Eleventh Circuit Criticizes District Court for Focusing on Bad Faith Set-up Conduct

In Moore v. GEICO General Ins. Co., 2016 WL 736824 (11th Cir., Feb. 19, 2016), the United States Eleventh Circuit Court of Appeals reversed a District Court grant of summary judgment in favor of GEICO in a bad faith set-up case relating to a Florida lawsuit. In granting summary judgment, the District Court focused on the conduct of the insured’s attorney. In a serious injury and death case, GEICO offered its policy limits. The attorney, Lance Holden, advised GEICO that his client would accept the policy limits only if GEICO provided (1) affidavits from the insureds establishing that they had no other applicable insurance policies, and (2) a precisely worded release-of-claims document for Holden’s clients to sign. However, neither the affidavits nor the release that GEICO subsequently transmitted to Holden complied with Holden’s demands. Holden therefore treated GEICO’s submission as (1) a rejection of his settlement offer, and (2) a counteroffer for settlement on new terms. Holden then rejected the new settlement offer and stated that he would pursue litigation.

The lawsuit resulted in a $4 million verdict in favor of Holden’s clients. Thereafter, the insured filed a bad faith claim against GEICO in the District Court for the Middle District of Florida. The District Court granted summary judgment in favor of GEICO. While noting that GEICO’s conduct was “sloppy” and “bordering on negligent,” the Court nevertheless determined that this conduct did not rise to the level of bad faith. Additionally, the Court extensively discussed attorney Holden’s conduct. The Court concluded that Holden had attempted to manufacture an artificial bad faith claim by creating unnecessary obstacles to GEICO’s settlement of the claims against the insureds. As a result, the Court attributed the failure to settle to Holden, absolving GEICO.

The Eleventh Circuit Court of Appeals reversed the grant of summary judgment. First, the Eleventh Circuit Court noted that there was evidence supporting and contradicting the allegations of bad faith. Second, the Eleventh Circuit Court noted that the District Court had improperly focused its analysis on the conduct of Holden. Under Florida bad faith law, the Court’s focus should not have been on the actions of the insured or the insured’s attorney agent, but rather on the conduct of the insurance company in fulfilling its obligations to the insured. Therefore, the Eleventh Circuit Court of Appeals reversed the District Court’s grant of summary judgment.

The Moore case signals that at least the Eleventh Circuit Court of Appeals will not allow summary disposition in bad faith set-up cases. If, in fact, an attorney is attempting to set up an insurance company for bad faith, such a determination will have to be resolved by the trier of fact.