Mansell, Engel & Cole

Insurer would certainly like a “do over” in this bad-faith case

Insurance companies in Oklahoma and across the country sometimes act in head-scratching ways to claims that are clearly bona-fide and warrant prompt payment in full.

Regular readers of our insurance law blog at Mansell, Engel & Cole in Oklahoma City know that, of course, given the firm’s routine reporting of cases involving insurers’ strong resistance to legitimate claim payouts.

Sadly, insurers’ bad faith conduct in the wake of an accident or injury is less a rarity than it is a commonplace. In a very real sense, insurance bad faith is a sub-industry of the larger insurance realm itself.

We spotlight today the verdict quickly reached by a federal jury last week in a case involving national insurer Geico. The key facts in the litigation are clear and were uncontested, and raise fundamental questions as to why Geico proceeded in the manner it did.

In quick summary, a bicyclist was injured several years ago after being struck by an at-fault motorist insured by Geico. The insurer could have settled the matter by paying out the policy limit of $30,000. Instead, it offered a low-ball settlement, which prompted the injured party to sue the motorist directly for payment.

That litigation yielded a nearly $3 million default judgment for the bicyclist. That award spurred Geico to action. The company sought to set the judgment aside, but failed in its efforts to do so.

Following that, the money was attempted to be collected via a bankruptcy claim against the motorist, in which Geico also intervened. The injured bicyclist’s legal counsel states that the insurer’s unsuccessful attempt to defeat the bankruptcy petition owed solely to its “desire to protect itself from the bad faith lawsuit it knew would be forthcoming” if the bankruptcy proceeded.

And that is what materialized, with the above-cited jury dinging Geico with a $2.763 million penalty last Thursday.

That money will go to the bankruptcy trustee. And it will in turn be awarded to the bicyclist, who was the sole creditor in the case.

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