Bad-faith lawsuit against GEICO revived on appeal to 11th Circuit

(Reuters) - A federal appeals court on Tuesday revived a lawsuit accusing GEICO of bad-faith settlement practices that left its insureds on the hook for $5 million in damages beyond the $100,000 policy limit.

The 11th U.S. Circuit Court of Appeals reversed a ruling by a federal judge in Tampa, who said that Willard Warren and Erika McNamara could not sue GEICO for failing to settle a lawsuit against them within policy limits, because they had not suffered any judgment that exceeded those limits.

The judge had said Warren and McNamara’s stipulated settlements with the plaintiff, resulting in consent judgments totaling about $5.2 million, were not true “excess judgments” because they resulted from contract, not a verdict.

“Under Florida law, it doesn't matter that these judgments resulted from stipulated settlements instead of verdicts,” Circuit Judge Kevin Newsom wrote for the appellate panel. “Because Warren and McNamara were subject to excess judgments, they could prove causation in their bad-faith case.”

The panel faulted U.S. District Judge Steven Merryday for “reflexively” relying on an unpublished 11th Circuit opinion that came out in 2019, while Merryday was presiding over Warren and McNamara’s lawsuit against GEICO.

Unpublished opinions are nonbinding, but can be cited for their persuasive value. However, the 2019 opinion was not persuasive since it “misinterpreted Florida law,” Newsom wrote. He was joined by Circuit Judges Elizabeth Branch and Andrew Brasher.

Attorneys for GEICO, Warren, and McNamara did not immediately respond to requests for comment on Tuesday.

In the district court, GEICO denied acting in bad faith and said it had attempted numerous times to settle the case against Warren and McNamara within policy limits, but was rebuffed each time.

GEICO also paid for Warren and McNamara’s defense in the underlying lawsuit, filed in 2012 on behalf of Deborah Bennett by her husband and court-appointed guardian, Kenneth Bennett.

Deborah Bennett was thrown from her motorcycle and suffered a debilitating brain injury in a collision with Warren’s automobile, which McNamara was driving with his permission.

McNamara and Warren settled with the Bennetts in 2015, consenting to judgments of $4.7 million and $470,000, respectively. They sued GEICO for bad faith in 2017, saying the insurer had imposed unreasonable conditions on the Bennett settlement.

The Bennetts did not sue GEICO, but Kenneth Bennett intervened in the 11th Circuit appeal to protect his wife’s interests as a judgment creditor, his attorney said in an email.

“From day 1, GEICO has only been looking out for GEICO – not for its insureds, and certainly not for Ms. Bennett,” Brent Steinberg of Swope Rodante said. “We are pleased that a jury will now get to decide whether GEICO was guilty of bad faith failure to settle.”

The case is Erika McNamara and Willard Warren v. Government Employees Insurance Co., 11th U.S. Circuit Court of Appeals, No. 20-13251.

For McNamara and Warren: Philip Burlington and Bard Rockenbach of Burlington & Rockenbach; Kenneth McKenna of Dellecker Wilson King McKenna Ruffier & Sos

For Intervenor Appellant Kenneth Bennett: Brent Steinberg and Dale Swope of Swope Rodante

For GEICO: B. Richard Young, Megan Alexander and Jordan Thompson of Young Bill Boles Palmer Duke & Thompson

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