The issue in this third-party bad faith lawsuit was the propriety of the following jury instruction, given by the trial court:
In your determination of whether GEICO General Insurance Company acted in bad faith in the handling of the Giovo claim against Jack McDonald, Penny McDonald, and Brandi McDonald, any question about the possible outcome of a settlement effort should be resolved in favor of Jack McDonald, Penny McDonald, and Brandi McDonald. GEICO General Insurance Company has the burden to show that there was no realistic possibility of settlement within policy limits.
GEICO General Insurance Company v. McDonald, 2008 WL 4946221 (11th Cir. November 20, 2008).
GEICO objected to this jury instruction, asserting that it was not an accurate statement of the law, and was tantamount to directing a verdict in favor of the bad faith plaintiffs.
The 11th Circuit held:
The district court’s jury instruction was not an inaccurate statement of Florida law that misled the jury as it was taken directly from Powell [v. Prudential Property and Casualty Insurance Co., 584 So.2d 12, 14 (Fla. 3d DCA 1991)]. Additionally, we reject GEICO’s contention the instruction was tantamount to giving the McDonalds a directed verdict, as the district court correctly instructed that GEICO had the burden of showing there was no possibility of settlement within policy limits. If GEICO had met that burden at trial, the jury could have reasonably found GEICO did not act in bad faith.
GEICO also argued that the trial court should have entered a judgment notwithstanding the verdict because, according to GEICO, the plaintiffs presented “absolutely no evidence of bad faith on the part GEICO….” The 11th Circuit disagreed, holding that:
The evidence showed that although GEICO attempted to settle with Giovo, it did not keep the McDonalds informed of the settlement negotiations. GEICO exposed the McDonalds to a significant excess judgment without the McDonalds’ knowledge. GEICO made a counteroffer on Giovo’s offer, but represented to the McDonalds it had complied with Giovo’s demands. Regardless of whether mere negligence is enough to find bad faith under Florida law, the evidence was legally sufficient to find that GEICO’s conduct was more than mere negligence and that GEICO acted in bad faith.
This decision addresses a huge issue in many third-party bad faith cases where the insurer claims that the underlying case could not have settled. This case along with Powell, places a heavy burden on insurers to prove that the underlying case could not have settled, with any question about the possible outcome of a settlement effort to be resolved in favor of the insured.