Whiteside v. Geico Indem. Co.

FIFE M. WHITESIDE, Trustee in Bankruptcy, Plaintiff, v. GEICO INDEMNITY COMPANY, Defendant.

CASE NO. 4:16-CV-313 (CDL)

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF GEORGIA COLUMBUS DIVISION

March 29, 2018

ORDER

This Order addresses unfinished business from the final pretrial conference now that the Court has received additional briefing from the parties. The Court explains the causation and damages principles to be applied in this atypical failure to settle/excess liability case. Applying these principles, the Court decides the parties' motions in limine that were not decided at the pretrial conference.

I. Background

GEICO rejected a time-limited offer to settle a liability claim within its insured's policy limits. At that time, coverage existed under the GEICO policy. After the time-limited demand expired without acceptance, the injured person filed an action against the driver of the vehicle, who for purposes of the present discussion would have been a covered insured under the GEICO policy when the lawsuit was filed. The defendant in that action allowed the case to go into default, and a default judgment was entered against her in the amount of $2,916,204.00. GEICO unsuccessfully sought to have that judgment set aside both by the trial court and the Georgia Court of Appeals. The injured plaintiff subsequently filed an involuntary bankruptcy petition against the defendant, and the bankruptcy trustee filed this action against GEICO to recover for bad faith or negligent failure to settle the underlying personal injury claim. GEICO claims that it has no liability for such a claim because it had no opportunity to defend the underlying action before it went into default and because the actions of its insured (the defendant in the underlying action) in allowing the matter to go into default were the sole proximate cause of any damages she suffered. The Court previously denied summary judgment on these issues, and the case is scheduled for a jury trial.

II. Causation and Damages

In general, a liability insurer who fails to settle a claim against its insured within the insured's policy limits is liable to the insured for any damages to which the insured is exposed in excess of those limits, if a reasonably prudent insurer would have settled the claim under similar circumstances. E.g., Cotton States Mut. Ins. Co. v. Brightman, 580 S.E.2d 519, 521 (Ga. 2003); see Delancy v. St. Paul Fire & Marine Ins. Co., 947 F.2d 1536, 1546-47 (11th Cir. 1991) (explaining Georgia law onthis issue). Thus, the measure of damages is typically the amount that the final judgment exceeds the insured's liability policy limits. See, e.g., Brightman, 580 S.E.2d at 521-22 (affirming jury verdict in the amount of the excess judgment); McCall v. Allstate Ins. Co., 310 S.E.2d 513, 514-15 (Ga. 1984) ("Hence, where a person injured by the insured offers to settle for a sum within the policy limits, and the insurer refuses the offer of settlement, the insurer may be liable to the insured to pay the verdict rendered against the insured even though the verdict exceeds the policy limit of liability."). The tort is the insurance company's bad faith failure to settle the claim, which then exposes its insured to an uncovered liability. GEICO pointed the Court to no statutory provision or Georgia case supporting its contention that a jury in a bad faith failure to settle case may revisit the excess judgment from the underlying case.¹ And the Court is unaware of any principle whereby a jury in this action could reconsider the reasonableness of the amount of the verdict/default judgment in the underlying case, a judgment which is final and binding on the person against whomit was rendered and who was a GEICO insured when GEICO had an opportunity to resolve the claim within the policy limits.

Based on the foregoing, the starting point in this case is: if a jury finds that GEICO breached its duty to its insured when it failed to settle the claim within the policy limits, GEICO is potentially liable for the amount of the excess judgment if GEICO's failure to settle the case was the proximate cause of the excess verdict. GEICO's liability can be reduced if the jury determines that the insured, in allowing the underlying action to go into default, was "to some degree responsible for the injury or damages claimed." O.C.G.A. § 51-12-33(a).

To be clear about what the jury will have to decide in this case, the Court finds a refresher on certain fundamental principles to be helpful. Although GEICO contests that it breached any duty, the Court assumes for purposes of this Order that a jury will find that GEICO breached its duty when it failed to settle the underlying claim within the policy limits. The next issue for the jury to decide is causation. That analysis begins with the concept of "cause in fact," or "but-for causation." This concept simply means that without the breach the event would not have occurred. Cause, but-for cause, Black's Law Dictionary (10th ed. 2014); see, e.g., Am. Ass'n of Cab Cos., Inc. v. Parham, 661 S.E.2d 161, 167 (Ga. Ct. App.2008) (explaining the difference between "but-for causation" and proximate cause).

