Filed Under:Claims, Litigation

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

The federal circuit court has ruled that the parties must go back and again litigate the statutory damages. (Photo: Shutterstock)
The federal circuit court has ruled that the parties must go back and again litigate the statutory damages. (Photo: Shutterstock)

This story is reprinted with permission from FC&&S Legal, the industry’s only comprehensive digital resource designed for insurance coverage law professionals. Visit the website to subscribe.

The U.S. Court of Appeals for the Eleventh Circuit has reversed a decision by the U.S. District Court for the Middle District of Florida awarding an insurance bad faith plaintiff $30 million based on a state court jury’s determination of damages in an underlying uninsured/underinsured motorist (UM) breach-of-contract action.

Related: Berkshire's earnings hit speed bump on insurance businesses.

Deadly highway accident


Gerard Bottini was traveling on I-75 in Hillsborough County, Florida, when a car ahead of him caught fire and began emitting smoke, obscuring his view of the road. Mr. Bottini lost control of his vehicle, which left the roadway, rolled over, and ejected him. He died from his injuries.

The vehicle Mr. Bottini was driving was insured by a Geico policy that provided $50,000 of UM insurance coverage. The car that caught fire was underinsured for purposes of Florida law.

After Mr. Bottini’s death, Mary Bottini, his wife, became the personal representative of Mr. Bottini’s estate. In the months following the crash, Ms. Bottini’s lawyer sent two letters to Geico demanding payment of the policy maximum because Mr. Bottini had not been at fault, and Geico had possession of crash reports supporting that conclusion.

Geico denied the requests, stating that it was still conducting its own investigation to determine whether Mr. Bottini had been at fault for the accident, which would render the coverage inapplicable.

Failure to honor claim?


One hundred and four days after Ms. Bottini’s lawyer sent her first letter to Geico and 158 days after the crash, she filed a civil remedy notice of insurer violation (CRN) with the Florida Department of Financial Services. Filing the CRN was a statutory prerequisite to filing a bad faith claim against an insurer.

As required by Fla. Stat. § 624.155(3)(b)(1), Ms. Bottini’s CRN listed the statutory provisions that she alleged Geico was violating by failing to honor her claim.

Related: Does uninsured motorist coverage cover the car or the injuries?

In response, Geico stated that its investigation had led it to conclude that smoke from the vehicle in front of Mr. Bottini had not caused him to lose control of his vehicle, it had not acted in bad faith, and it would “continue to make every attempt to resolve this claim amicably.”

About two weeks later, in an apparent change of heart, Geico sent Ms. Bottini’s lawyer a check for the full $50,000, including with it a complete release of liability for any related claims.

Bottini rejected the release of liability and returned the check.

Sued for UM benefits


Bottini sued Geico, seeking benefits under the UM policy. Geico defended on the basis that Mr. Bottini had been negligent in driving his vehicle and that his negligence either was the sole or contributing cause of the accident.

Related: Florida appeals court declines to weigh in on Allstate insurance question

Bottini countered that the vehicle that caught fire ahead of Mr. Bottini had been maintained and operated negligently, and that negligence had caused the crash, not any breach of duty committed by Mr. Bottini.

The case was tried to a jury, and the jury found for Ms. Bottini. It decided that Mr. Bottini had not been negligent, that both the operator and owner of the smoking vehicle had been negligent, and that Geico, therefore, was liable.

The jury also decided the full extent of damages arising from the accident:

- $103,552 to the estate;

- $14,522,478 to Ms. Bottini for loss of support, services, companionship, and pain and suffering; and

- About $5.4 million to each of Mr. Bottini’s three children for loss of support and services, parental companionship, instruction and guidance, and pain and suffering.

In total, the jury found damages amounting to $30,872,266.

Motion to limit judgment granted


Following the verdict, Geico filed motions for new trial and remittitur, but those were denied. It then filed a motion to limit the judgment to the $50,000 policy maximum, and that motion was granted.

Thus, after rejecting the jury’s $30,872,266 damages verdict and assessing setoffs, the trial court entered a final judgment for $50,000.

Geico appealed the judgment to a Florida appellate court. It sought a new trial on several grounds, three of which were pertinent to the computation of damages. It argued that Bottini’s counsel impermissibly had attacked the character of the driver of the vehicle that caught fire, that Bottini’s counsel had made a highly inflammatory closing argument, and that $30 million in damages was excessive and against the “manifest weight of the evidence.”

Geico also contended that the judgment clearly reflected a “punitive component” as a result of “prejudicial and improperly admitted evidence and argument.”

The appellate court affirmed the judgment in a short per curiam opinion that read in its entirety as follows:

Geico General Insurance Company raised five issues in this appeal. We conclude that none of the issues warrants reversal. We note that Geico’s arguments include claims of error that impacted the amount of damages determined by the jury. The jury verdict found that the Estate’s damages were $30,872,266. But the judgment amount entered by the trial court against Geico is $50,000, based on the applicable insurance policy limits. Based on the evidence presented, we are satisfied that even if Geico were correct that errors may have affected the jury’s computation of damages, in the context of this case and the amount of the judgment, any such errors were harmless. Thus, we do not address further Geico’s claims of error.

One judge wrote separately to address the effect of the jury’s calculation of damages in the UM suit on the likely forthcoming bad faith lawsuit:

This appeal is motivated by the lawsuit that both parties know will follow. The Estate will sue Geico under section 624.155, Florida Statutes (2006), for failure to settle this claim at an earlier time....

