New Law and a New Trial: Eleventh Circuit Overturns Florida Court Judgment Against GEICO in Bad Faith Lawsuit

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On Wednesday, August 19, 2015 the Eleventh Circuit issued a significant ruling that allows evidence to be introduced at trial regarding previous decisions in that litigation, as well as changes in coverage law. In doing so, it vacated a $5 million bad faith judgment against GEICO General Insurance Co. (GEICO) from the U.S. District Court for the Southern District of Florida.

The lawsuit arises out of an automobile accident that occurred in 2006. The plaintiff represented the estate of a woman killed in that crash after she was rear-ended. The other vehicle was driven by the brother of the man who had rented the vehicle. The driver was not named on the rental agreement, but was insured by GEICO. The original wrongful death suit between the plaintiff and the driver settled for $5 million, collectible against GEICO.

A Florida Federal court upheld GEICO’s decision not to pay the settlement because at the time, Florida common law precluded the argument that rental agencies impliedly consent to the operation of the vehicles by third parties. Before the bad faith portion of the lawsuit proceeded to trial however, the Florida Supreme Court ruled that implied consent arguments were once again allowed. The Southern District barred GEICO from introducing evidence of prior decisions in the litigation or the fact that the law had been in flux, and the jury ultimately found that GEICO had indeed acted in bad faith.

The Eleventh Circuit took issue with the Southern District’s preclusion of said evidence from the jury:

Ultimately, where the “weight of legal authority on the coverage issue” and the reasonableness of the coverage decision are at issue … we would expect opinions considering, applying, and clarifying such legal authority to be relevant. Because the evidence was relevant, and because any other basis for exclusion raised by the district court or by Garcia is insufficient as a matter of law, the exclusion was an abuse of discretion.

Garcia v. GEICO Gen. Ins. Co., 2015 U.S. App. LEXIS 14532 *16-*17 (11th Cir. Aug. 19, 2015)(citations omitted).

According to the Eleventh Circuit, by prohibiting GEICO from introducing evidence related to the changing law and the fact that GEICO’s coverage determination had been upheld by a judge previously, the lower court had wrongfully stripped GEICO of its ability to defend itself. The court opined:

 A jury would no doubt find it exceedingly relevant that Florida law on implied consent was in a state of flux, or that a panel of Florida’s First District Court of Appeal and a United States District Judge for the Southern District of Florida supported GEICO’s conclusion regarding implied consent.

Id. at *16. The Eleventh Circuit ultimately vacated the final judgment and remanded for a new trial.