The Impact and Future of Florida Bad Faith Claims after Harvey v. Geico

The Florida Supreme Court has rocked the boat with its most recent decision regarding bad faith claims. On September 20, 2018, the Florida Supreme Court held that insurers can no longer escape liability by satisfying a long-followed “checklist” set forth by precedent. See Harvey v. Geico General Insurance Company, 43 Fla. L. Weekly S375a (Fla. 2018).

The (Boston) OLD (Colony) Standard

The 1980 Florida Supreme Court decision in Boston Old Colony Insurance Co. v. Gutierrez set forth insurers’ good-faith obligations to policyholders that have been used as a guide ever since. In order to avoid liability for bad faith under Boston Old Colony, an insurer was to:

1. advise the insured of settlement opportunities;
2. advise the insured as to the probable outcome of the litigation;
3. warn the insured of the possibility of an excess judgment;
4. advise the insured of any steps that may be taken to avoid an excess judgment;
5. investigate the facts;
6. give fair consideration to reasonable settlement offers; and,
7. settle when reasonable.

Now, this “checklist” is a thing of the past, and insurers will have to go above and beyond to avoid a bad faith claim.

Case Background

In Harvey v. Geico General Insurance Company, the claimant (Harvey) was found liable for the death of another (Potts) as a result of a 2006 automobile accident. After suing Harvey on a wrongful death claim, Potts’ estate won an estimated $8.5 million in damages. As a result, Harvey brought forth action against Geico, his insurer, for bad faith.

Harvey claimed that Geico’s insurance adjuster failed to communicate effectively between the parties and did not cooperate in settlement negotiations. At trial, Geico’s motion for a directed verdict was denied; however, the Fourth District Court of Appeal ruled that Harvey had insufficient evidence to prove bad faith.

The Florida Supreme Court disagreed, overturned the appellate decision, and held Geico liable for the $8.5 million judgment against Harvey.

Florida Supreme Court Decision

Unlike the Fourth District Court of Appeal, the Florida Supreme Court focused on the adjuster’s deficiencies, citing Berges v. Infinity Insurance Co. Under Berges, “the focus in a bad faith case is not on the actions of the claimant but rather on those of the insurer in fulfilling its obligations to the insured.” The 4-3 majority made it clear that insurers can no longer look to a checklist to meet their obligations to a policyholder. Instead, the insurer must use the same “haste and precision” as if they were in the insured’s shoes and show that everything has been done to protect the insured. If the insurer fails to meet this heightened burden, they are subject to liability for bad faith.

Interestingly, Chief Justice Canady and Justice Polston authored two dissenting opinions, arguing that mere negligence has now become bad faith. Placing the insured’s interests at the forefront sounds like an easy task to some; however, many fear that this ambiguous decision puts an insurer at risk no matter the good-faith actions that are taken.

Impact on Future

At first blush, this decision is a victory for the policyholder and a bitter defeat for the insurance company. However, the loosened standard for bad faith may lead to a dramatic increase in suits filed by policyholders against their insurer. This outpour of litigation may then cause a rise in insurance premiums in order to fund these suit; adversely affecting policyholders statewide.

My advice to insurance companies: have adjusters document every move they make when handling a claim, exceed expectations of obligations, and go beyond that “old checklist” being used!