The statute does not explain how the finder of fact in the next lawsuit determines the “total amount” of the claimant’s damages. Not unreasonably, both sides in this appeal anticipate that the Estate will attempt to use the verdict in this case as evidence of the total amount of damages in the next lawsuit.

Constitutionally, this court is given power to review final judgments for reversible error. We can also write an opinion affirming a judgment as to issues that, if we were to reach an opposite result, would lead to a reversal of the judgment. But I am unconvinced that we have a scope of review that allows us to rule on issues that do not and cannot affect the judgment on appeal. In this case, given that we decided to affirm on the issues relating to liability, Geico essentially wants this court to write an opinion that affirms the judgment, but “reverses” the verdict as to elements of damage not included within the judgment. I simply conclude that this court does not have the power to issue such an opinion. The fact that such an opinion might be convenient for purposes of the next lawsuit or facilitate its settlement does not change the authority given to me under the Florida Constitution.

Accordingly, this concurrence permits both sides to know that at least one judge on this panel has not decided that the verdict is correct or incorrect.... If I am refusing to do that which the law requires me to do, I would assume that by writ of mandamus the supreme court could order me to conduct such a review. If so ordered, I would perform that review. 

Geico did not take any further action with respect to the appellate court’s decision.

Bad faith suit filed in federal court


Bottini sued Geico in the U.S. District Court for the Middle District of Florida, alleging that Geico had acted in bad faith, violating several provisions of Fla. Stat. § 624.155. She contended that, therefore, she was entitled, in accordance with Fla. Stat. § 627.727(10), to the full amount of damages designated by the jury in the UM breach-of-contract lawsuit.

Related: 5 rules of insurance bad faith, according to the Texas Supreme Court

Bottini moved the district court for summary judgment on the issue of damages, arguing that the trial court jury verdict had fixed the damages at $30,872,266.

Geico countered, arguing that it never received appellate review of that damages verdict; therefore, giving effect to the verdict in the bad faith lawsuit would violate its right to procedural due process.

The district court granted Ms. Bottini’s motion, holding that the verdict was binding as the measure of damages in the bad faith suit.

Parties again must litigate statutory damages 


The circuit court reversed the district court’s order granting partial summary judgment on the binding effect of the verdict in the trial court breach-of-contract case, holding that the parties again must litigate statutory damages.

Related: Florida judge uses unusually blunt language to deny motion in insurance coverage case

In its decision, the circuit court explained that to determine whether the UM verdict bound Geico, it had to resolve whether Geico actually had received appellate review of the trial court’s determination of statutory damages. Then, it said, if Geico had not received appellate review, it had to determine whether its failure to pursue further review of the appellate court’s decision had waived any objection it might have had to using that determination in the bad faith suit.

With respect to the first issue, the circuit court found that the Florida appellate court’s “short” opinion “did not review the errors Geico alleged to the extent such errors may have impacted damages beyond the $50,000 policy maximum.” The Eleventh Circuit noted that the Florida appellate court had refused to do so because it had believed that “any such errors were harmless.”

The Eleventh Circuit then held that because the Florida appellate court had chosen not to address Geico’s alleged errors, it had “failed to provide the appellate review to which Geico was entitled under Florida law.”

The circuit court added that the Florida appellate court’s statement that “none of the issues [raised by Geico] warrants reversal” did not mean that the jury had not committed errors, only that reversal would not be warranted “even if” they had occurred.

Accordingly, the Eleventh Circuit held that because the Florida appellate court had not reviewed the errors alleged by Geico, Geico had been denied its “right to appellate review of properly preserved claims of error in the determination of damages.”

Next, the Eleventh Circuit ruled that Geico had not waived its right to appellate review by failing to take any additional actions — such as by moving the Florida appellate court to clarify or rehear its decision; moving the Florida appellate court to rehear the case en banc; seeking review in the Florida Supreme Court; or filing a writ of mandamus in the Florida Supreme Court — after the Florida appellate court had issued its opinion.

It conceded that if Geico had failed to appeal the verdict to the appellate court, “the answer may be different.” The alternatives noted above, the Eleventh Circuit declared, all were “discretionary” and none of them guaranteed that Geico would have had its argument considered.

The Eleventh Circuit found that Geico had taken action — appealing to the Florida appellate court — but that the Florida appellate court had “erred” by failing to review Geico’s alleged errors and it did not “vindicate” Geico’s right to an appeal.

The Eleventh Circuit concluded that the measure of damages determined by the jury in Ms. Bottini’s underlying UM suit did “not bind the parties” in her bad faith action in the district court.

The case is Bottini v. GEICO, No. 15-12266 (11th Cir. June 15, 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 smeyerowitz@meyerowitzcommunications.com.

Related

Massachusetts top court limits bad faith awards against insurers

According to Massachusetts law, an award of bad faith against insurers allows for treble damages, but it's not clear how...

Featured Video

Most Recent Videos

Video Library ››

Top Story

20 safest airlines to fly with in 2018

To recognize those leading the way, AirlineRatings.com released its annual list of the world's safest airlines. Of the 409 airlines it monitors, 20 stand out as the 'best of the best.'

Top Story

11 ways cars will be smarter in 2018

Connected vehicle technology, better electric batteries, and 'infotainment' systems are just three of the trends for insurers and claims specialists to watch.

More Resources

Comments

eNewsletter Sign Up

Claims Connection eNewsletter

Breaking news on disasters, fraud, legal trends, technology, and CE initiatives for the P&C claim professional – FREE. Sign Up Now!

Mobile Phone

Advertisement. Closing in 15 seconds.