This week, the Eleventh Circuit reversed a $5 million bad faith judgment entered by the U.S. District Court for the Southern District of Florida. Esperanza Garcia v. Geico General Insurance Company, No. 13-15788, U.S. Court of Appeals for the 11th Circuit (August 19, 2015). The district court initially ruled that the driver of a rental car who caused an accident that killed the plaintiff did not have implied consent of the rental company to drive the car, and thus, had no coverage under the GEICO auto policy in question.
A change in Florida’s implied consent law during appeal caused the Eleventh Circuit to remand the case to the district court for a new trial. In that trial, a different district judge allowed the plaintiff to argue the current implied consent law as if it had been in effect at the time GEICO made its decision. The district court also allowed testimony that the court had, prior to trial, determined coverage in the plaintiff’s favor, but did not allow explanation that the decision only came after Florida changed the law. The jury returned a verdict of $5 million against GEICO.
The Eleventh Circuit reversed, holding that the trial court’s previous finding that GEICO’s legal conclusion under then-existing Florida law was correct was relevant to the reasonableness of GEICO’s no-coverage determination. The court also held that the district court erred in refusing to admit evidence of the district court’s prior rulings in GEICO’s favor.
While the Eleventh Circuit agreed with the plaintiff that an insurer cannot rely on court decisions issued after the insurer’s determination that no coverage exists, the insurer can rely on then-existing law to show reasonableness of its decision. The appellate court found that the exclusion of the evidence substantially influenced the outcome of the case because its omission prejudiced GEICO. The court found that it would have been relevant to a jury that Florida law on implied consent was in a state of flux at the time of GEICO’s decision and that several Florida and federal courts sided with GEICO at that time.