Geico hit with $2M post-apportion award in bad faith suit

A federal jury in Columbus, Ga., delivered a post-apportionment award of more than $2 million against Geico insurance in a bad-faith failure to settle a case stemming from an accident in which a bicyclist was struck by a motorist.

The insurer had been declared in default after the defendant driver — who had borrowed the Geico customer’s car and was driving on a suspended license — allegedly failed to tell the insurer she’d been sued.

The case had several unusual complications, including Geico’s claim that it had offered to settle the injured man’s claims for $12,409—less than half of the $30,000 policy limit his lawyers demanded—but had been frustrated by “fruitless” efforts to follow up on the offer with his lawyer.

There were also allegations that the defendant driver was difficult to reach and tore up a letter from Geico because she was “messed up that day” and “probably on crack or pot” when it arrived.

The driver was allocated 30% of the nearly $2.9 million judgment, while Geico was deemed liable for 70%.

Related: Can you apportion fault in a car accident between a ‘phantom’ & an actual defendant?

Offer to settle

“They only had a $30,000 policy, and we offered to settle for that and gave them 30 days,” said Charlie Gower of Columbus’ Charles A. Gower P.C., who represented both the original accident victim and, in the recently concluded derivative action, the bankruptcy estate of the defendant driver.

The injured man suffered extensive injuries that also aggravated prior medical issues, said Gower, who tried the case with firm colleagues Miranda Brash and Shaun O’Hara.

Gower said he submitted an offer to settle for $1.5 million shortly after the suit was filed, so he will also be seeking attorney fees under Georgia’s offer of settlement statute. Under that law, a plaintiff whose settlement offer is rejected and then receives a judgment worth 125 percent or more of that amount can seek attorney fees from the time the offer was made.

“Geico never offered one penny” in response, he said.

Geico was represented by Cruser & Mitchell partners J. Robb Cruser and Kathleen Hurley and Macon, Ga., solo Wallace Miller III. Cruser declined to comment on the case.

Related: Appeals court resurrects $5M bad faith lawsuit against insurance company

Personal injury claim

According to Gower and court filings, the underlying accident happened in February 2012 when Bonnie Winslett was driving an SUV belonging to a friend in Columbus and hit bicyclist Terry Guthrie.

Guthrie was taken to an emergency room and ran up nearly $10,000 in medical bills. According to his pleadings, he was unable to access follow-up care because he had no insurance. “Eventually Terry obtained health insurance and had surgery to repair his injuries,” his portion of the pretrial order said, but he “continues to suffer significant and constant pain” from the accident.

A few days later, Geico sent Winslett a letter stating that it had concluded that the insurer was “responsible for the accident” and would “be handling this injury directly with Attorney Charles Gower.”

In May 2012, Gower sent Geico a time-limited demand for the policy’s $30,000 limit and “made clear that [Guthrie] continued to suffer from his injuries” and needed additional treatment.   

Geico’s adjuster concluded that a “fair” value range for Guthrie’s injuries was between $12,409 and $15,909 and offered the lower figure, which was rejected.

Geico had lost contact with Winslett who, Gower said, had a history of mental issues and was often homeless, and she was never told of the rejected offer.

Gower sued Winslett a few weeks later in Muscogee County Superior Court, and she was served a copy of the complaint but never contacted Geico.

The insurer’s filings said Winslett called Gower’s office and was told to contact the insurer but that she “ripped up” the suit papers and never did so.

Related: 3 ways to protect yourself from uninsured and underinsured motorists

Default judgment against Geico

In August 2012, Judge Bemon McBride III entered a default judgment against Geico for $2.9 million after hearing evidence about his injuries and mortality table data. Geico’s pleadings said the hearing lasted 45 minutes and that only Guthrie testified.

In Geico’s pleadings, the insurer said no one—“Guthrie, nor Gower, nor Winslett, nor [the car owner] nor anyone else”—ever told it about the lawsuit until after the default judgment had been entered.

The insurer attempted to have the default opened and set aside and hired counsel to represent Winslett in challenging it, but the trial court and the Georgia Court of Appeals refused to do so. The Georgia Supreme Court declined to hear the case.

Guthrie declared bankruptcy and his trustee, Fife Whiteside, filed an involuntary bankruptcy petition against Winslett in an effort to collect the judgment.      

Geico hired a lawyer to fight the involuntary bankruptcy petition “so that it could not be sued by the bankruptcy trustee for bad faith failure to settle Terry Guthrie’s bodily injury claim,” said a plaintiff’s account in the pretrial order.

In 2015, Geico denied all liability for Guthrie’s injuries; the following year, his trustee, Whiteside, sued Geico in the U.S. District Court for the Northern District of Georgia.

During a 3½-day trial before Judge Clay Land, Gower said Geico “basically put us on trial, saying this whole thing was a setup for a bad faith claim.”

“We were saying anybody in their right mind would pay $30,000 to somebody hit by an SUV and flipped up in the air into a power pole,” Gower said.

Related: 1 in 8 U.S. drivers was uninsured in 2015, new study says

The jury was asked to determine whether Geico, Winslett or both were liable for the $2,886,204 default judgment.

Gower said it took about three hours for the jury to vote “yes” on both questions and find Geico liable for 70%, or $2,020,342.

He said the lawyers did not speak to jurors afterward.

Gower said he has “no doubt” that Geico will appeal.

Related: 9th Circuit reduces $2.5M bad faith award against GEICO to $1M