GEICO insurance office/photo by Jonathan Weiss/Shutterstock.com

In a case stemming from a fatal car accident a dozen years ago, a sharply divided Florida Supreme Court backed a jury's conclusion that GEICO General Insurance Co. acted in “bad faith” in the way it handled a customer's claim.

The 4-3 ruling came in a multimillion-dollar case that has been watched by the insurance industry and trial attorneys. The ruling reinstated a bad-faith verdict against GEICO after the Fourth District Court of Appeal had overturned the jury's decision.

Bad-faith litigation has long been a contentious — and big-dollar — issue in the courts and the Legislature. In general terms, bad-faith cases involve allegations that insurers have not properly looked out for the interests of their customers in insurance disputes.

Thursday's ruling in a Palm Beach County case centered on how GEICO handled a claim involving customer James Harvey, who was found at fault in an August 2006 auto accident that killed John Potts. Harvey had $100,000 in coverage under a GEICO policy, but the case dealt with whether a GEICO claims adjuster failed to properly respond to requests for information from an attorney for Potts' estate. That information involved issues such as the extent of Harvey's assets and whether he was driving as part of his job at the time of the accident.

GEICO sent Potts' estate a check for the $100,000 in policy limits. But the estate ended up returning the check and filing a wrongful-death lawsuit against Harvey that resulted in an $8.47 million verdict against him.

Harvey then filed the bad-faith lawsuit against GEICO about the handling of the claim. The lawsuit led to a $9.2 million judgment against the insurer that was overturned by the Fourth District Court of Appeal.

In Thursday's majority opinion, Supreme Court Justice Peggy Quince disputed the appeals court's conclusion that there was “insufficient” evidence that GEICO had acted in bad faith. Quince also wrote, among other things, that the appeals court had not properly applied legal precedents in its decision.

“An insured [the customer] pays its insurance premiums with the expectation that the insurer will 'act in good faith in the investigation, handling, and settling of claims brought against the insured,' ” Quince wrote, quoting an earlier case. “In this case, a jury found that GEICO acted in bad faith by failing to settle the estate's claim against Harvey. Substituting its own judgment for that of the jury, the Fourth District erroneously concluded that the evidence was insufficient to show that GEICO acted in bad faith and that, even if it did, GEICO's actions did not cause the excess judgment against Harvey.”

Quince was joined in the majority opinion by Justices Barbara Pariente, R. Fred Lewis and Jorge Labarga. But Chief Justice Charles Canady wrote a blistering dissent that was joined by Justices Ricky Polston and Alan Lawson.

“Finding bad faith in the circumstances presented here works a vast and unwarranted expansion of liability for bad faith claims,” Canady wrote. “In Florida law, mere negligence has now become bad faith. I strongly dissent from this unjustified change in the law.”

As a sign of the interest in the case, it drew friend-of-the-court briefs from the Florida Justice Association, which represents trial attorneys, state and national insurance-industry groups and the Florida Justice Reform Institute, a business-backed group that supports efforts to limit lawsuits.

William Large, president of the FJRI, issued a statement after the decision that called on lawmakers to address the state's bad-faith laws.

“Today's decision by the Florida Supreme Court in Harvey v. GEICO once again confirms that the Legislature must set clear, objective standards in statute for avoiding bad faith while settling insurance claims,” Large said. “In this case, GEICO tendered its policy limits in nine days, and the Fourth District Court of Appeal concluded that GEICO had fulfilled every obligation it owed its insured. Yet, the Supreme Court still found room under precedent to allow a jury to turn a $100,000 insurance policy into an $8.47 million judgment.”

Jim Saunders reports for the News Service of Florida.