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11th Circuit OKs $2.7M Bad Faith Award Against GEICO

GEICO Insurance argued that it was blindsided by a $2.9 million default judgment in a case it didn't know about, but the U.S. Court of Appeals for the Eleventh Circuit — after asking the Supreme Court of Georgia for guidance — affirmed the award.


Source: Law.com, May 13, 2021.


On the heels of a Georgia Supreme Court opinion that said a trial judge and jury were legally authorized to award $2.7 million in a bad faith case against GEICO Insurance, the U.S. Court of Appeals for the Eleventh Circuit — which had asked the justices to weigh in —affirmed the award on May 12, 2021.


Greg Land, who covers topics including verdicts and settlements and insurance-related litigation for the Daily Report in Atlanta, writes, "The case involved a 2012 accident in Columbus when a borrowed pickup truck driven by Bonnie Winslett hit bicyclist Terry Guthrie, who was hospitalized and ran up about $10,000.00 in medical bills."


The truck’s owner carried GEICO coverage. Guthrie’s lawyer contacted the insurer, which in turn sent Winslett a letter stating it would “be handling this injury directly” with the claimant's attorney.


GEICO offered $12,000.00 in response to a demand for the policy limit of $30,000.00. Although the company said it could never reach the her lawyer to discuss a settlement, Guthrie sued Winslett in Muscogee County Superior Court in Columbus, Georgia.


When Winslett was served with the complaint, she “wadded it up” and threw it away. She never told GEICO about the suit, and two months later a default judgment for more than $2.9 million was entered against her. The trial court subsequently refused to set the judgment aside.


Guthrie filed a petition for involuntary bankruptcy against Winslett, whereupon the bankruptcy trustee sued GEICO for bad faith failure to settle. A federal jury awarded her $2.9 million as the measure of damages, apportioning GEICO 70 percent of the liability, for a final judgment of more than $2.7 million, including accrued interest.


On appeal, GEICO argued that Georgia law and the insurance policy relieved insurers of liability from suits they did not know about, that its rejection of the policy limit demand did not cause the excess judgment (which it blamed on Winslett), and that the judgment violated its due process rights because it was unaware of the original lawsuit.

Observing that the arguments “raised novel issues of Georgia law,” the appeals court certified three questions to the Georgia Supreme Court:

  1. When an insurer has no notice of a lawsuit against its insured, does [Georgia law] and a virtually identical insuring provision relieve the insurer of liability from a follow-on suit for bad faith?

  2. If the notice provisions do not bar liability for a bad faith claim, can an insured sue the insurer for bad faith when, after the insurer refused to settle but before judgment was entered against the insured, the insured lost coverage for failure to comply with a notice provision?

  3. Does a party have the right to contest actual damages in a follow-on suit for bad faith if that party had no prior notice of or participation in the original suit?

In a unanimous opinion, the Georgia court wrote that answers were a “qualified no,” a “qualified yes,” and “no.”


The 11th Circuit, in an unpublished opinion, subsequently declared the matter settled: “The answers supplied by the Supreme Court of Georgia largely resolve this appeal,” it said. “We thank that court for its guidance, and the decision below is affirmed.”


Read and download the Georgia decision here: GEICO Indem. Co. v. Whiteside (April 19, 2021).


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