On December 10, 2012, a Geico representative inspected the RV and determined that there was physical damage consistent with a forced entry. The representative estimated the damage to the vehicle at $498.65, just under Duepner's $500 deductible.

Duepner opted to self-repair the door, and a year later obtained a third-party estimate of $1,400 to repair the damage. He never submitted the estimate to Geico.

The Geico representative later admitted in deposition that based on the pictures shown to him, his $498.65 estimate was too low. 

3 baseball card sets from 1970s stolen

According to Duepner, the items stolen included a plasma cutter, which Duepner valued at $1,100, and three baseball card sets from the early 1970s, which he valued at $6,000. 

Geico requested proof that Duepner owned the plasma cutter, which he provided. Geico, however, denied coverage for the plasma cutter, because it was not “normally used in conjunction with” an RV. Mr. Duepner explained that the plasma cutter was used to build a stove for his RV.

On December 31, 2012, Geico received a letter from Duepner requesting a written explanation for the denial of coverage.

Related: How Geico managed to overturn a $30M insurance bad faith award — for now

Within the next month, Duepner sent two similar letters to Geico requesting a written explanation. Having received no response, on January 25, 2013, Duepner called Geico and again requested a written explanation. On February 5, 2013, after reviewing the claim, a Geico supervisor noted in an internal document that, based on the language of the policy, “we have no basis to deny or disclaim as nothing [states the] plasma cutter would not be covered.” Geico informed Duepner of its decision within the next two weeks. 

Geico also initially refused to cover the baseball cards, asserting that they had “no value unless [Mr. Duepner] ha[d] a[n] appraisal for them” and otherwise had only “sentimental value.” In response, Duepner estimated they were worth between $5,250 and $6,375 based on the Beckett pricing guide, similar items on eBay, and his estimation of the cards' condition when they were stolen.

Later, Duepner sent Geico a “Price Guide” survey with an approximate value of the cards.

Geico consulted its own expert who determined the current Beckett pricing guide value of the cards was between $3,000 and $6,000 depending on condition but estimated (without explanation and contrary to the values obtained) that the cards would only sell for $2,400. 

On February 5, 2013, Geico agreed to pay $1,010 for the plasma cutter (although it was determined to be worth $1,100) and $1,000 for the baseball cards. Geico then closed the claim, erroneously informing Duepner that the coverage limit on his policy was $5,000 and had been met.

Related: Sports memorabilia: What it's worth & how to evaluate it

At the time the claim was closed, Geico had accepted coverage for $5,329.50 in losses.

Duepner called and left a message with Geico to ask why coverage was being limited to $5,000 when his policy was for $10,000.

After two days without a reply, Duepner called again, and Geico admitted its mistake and agreed to reopen the claim. In a deposition, the Geico employee responsible stated it was an “oversight” and a “mistake” made because most RV policies carry a $5,000 limit. The Geico employee admitted the error would not have been corrected if Duepner had not challenged it. 

During a February 19, 2013 call requesting the claim be reopened, Duepner questioned the $1,000 payment for the baseball cards. In the voicemail closing the claim, a Geico representative stated that “for collecting items, such as baseball cards and such, there is a $1,000 cap.” Duepner asked GEICO to review the $1,000 limit determination and again requested a written explanation.

Geico's representative was “hoping” to get a letter to him by “the end of the month.”

On April 5, 2013, Duepner called again, asking why he had not received anything in writing despite his repeated requests.

On April 9, 2013, Geico sent a letter to Duepner with a breakdown of all the payments made on his claim and quoting the policy's $1,000 limit on “coin collections, stamps, and collecting supplies.” 

Insured sued Geico alleging bad faith

Duepner sued Geico in January 2014, alleging bad faith. During a deposition, a Geico supervisor admitted the baseball cards were not “coin collections, stamps, and collecting supplies” and that its interpretation of the insurance contract had been “a mistake” and “in error.”

When asked when that determination of error was made, the supervisor replied “yesterday” while he was reviewing previous depositions. The supervisor admitted that it was unfair to Duepner that it took more than two years, and 14 months of litigation, to correct the error or mistake.

In July 2015, the same supervisor sent a letter to Duepner with a check for an additional $1,500, plus interest, for the value of the baseball cards, bringing the total amount paid for the cards to $2,500, slightly more than the insurer's lowest estimated value. 

Duepner moved for partial summary judgment and Geico moved for summary judgment. The trial court granted Geico's motion and denied Duepner's.

Duepner appealed.

Appellate court: Insured presented sufficient evidence of bad faith

The appellate court reversed, finding that Duepner had presented sufficient evidence from which a jury could find that Geico had acted in bad faith.

In its decision, it explained that, based on the sequence of events,  Duepner had produced sufficient evidence from which a jury could find Geico liable for bad faith. The appellate court conceded that some of the evidence demonstrated “objectively reasonable behavior, and Geico did cover some items without objection.”

Related: Insurance and collectibles: What agents need to know

The appellate court added, however, that Geico's “ultimate coverage of other items resulted only after substantial delay, and efforts on the part of [Mr. Duepner] that a jury could find were required by GEICO's undue recalcitrance to pay clearly covered claims.” 

The appellate court noted that, for example, there might have been “a fair debate concerning coverage for loss of the plasma cutter,” because it might not have been “normally used in conjunction” with the RV. The appellate court observed, however, that that rationale had not been presented until after Geico had said that it would deny coverage without proof of ownership.

'Lowballed the claim' & 'needless adversarial hoops'

Moreover, the appellate court continued, Geico's handling of Duepner's claim for the loss of his baseball cards also gave rise to inferences that it “lowball[ed]” the claim and forced Duepner to “go through needless adversarial hoops.”

According to the appellate court, on this record, “a jury could find Geico's actions in attempting to deny coverage and minimize payment for the baseball cards amounted to bad faith.”

Therefore, the appellate court reversed the entry of summary judgment on bad faith. (The appellate court also concluded that the trial court had correctly ruled that Duepner was not entitled to proceed with his claim for punitive damages.) 

The case is Duepner v. Government Employees Ins. Co., No. 1 CA-CV 16-0242 (Ariz. Ct.App. June 8, 2017).

Steven A. Meyerowitz, Esq., is the director of FC&S Legal, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc. Email him at [email protected].