In one way, bad faith is a straightforward issue. The relevant state’s legal standard, that an insured must meet, to be awarded damages for bad faith (first party and failure to settle), have been well-defined by courts. In other words, the rules can be easily articulated. On the other hand, bad faith can be the furthest thing imaginable from a straightforward coverage issue. That’s because the question, whether that easily articulable bad faith standard has been met, can be extremely fact-intensive. A policyholder, asserting a claim for bad faith, will likely point to a host of factors, concerning the manner in which the insurer handled a claim, or made a coverage determination, in arguing that it has been. Of course, facts, and their significance, are often times disputed. Courts will likely consider the various factors, give relative degrees of weight to them, and decide if they give rise to bad faith. In doing so, the bad faith considerations will likely be related to the claim at hand. But sometimes policyholders attempt to assert that the insurer’s handling, of other claims, should also be relevant to the bad faith determination at hand.
Moore v. GEICO involved a court’s analysis of bad faith based on a factor that I have never seen considered before. A policyholder argued that its insurer acted in bad faith by not settling a claim made against it. Of note, in support of its position, the policyholder pointed to the manner in which another insurer handled and settled a claim, for another insured, arising from the same circumstances.
I’m not certain if Moore is the first case addressing this alleged bad faith factor, but there certainly aren’t many. Granted, not every case involves multiple insurers and insureds. But enough do. Add to that the frequency in which policyholders allege bad faith, the novelty of the argument, the paucity of case law addressing the issue and that Moore is from a Circuit Court of Appeals. And, what’s more, while the insurer won, the court’s decision still offers opportunities for policyholders to use it to their advantage. This combination led to Moore making the cut as one of 2018’s top ten coverage decisions.
The bad faith allegations in Moore grew out of a horrific car accident. Joshua Moore and Richard Waters got into a road rage situation on a Florida highway. Waters was drunk and on opioids. Hand gestures were exchanged. Waters swerved into Moore’s vehicle. Moore lost control, crossed the median, and hit Amy Krupp’s car head-on. Her ten year son was in the vehicle. Krupp died. Her son sustained brain injuries. Waters was sent to prison.
Waters was insured by Peak Insurance. However, his policy offered only $10,000 in property damage coverage. Moore was insured under his parents’ GEICO policy, which provided bodily injury coverage of $10,000 per person/$20,000 per occurrence and $10,000 in property damage coverage.
Attorney Lance Holden was hired to represent the Krupps. Holden made what the court described as “essentially identical settlement offers to both Waters’ and Moore’s insurers: If, among other things, the insurer, within twenty-one days, paid claimants the full amount of available coverage, submitted a document for claimants to sign releasing only the insureds and provided affidavits from the insureds or their insurance agents swearing that there was no other available insurance, claimants would fully release the insureds from any further liability stemming from the accident.”
Waters’ insurer, Peak, complied with these conditions and the Krupps settled their claims against Waters.
It was more complicated with GEICO. GEICO tried to settle, but the Krupps found GEICO’s efforts inadequate, “primarily because (1) GEICO provided a form document that released, not only its insureds, but also ‘all officers, directors, agents or employees of the foregoing [named insureds], their heirs, executors, administrators, agents, or assigns’, and (2) GEICO provided vague and incomprehensible affidavits from its insureds, the Moores, regarding the possible availability of additional insurance.”
The Krupps rejected GEICO’s efforts to settle their bodily injury claims and sued Moore. A jury returned a verdict of approximately $45 million in the Krupps’ favor and held Moore 10% responsible. The court entered judgment against Moore for over $4 million.
Moore initiated suit in federal court against GEICO. He asserted that, under Florida law, GEICO acted in bad faith in failing to settle with the Krupps for his coverage limits when it had the opportunity to do so.
GEICO filed a motion in limine, requesting that, under Fed. R. Evid. 403, the district court prohibit Moore from “(1) ‘presenting evidence, testimony, or argument that the underlying claim ‘could' have been settled, that [claimants were] willing to settle, or that GEICO had an opportunity to settle the underlying claim because [claimants] settled with PEAK’; and (2) ‘presenting evidence, testimony, or argument relating to PEAK’s handling of a claim against Waters.’”
The district court denied GEICO’s motion. So, during trial, “Moore frequently put on evidence and made argument that Peak was able to settle claimants’ property damage claim against its client for the property limits of that policy.” The jury found that GEICO had acted in bad faith.
Afterwards the court ruled that it erred in permitting the jury to hear evidence of claimants’ settlement with Peak and the manner in which Peak handled the claim. The court granted a new trial. This time GEICO prevailed. Moore appealed on the issue of the admissibility of Peak’s handling of the claim.
The Eleventh Circuit affirmed the decision that the Peak settlement was inadmissible. The court explained that Rule 403 provides that “[t]he court may exclude relevant evidence if its probative value is substantially outweighed by a danger of one or more of the following: unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.”
The court explained its decision: “Evidence of claimants’ settlement with Peak certainly had some probative value. The manner in which Peak handled the claims against its insured was probative, at a minimum, to counter GEICO’s evidence that it could not understand claimants’ settlement conditions, which were the same for both insurers. Evidence of Peak’s claims handling also bolstered Moore’s expert’s testimony as to the insurance industry’s custom and practice in handling claims of catastrophic injuries. Moreover, the fact that claimants settled with Peak was relevant to counter GEICO’s argument that claimants never intended to settle their claims for the minimal insurance coverage available.
On the other hand, the probative value of this evidence was diminished because the claim Peak settled was not identical nor even substantially similar to the claim GEICO was handling. Peak’s insured had only property damage coverage and, between that coverage and the property damage coverage that GEICO provided its insured Moore, there was no likelihood that claimants’ property damage claims would exceed that available coverage. By contrast, GEICO provided its insured, Moore, not only property damage coverage, but also bodily injury coverage. The amount of that bodily injury coverage, however, was minimal. Faced with catastrophic bodily injury claims, there was a clear possibility of a bodily injury judgment against Moore that would far exceed his coverage. The claims Peak settled, then, were significantly different from the claims GEICO was handling.”
An insurer defending a bad faith case, that is faced with evidence of how another insurer handled a claim, for a different insured, is likely to argue that it’s an apples to oranges comparison. And there are indeed likely to be differences that can be pointed out. But despite the differences here, and the Eleventh Circuit’s affirmance, the appeals court seemed to suggest that it “might” have gone the other way if it had been reviewing the matter de novo and not based on an abuse of discretion standard. Bad faith determinations are often tied to consideration of a host of factors. Moore provides a unique one that a court may be willing to include in the mix.
