Claims and Bad Faith Law Blog

Good Faith Facts Can Make Law.

     The Federal Court in the Eastern District of Kentucky was faced with a question that, as of January 12, 2006, no Court in Kentucky had answered.  Lawyers call this "a case of first impression".  The author was retained as an Expert Witness in an Insurance case in Florida just like this one.

     The question in the Kentucky case was whether there was Good Faith or Bad Faith by a Liability Insurance Company in its settlement with more than one person who made a liability claim against the Policyholder.  In the process of settling these claims, the Insurance Company exhausted or used up the Policyholder's complete policy limits -- and triggered a policy provision that the Insurance Company no longer had to defend once the policy limits are exhausted.  The answer to this question will determine Good Faith or Bad Faith, and at the same time the answer in a case like this also determines whether the Insurance Company has to defend the next claim from the same automobile accident in this particular situation.

     In January, 2006, the Federal Court said that there was not enough evidence in the record to determine whether the Insurance Company had settled in Good Faith or in Bad Faith:  Safeco_Insurance_Co. v. Ritz (E.D. Ky., Opinion Filed Jan. 12, 2006).pdf.  When there was enough evidence to consider the Good Faith or Bad Faith question, Kentucky law as announced by the Federal Judge for cases involving more than one claimant, would require various facts to be considered:

     Among the 'various factors' to be considered in determining the existence of bad faith are (1) whether the settlement offers of all the claimants totaled the policy limits or less, (2) whether the insured demanded that the insurer settle with all claimants, and (3) the probability that the claimants excluded from the settlement would obtain a jury verdict or verdicts against the insured which would exceed the policy limits.

Slipsheet Opinion at page 12.  The Supreme court of Kentucky makes it clear that these are not going to be the only factors to consider, the Federal Judge hastened to add.  Among other things, Kentucky Courts in such cases will "likely look to courts in other jurisdictions" as the Federal Judge himself did in this case.

     In December of the same year, the Federal Judge held that there was no Bad Faith, granted the Insurance Company's motion for summary judgment on the record by that time, and also held that the Insurance Company in that case did not have a duty to defend the next claim, based on the same automobile accident, and by a claimant with whom the Insurance Company had not settled:  Safeco_Insurance_Co. v. Ritz (E.D. Ky., Opinion Filed Dec. 5, 2006).pdf.

     Many legal results depend on the actual facts, and this is one of them.

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No Bad Faith Claim, Coverage Not Decided: No Claims Handling Discovery.

     Where there is no pending Bad Faith claim, and Coverage is undetermined, GEICO did not have to provide "documents setting forth GEICO's general claims handling practices and procedures," including "among other things, [whether] GEICO trained its examiners regarding 'good faith claims handling,'" Florida's Third District Court of Appeal has recently held:  GEICO v. Rodriguez (Fla. 3d DCA Case No. 3D07.669, Opinion Filed June 20, 2007:  STATED NOT RELEASED FOR PERMANENT PUBLICATION).

     The nature of the lawsuit is interesting.  The appellate court describes it only as an "automobile negligence case".  The Court does not mention it, but in Florida Injured Plaintiffs who sue a Policyholder for "automobile negligence" cannot sue an Insurance Company until they hold a judgment against the Policyholder.  The Rodriguezes sued one Blanchard, a GEICO Policyholder.  Blanchard denied liability and alleged an affirmative defense of settlement.  In the Rodriguez lawsuit against him, Blanchard affirmatively alleged that Blanchard's Insurance Carrier, GEICO, had already settled with the Rodriguezes before they filed their lawsuit against Blanchard.

     The Rodriguezes, according to the appellate opinion, then served or made "discovery requests" upon GEICO including for GEICO's documents setting forth its claims handling practices and procedures and whether it trained its claims handlers in good faith claim handling practices.  This means, since GEICO could not have been a party to the Rodriguez lawsuit against Blanchard, that GEICO was a nonparty in that lawsuit and had to be subpoenaed for these documents.  None of this background is set out in the opinion on appeal, where the appellate court treated GEICO as a party raising an affirmative defense of settlement, or "accord and satisfaction," although only Blanchard could raise that affirmative defense as the ONLY party Defendant in the Rodriguez lawsuit.

