Insurers Beware: One Insurer’s Settlement Can Support a Bad Faith Failure-to-Settle Claim Against a Nonsettling InsurerAn insurer defending a claim against an insured that could exceed policy limits has a good faith obligation to settle the claim if possible. Failure to do so puts a nonsettling insurer at grave risk.  An Eleventh Circuit Court of Appeals decision shows that one insurer’s response to a policy limits settlement opportunity can be introduced as evidence in a subsequent bad-faith action against a nonsettling insurer – and when admitted – can have dire consequences for the nonsettling insurer.

In Joshua Moore v. GEICO General Insurance Co., the Eleventh Circuit considered the admissibility of another insurer’s settlement of a catastrophic personal injury claim arising from a road rage incident. A highway altercation ensued when Richard Waters, intoxicated on alcohol and opioids, “cut off” college student Joshua Moore, who sped up and lost control of his truck, severely injuring a 10-year-old boy and killing the boy’s mother. The victims’ family sued both Waters and Moore.

Settlement Differences

Two insurance policies were available to respond to the lawsuit. Peak Insurance had issued a $10,000 property damage policy to Waters, the intoxicated driver. GEICO had issued a policy insuring Moore, the other driver. The GEICO policy provided $10,000 in property damage limits and $10,000 per person/$20,000 per occurrence in bodily injury limits. The family of the victims offered to release the claims against both Waters and Moore for the combined policy limits upon submission of an affidavit that the two defendants had no other insurance.

Peak Insurance settled for limits and provided the requested affidavit. But GEICO flailed by presenting plaintiffs’ counsel with a vaguely worded affidavit hedging on the availability of other insurance. The case against Moore proceeded to trial, and the Florida jury found Moore liable for more than $4 million in damages.

Bad Faith Litigation and a New Trial

In a subsequent bad-faith action against GEICO by Moore, GEICO sought to exclude evidence of Peak’s handling of the settlement offer. The federal district court allowed the evidence, finding it relevant and not unfairly prejudicial.

After a jury finding of bad faith, however, the court decided the evidence should not have been admitted and granted GEICO a new trial. Without that evidence, the second trial resulted in a defense verdict from which Moore appealed.

The Eleventh Circuit ultimately held that it was within the trial court’s discretion to decide whether the evidence was unfairly prejudicial and that the court had not abused that discretion.  But the court recognized the probative value of Peak’s settlement because Peak’s settlement contradicted GEICO’s argument that it did not understand the identical settlement offer, as well as GEICO’s argument that the plaintiffs never intended to settle the bodily injury claims. Peak’s settlement also supported the testimony of Moore’s expert about insurance industry custom and practice when handling catastrophic injury claims.

The Eleventh Circuit reasoned that the trial court did not abuse its discretion because the Peak insurance policy provided only property coverage, while the GEICO policy provided property damage and bodily injury coverage, a difference the court said diminished the settlement’s relevance. The court specifically noted that the property-damage claim was unlikely to exceed Peak’s policy limits, while the personal-injury claim against Moore could “far exceed” GEICO’s limits.

Potential Upshots

Although GEICO ultimately prevailed, the Eleventh Circuit’s recognition that the trial court could permit the evidence of another insurer’s policy limits settlement could affect other coverage disputes. It also provides additional leverage for policyholders facing an excess judgment to convince their carriers to settle.

Upcoming Event – Catastrophe Claims: Insurance Coverage for Natural and Man-Made DisastersBradley attorney Geoffrey Greeves will present “Catastrophe Claims: Insurance Coverage for Natural and Man-Made Disasters” as part of Strafford Live CLE Webinars.

The panel will discuss the evolving trends and key coverage issues triggered by natural and man-made disasters, which produce claims under nearly every type of insurance in the marketplace. The program will explore the types of property and liability insurance involved and offer practical guidance on claim investigation, policy interpretation, and advocating for or against the major exclusions involved in catastrophe claims.

Geoffrey will be joined by Huhnsik Chung, Partner at Stroock & Lavan, John N. Ellison, Partner at Reed Smith, and James E. Fitzgerald, Partner at Drinker Biddle & Reath.

When:  Thursday, September 19, 2019, 1:00PM – 2:30PM EST

Where:  Webinar

What:  The webinar will review these and other relevant issues:

  • What are the most critical issues and practical considerations when addressing catastrophic claims?
  • What are the essential coverage issues in catastrophic claims?
  • What are best practices for determining the cause of loss, value of the loss, and interpreting the terms of the policy?
  • What legal effects have more frequent and more catastrophic disasters had on insurance coverage?
  • How do courts treat exclusions, concurrent causation, and anti-concurrent causation policy provisions?
  • How does the language of typical commercial property and liability policies impact coverage for losses from natural and man-made disasters?
  • How to minimize the potential for claims of bad faith in handling catastrophe claims

For more information, visit the event website and register today.

We look forward to seeing you there!

No Uninsured Motorist Coverage for Rideshare DriverA recent decision involving insurance coverage for a rideshare driver explains the temporal aspect of rideshare policies, which insure drivers during certain phases of the rideshare process. Here a driver sought uninsured motorist coverage under policies issued by James River Insurance Company, an insurer for transportation network company Uber, for injuries she sustained after dropping off a passenger.

James River issued two business auto policies that insured drivers during different stages of the ridesharing process. The “100 policy” insured drivers en route to pick up passengers and while transporting passengers to their destinations, as well as when engaged in different phases of the rideshare process while at airports. The “200 policy” insured drivers not at airports while logged on the Uber platform but before they accepted ride requests. Only the 100 policy provided uninsured motorist coverage.

The driver sought coverage under the 100 policy’s coverage that applied when a driver had logged and recorded acceptance of a ride request and was either en route to pick up passengers or traveling to a passenger’s final destination. The plaintiff rideshare driver was not engaged in either activity. She had dropped off a passenger when she was injured by an object ejected by an oncoming tractor-trailer; the truck did not stop and was never identified, hence leading to the uninsured motorist claim. The 200 policy would have provided coverage if the driver was logged on the Uber platform and available to receive ride requests off of airport premises, but the coverage grants did not include uninsured motorist coverage.

As this opinion illustrates, rideshare insurance policies typically tie insurance coverage to particular stages of the rideshare process. Unlike other business auto policies, which may insure a fleet of autos at all times, these insurance policies insure autos during certain stages of the rideshare process, and do not cover all claims involving a rideshare auto. To avoid needless disputes, insureds and insurers alike should carefully consider the scope of coverage offered in these types of policies when assessing coverage for an auto claim.