Winning a bad faith lawsuit against an insurance company is never easy. Laws vary from state to state, but plaintiffs generally have to prove intent. That can be difficult under any circumstances, and especially so when the opponent has vastly more financial resources and legal expertise at their disposal. But a recent court ruling regarding the admissibility of evidence may have a positive long-term impact for those challenging their insurers in court.
Let’s take a brief step back and define what bad faith is. Courts recognize that most everyone is at a disadvantage when negotiating with their insurance company. In addition to the advantages already listed, the insurer can also “play the long game” in negotiations while clients may need money quickly. Because of this, courts require that insurance companies at least deal in good faith.
That brings us to the case of Joshua Moore vs. GEICO Insurance. In a tragic situation, Moore, along with another driver, Richard Waters, was involved in a road rage accident that resulted in the death of a woman in another car and injuries to her 10-year-old son. The family of the victims sued Waters and Moore.
Both defendants were prepared to settle for the maximum of their respective policy limits. Peak Insurance, which covered Waters, accepted the settlement. GEICO did not and claimed to not understand certain facets of the settlement agreement. The result was that the case against Moore would proceed to trial and ended up in a $4 million verdict.
After the verdict, Moore took GEICO to court for bad faith over their refusal to accede to the settlement. Moore cited the fact Peak accepted the very same agreement GEICO alleged not to have understood as a piece of evidence in the bad faith claim. GEICO sought to have this evidence excluded from the proceedings, arguing that the 2 negotiations were entirely separate circumstances involving different companies and different people.
The trial court did not agree and Peak’s acceptance was admitted into the trial. The federal court of appeals in the Eleventh Circuit agreed that the trial court had not abused its discretion in choosing to admit the evidence.
Now it’s of no small significance that GEICO would ultimately win its case—the fact its policy limits were higher than that of Peak would prove decisive in defending themselves against bad faith. But what made the process interesting to legal observers was an important ruling during what proved to be a lengthy appeals process.
Plaintiffs can now cite the settlement negotiations of another insurance company in a completely separate matter as evidence in a bad faith lawsuit against their own insurer. The implications of a seemingly minor procedural ruling that did not impact the outcome of its own case will have ripple effects that the insurance industry is likely to find…well, unsettling.