A federal district court in Georgia has denied an insurance company's motion to overrule a bad faith judgment of over $2,750,000. The case is Whiteside v. GEICO Indem. Co., No. 4:16-CV-313 (CDL), 2018 U.S. Dist. LEXIS 193036 (M.D. Ga. Nov 13, 2018).

In February 2012, Karen Griffis let her friend Bonnie Winslett borrow her vehicle, which was insured by GEICO Indemnity Company. While Winslett was driving the vehicle, she struck Terry Guthrie who was riding his bicycle. Guthrie went to the emergency room to receive treatment for his injuries while Winslett was sent to jail for driving without a license. Later, Winslett received communications from GEICO which she concluded meant that GEICO had taken care of everything and she didn't have to do anything else with the claim. Winslett moved and GEICO was unable to contact her. Guthrie suffered minor injuries but was unable to pursue the necessary medical care because he did not have insurance. His lawyer sent a letter to GEICO demanding $30,000, the policy's bodily injury liability limit. The demand was set to expire in June 2012. GEICO Indemnity Company did not comply with the demand prior to the expiration. After the demand expired, Guthrie filed an action against Winslett. When that action was filed, Winslett would have been covered under the GEICO policy. Neither Winslett, Guthrie, nor Guthrie's counsel advised GEICO of the lawsuit. Winslett allowed the case to go into default, and the default judgment of $2,916,204 was entered against her. GEICO was not notified of the default judgment until after it was entered. The company sought to have the default judgment set aside, but that motion was denied, the denial affirmed by an appellate court in Georgia. Winslett still had the final and enforceable judgment against her.

Guthrie filed an involuntary bankruptcy petition against Winslett. In response, her bankruptcy trustee sued GEICO to recover for bad faith or negligent failure to settle Guthrie's claim, claiming that GEICO's bad faith failure to accept that the demand was the proximate cause the judgment against Winslett in excess of the policy limits. GEICO maintained that it could not be liable for the excess judgment because it had not been notified of the lawsuit prior to the default, even if GEICO should have paid the policy limits demand. After a finding by the trial court that genuine factual disputes existed, the case went to trial.

The jury found in favor of the bankruptcy trustee, finding that (1) GEICO failed to exercise the degree of care a reasonably prudent insurance company should exercise when it did not accept the policy limits demand of $30,000; (2) GEICO's failure to accept the demand was a proximate cause of the default judgment later entered against Winslett; (3) Winslett's contributory negligence was also a proximate cause of the default judgment; and (4) Winslett shared 30% of the fault and GEICO had 70% of the fault for the default judgment. The jury awarded damages for the amount the judgment exceeded the initial $30,000, plus the accrued interest and minus the 30% for her own liability. GEICO moved for a judgment as a matter of law.

The district court denied GEICO's motion finding that evidence existed from which a reasonable jury could have concluded that GEICO's failure to accept the policy limits demand was a proximate cause of the excess judgment, and the intervening conduct of Winslett was reasonably foreseeable. The court rejected GEICO's claim that Winslett's failure to notify GEICO of the lawsuit excused GEICO's tortious behavior. The court determined that the jury considered this failure to notify, and that is why they awarded Winslett 30% of the fault in their determination.

Editor's Note: The court in this case found that it was “reasonably foreseeable” that a lawsuit would be filed, and it was possible that a jury verdict in excess of the policy limits to be rendered, when GEICO initially failed to accept the policy limits demand. The court also said it was “foreseeable” that the jury could find GEICO's failure to pay to be unreasonable. The court concluded by stating that although GEICO did not have a chance to dispute the amount of money in the underlying judgment, the court reasoned that GEICO had the chance to completely avoid the underlying judgment by paying the policy limits demand.

A consequence is “reasonably foreseeable” if it could have been anticipated by an ordinary entity of a similar like, kind, and quality as the one involved, of average intelligence. Simply, a reasonable insurance company would have been able to predict or expect the ultimately harmful result of the action of failing to pay out the demand for the policy limits.

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