By: Chris Reynolds
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What Is a Bad Faith Failure to Settle in a Personal Injury Action?
A typical personal injury lawsuit might involve a person who is injured in a car crash. The injured person’s lawyer will generally try to negotiate a settlement with the at-fault person’s insurance company (the “bodily injury insurance carrier”). If the at-fault person does not have insurance (or not enough insurance to properly compensate the injured person), a claim might be made with the uninsured/ underinsured motorist policy held by the injured person (the “UM insurance carrier”).
In either event, if the bodily injury carrier or the UM carrier do not make an offer that the injured person accepts, the injured person might elect to file a lawsuit against the at-fault driver or the uninsured motorist insurance company. If a trial ensues, and the jury awards the injured person more than the total of the insurance policy at issue (either the bodily injury policy or the uninsured motorist policy), this potentially creates what is called a bad faith action.
Essentially, the theory is that insurance companies have a duty to negotiate in good faith, and should settle claims in a timely manner for appropriate amounts. If the insurance company does not settle when it should have settled, and the injured person goes to trial and the jury awards an amount greater than the insurance policy limits, the law might look to the insurance company and question why the insurance company made the person go to trial and failed to settle the case earlier.
A bad faith lawsuit is a separate lawsuit that punishes insurance companies for not settling cases when they should settle them, and these bad faith lawsuits can often result in verdicts that are much higher than the underlying personal injury lawsuits. This area of the law is intended to encourage insurance companies to do the right thing during settlement negotiations. Specifically, once the insurance company has sufficient information to know it should pay the policy limits, the insurance company is required to pay the insurance limits to the injured person. If the insurance company does not pay the insurance limits when it should have paid the limits, then the insurance company is said to have acted in bad faith, and is subject to a separate “bad faith” lawsuit for failing to pay a claim in a timely fashion.
Of course, the question then becomes, when and under what circumstances does an insurance company have enough information to pay the insurance limits on a claim? And moreover, what constitutes a timely payment? These questions were addressed in a recent Florida case in GEICO v. Harvey, 42 Fla. L. Weekly D110a (January 4, 2017).
In Harvey, the person not at fault in an automobile accident died in the accident. The at-fault driver had a $100,000 bodily injury policy through GEICO. GEICO tendered the $100,000 policy limits 9 days after the request for the insurance policy limits from the estate for the person who died in the accident. The estate for the person who died in the accident did not accept the tender of the $100,000 bodily injury policy limits and instead filed a lawsuit and went to trial. The jury awarded the estate more than $8 million dollars. \A bad faith lawsuit then ensued. GEICO asked that the trial court rule in its favor and end the bad faith lawsuit. The trial court denied this request from GEICO. After the jury found against GEICO in the bad faith lawsuit, GEICO appealed.
The appellate court reversed the trial court and decided that there was not enough evidence to support a bad faith claim. The appellate court noted that insurance companies must “settle, if possible, where a reasonably prudent person, faced with the prospect of paying the total recovery, would do so.” (quotingBoston Old Colony Insurance Co. v. Gutierrez, 386 So. 2d 783, 785 (Fla. 1980)). The appellate court concluded that offering the policy limits 9 days after the request for the policy limits was sufficient to show that there was no bad faith.
The appellate court noted that for purposes of a bad faith action, any alleged bad faith must be a cause for the excess jury verdict. In Harvey, there was certainly an excess verdict when the jury awarded over $8 million when the policy was only $100,000. However, the appellate court found that GEICO did not cause the excess verdict.
Of course, there are certainly times when insurance companies do not make timely and sufficient settlement offers, and there are times when bad faith lawsuits result in large verdicts against insurance companies. Only when an injured person has an experienced trial attorney can the insurance company be held properly responsible for slow or insufficient settlement offers. If you have been injured due to the negligence of another, please find an experienced trial attorney to discuss your options.