Harvey Court held that “[w]hile negligence is not the standard, we made clear in Boston Old Colony that ‘[b]ecause the duty of good faith involves diligence and care in the investigation and evaluation of the claim against the insured, negligence is relevant to the question of good faith.’”
The majority also rejected the lower court’s finding that Harvey was to blame for the estate’s decision to forego settlement and file suit, concluding that “the 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.” For this same reason, the Harvey Court also concluded that while Florida law requires “a causal connection between the damages claimed and the insurer’s bad faith,” an insurer cannot escape this requirement “merely because the insured’s actions could have contributed to the excess judgment.”
Finally, the Harvey Court made clear that the insurer’s offer to tender its limits did not impact its obligation to continue acting in good faith through the claims process.
In a first-party case where liability is clear and damages are likely in excess of policy limits, Harvey imposes an obligation on an insurer to act with utmost diligence in handling the claim. The insurer cannot simply offer its policy limits in settlement while doing nothing more than informing its insured of a possibility of an excess judgment. Additionally, the decision in Harvey was based, in part, on an adjuster’s communication lapses. Accordingly, insurers should exercise caution to document all settlement communications with claimants, apprise insureds of those communications, and ensure that a claimant’s reasonable requests are complied with in a timely manner.