Thus, for GEICO's failure to settle the claim within the policy limits to be the "but-for cause" of the default judgment, the jury must find that without the failure to settle, the default judgment would not have occurred. It is clear that if GEICO had settled the case within the policy limits when it had the opportunity to do so, there would have been no lawsuit filed and no default judgment. So, the failure to settle was a "but-for" cause of the default judgment.

The presence of "but-for" causation, standing alone, does not mean that GEICO is legally responsible for its insured's injury and damages. To be legally responsible, i.e., liable, GEICO's breach must also be the proximate cause, or legal cause, of the default judgment. This concept has created unnecessary confusion in the law. As one noted treatise explains:

"Proximate cause" — in itself an unfortunate term — is merely the limitation which the courts have placed upon the actor's responsibility for the consequences of the actor's conduct. In a philosophical sense, the consequences of an act go forward to eternity, and the causes of an event go back to the dawn of human events, and beyond. But any attempt to impose responsibility upon such a basis would result in infinite liability for all wrongful acts, and would set society on edge and fill the courts with endless litigation. As a practical matter, legal responsibility must be limited to those causes which are so closely connected with the result and of such significance that the law is justified in imposing liability. Some boundary must be set to liability forthe consequences of any act, upon the basis of some social idea of justice or policy.

Cause, proximate cause, Black's Law Dictionary (10th ed. 2014) (internal quotation marks and citations omitted) (quoting W. Page Keeton, et al., Prosser & Keeton on Torts § 41, at 264 (5th ed. 1984)).

Georgia courts have explained that proximate cause means "a legally attributable causal connection between the defendant's conduct and the alleged injury." Mayor & Aldermen of Savannah v. Herrera, 808 S.E.2d 416, 423 (Ga. Ct. 2017) (quoting Riggins v. City of St. Marys, 589 S.E.2d 691, 694 (Ga. Ct. App. 2003)). And, the Council of Superior Court Judges of Georgia suggests the following definition in its pattern jury instructions:

Proximate cause means that cause which, in a natural and continuous sequence, produces an event, and without which cause such event would not have occurred. In order to be a proximate cause, the act or omission complained of must be such that a person using ordinary care would have foreseen that the event, or some similar event, might reasonably result therefrom.

Georgia Suggested Pattern Jury Instructions - Civil 60.200.

Consistent with the definition of proximate cause under Georgia law and Professor Keeton's observations, this Court has previously charged a jury on causation as follows:

Proximate cause is that which, in the natural and continuous sequence, unbroken by other causes, produces an event and without which the event would not have occurred. Proximate cause is that which is nearest in order of responsible causes, as distinguished from remote; it is that which standslast in causation, not necessarily in time or place, but in causal relation. The mere fact that one event chronologically follows another is alone insufficient to establish a causal connection between them. The proof offered by the Plaintiff must establish a connection between the act or acts of negligence charged and the injury alleged before the Plaintiff can be permitted to recover damages.

GEICO argues that its insured's failure to respond to the lawsuit against her and her failure to inform GEICO of the lawsuit caused the action to go into default and resulted in the default judgment. Thus, GEICO maintains that the insured's negligence and failure to comply with the conditions of its policy were the proximate cause of the default judgment, not GEICO's refusal to accept the policy limits demand. GEICO also maintains that the insured's conduct was the superseding cause of the default judgment. Superseding cause simply means "[a]n intervening act . . . that the law considers sufficient to override the cause for which the original tortfeasor was responsible, thereby exonerating that tortfeasor from liability." Cause, superseding cause, Black's Law Dictionary; see also, e.g., Westbrook v. Atlanta Gas Light Co., 795 S.E.2d 320, 324 (Ga. Ct. App. 2016) ("[T]he general rule is that if, subsequently to an original wrongful act, a new cause has intervened, of itself sufficient to stand as the cause of the misfortune, the former must be considered as too remote[.]") (quoting Ontario Sewing Mach. Co. v. Smith, 572 S.E.2d 533, 536 (Ga. 2002))).

In denying GEICO's motion for summary...