     GEICO moved for a protective order, which the Trial Court denied, and the dispute reached the appellate court by a Petition for Writ of Certiorari, or request for a discretionary review of the Trial Court's ruling.  On appeal, the Rodriguezes continued to argue that GEICO "opened the door" to discovery of its claims handling practices because GEICO asserted "the  defense of settlement."   Even though Blanchard the GEICO Policyholder raised the affirmative defense--so that if anyone, Blanchard and not GEICO "opened the door"--the appellate court ignored the procedural posture and went straight to the issue of whether GEICO under these circumstances should be compelled to produce documents concerning its claims handling practices.  The "defense of settlement" was no door opener to such discovery, not in the eyes of the Third District which wrote in its opinion:

    

The argument that GEICO somehow opened the door to inquiry regarding its claims handling procedures by interposing the defense of settlement is without merit.  Either the case was settled, or it was not.  The content of GEICO's internal claims handling procedures is immaterial.

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Expert Witnesses-Lawyers Testify On Insurance Issues.

In last month's Seminar at the Orange County Bar Association in Orlando, Florida, "Survey of Insurance Issues EVERYONE Should Know," one of my topics was an Overview and Recent Cases.  Two recent cases in particular, one Federal and one State, decided issues concerning the admissibility of Expert Testimony from Lawyers on Insurance topics and both were cases involving claims of Good Faith - Bad Faith.

 IN THIS NEW FEDERAL CASE, THE LAWYER-EXPERT WAS PROFERRED ON THE ISSUE OF LIABILITY POLICY LIMITS THAT WERE REDUCED AS ATTORNEY'S FEES AND COSTS WERE INCURRRED:  In Pueblo Country Club v. AXA Corporate Solutions Insurance Co., 2007 WL 951790 *5 (D. Colo. March 28, 2007), the Federal Court held that a jury is "entitled" to hear the testimony of a lawyer-Expert Witness presented by the policyholder that the insurance company defendant knew "that attorneys' fees and costs were reducing the available policy limits," even though the policyholder allegedly was exposed to a judgment in excess of the same policy limits which were being reduced by the insurance company's instructions to defense counsel that resulted in incurring the fees and costs.

STATES ALSO ALLOW EXPERT WITNESSES-LAWYERS TO TESTIFY ON INSURANCE ISSUES

Similarly, in Johnson v. Tennessee Farmers Mutual Insurance Co., 205 S.W.3d 365, 371-72 (Tenn.  2006), an Attorney-Expert testified to opinions that the  insurance company "failed to adequately evaluate the case, that it should have settled the case, and that its failure to do so was in bad faith."

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PREDICTION FOR INDEPENDENCE DAY: Hurricane Center to Lose Independence....

                                        And Will be Relocated.    

     The 2007 Hurricane predictions by researchers at North Carolina State University arrived earlier this year, following on the heels of a demonstrated track record:  They simply were accurate in predicting Hurricanes in earlier years.  Those earlier years include Hurricane Katrina, for example.  The magazine Nature published a study, "Torrid Hurricane Season in Store," two months ago.  This information is accessible to all.  See for example "Hurricanes, Predictions, and Potential for Catastrophes" posted on May 23, 2007, and "Less on Hurricanes:  'Just Say No'" posted on May 24, 2007, on Insurance Claims And Issues Web Log.      

     The people presently populating the federal government, however, and particularly NOAA, the National Oceanic and Atmospheric Administration located in Washington, D.C., were plain wrong in their past predictions of Hurricanes.  Following the retirement of Dr. Max Mayfield as Director of the National Hurricane Center located in Florida, they are not paying attention it seems.  According to published reports, they now ignore the National Hurricane Center located in Florida.  In response to their poor record, they currently rely on Hurricane predictions from Inland.  They rely on predictions provided by Colorado State University, apparently a reliable source for them.

      Earlier this year, these same people also potentially put population centers at risk by shifting funds away from a satellite used to track severe storms.  The satellite reportedly has since failed.   In a related development, these same people, again, decreased the budget available for "Hurricane Hunter" aircraft flights to assess Hurricanes and other potentially catastrophic storms in 2007.   These  and other developments are also publicly available information.  See for example the two posts mentioned above, on May 23 and on May 24, 2007 in Insurance Claims And Issues Web Log.   

     The response of the federal government is, predictably (no pun intended), to attack the persons who have pointed out that instead of spending money on satellites and aircraft assessment flights, NOAA's budget shifts $4,000,000.00 to publicity, alone, for a celebration of its 200th anniversary in 2007.

     So now, also predictably (and again, no pun intended), these persons who brought us no preparation for Hurricane Katrina are prepared, in contrast, to deflect criticism away from their own inactions and actions, to the personalities and supposed shortcomings of other people instead.  They may be succeeding in the short run.

     The controversy including reports of personnel issues is thoughtfully and it seems, fairly explored by Martin Melzer in, "Storm Intensifies as Forecasters Want Director Removed," MiamiHerald.com (Posted on Tuesday, July 3, 2007).

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