Alleged bad faith failure to inform policyholder of consequences of settlement conduct forces insurer to settle $ 22 million lawsuit
Progressive recently settled a bad faith lawsuit with the guardians of a child injured in a car crash driven by Progressive insured Earl Lloyd. Progressive was responsible for an underlying judgment of more than $ 22 million against Lloyd, who had purchased a $ 10,000 auto insurance policy from Progressive. The bad faith lawsuit alleged that Progressive had failed to inform its insured of the importance of signing a financial affidavit. If the insured had signed the financial affidavit, the plaintiff would have accepted the policy limits of $ 10,000 from the insured in exchange for a release from Lloyd. The case, Wallace Mosley v. Progressive American Insurance Company, was to be tried on December 10, 2018 in U.S. District Court for the Southern District of Florida before Judge Beth Bloom.
On November 25, 2018, Bloom J. dismissed Progressive’s motion for summary judgment, finding that there were questions of fact as to whether Progressive breached its duty of good faith to Lloyd by failing to advise it of the consequences of not signing the financial affidavit. Mosley by & Through Weaver v. Progressive Am. Ins. Co., n ° 14-CV-62850, 2018 WL 6171417 (SD Fla. 25 November 2018). The court explained that since the focus is on the conduct of the insurer, the reasons Lloyd refused to sign the affidavit were irrelevant. Other alleged breaches of Progressive also led to the court ruling.
The underlying case
The underlying $ 22.7 million trial court judgment stems from a car crash in November 2008 when Lloyd struck an 11-year-old boy, Wallace Mosley, who was riding a scooter on the roadway. Lloyd did not report the accident to Progressive. Progressive learned of the accident almost 10 days later from Rosa Lopez, a lawyer representing a relative of Mosley. Lopez provided a copy of the police report to Progressive which stated that Mosley was struck by Lloyd who was “traveling at high speed.” Mosley was thrown about 100 hundred feet.
Progressive turned the matter over to its adjuster, who repeatedly tried to contact Lloyd. Progressive subsequently issued a reserve of rights letter to Lloyd on the grounds that he had not informed Progressive of the accident. Progressive did not deny the coverage, however. On December 4, 2008, without the benefit of any communication with Lloyd, medical records, or even a claim, Progressive turned over Lloyd’s $ 10,000 policy limits to Mosley’s attorney. Four days later, on December 8, 2008, Lloyd finally contacted Progressive.
On December 9, 2008, Lopez sent Progressive a 12-page financial affidavit as a condition of settlement. The covering letter stated that if the affidavit did not reveal any visible assets, Mosely would execute a release and settle the claim; in the absence of execution within two weeks, a lawsuit would be filed. Progressive contacted Lloyd and forwarded the affidavit to him the same day it was received. Despite the contemporary appeal notes in Progressive’s claim file reflecting the communications about the affidavit, Lloyd argued that other than the transmission, Progressive did not advise Lloyd of the consequences of not signing the affidavit. ; Progressive also did not send him an “excessive letter” explaining that he could be exposed to liability beyond the limits of the police. Lloyd, who believed to be a “sovereign citizen of Moorish descent,” refused to sign the affidavit because of his moral and religious beliefs.
On May 5, 2009, Mosley filed a lawsuit against Lloyd. Lloyd again failed to notify Progressive that he had been served with a complaint. Progressive was made aware of the lawsuit by counsel for the plaintiff and immediately retained the services of a defense lawyer to represent Lloyd. Defense counsel made several efforts to meet with Lloyd to discuss the affidavit. Although he eventually met the defense attorney, Lloyd still refused to execute the affidavit. During his testimony in the underlying case, Lloyd testified that he was an Apostle of God who had previously raised people from the dead, that he had sovereignty because of his Moorish beliefs, and that he was immune from lawsuits brought by the plaintiff.
The case went to trial in October 2014, and a judgment of $ 22.7 million was rendered against Lloyd. Lloyd subsequently entered into a deal with Mosley ceding his bad faith claim against Progressive in exchange for an agreement not to enforce the $ 22.7 million judgment.
The case of bad faith
On May 5, 2009, Mosley brought an action against Progressive for bad faith by a third party. Progressive sought summary judgment, claiming it properly advised Lloyd and claiming Lloyds’ stated religious beliefs were the reason the affidavit was not executed. The court dismissed Progressive’s petition, explaining that under Florida law, Progressive has a “fiduciary relationship” with its policyholders, which requires it to refrain from acting solely on the basis of its own interests. . Importantly, the court noted that “Progressive did not send Lloyd any written communication explaining the importance of the affidavit or the possibility of excessive judgment being rendered against him personally during the critical 14 day period”, and Progressive also did not inform Lloyd of the steps. it could take to avoid excessive judgment, as required Boston Old Colony Ins. Cie c. Gutierrez, 386 So. 2d 783 (Florida 1980).
Although the court recognized that Lloyd’s assertion of sovereignty “may be a factor to be taken into account”, the court determined that Progressive was not entitled to summary judgment in light of Lloyd’s arguably interested testimony. who had properly advised him, he would have signed the affidavit. The court explained: “in a case of bad faith, the emphasis is not on the actions of the plaintiff but rather on those of the insurer in fulfilling its obligations towards the insured”. Banks c. Infinity Ins. Co., 896 So. 2d to 677 (Fla. 2004).
Less than two weeks after the court handed down its summary judgment, Progressive settled the case.
This case is another example, in the wake of the Florida Supreme Court ruling in Harvey v. GEICO Gen. Ins. Co., # SC17-85, 2018 WL 4496566 (September 20, 2018 in Florida), from an inflated $ 10,000 policy to a policy with significantly higher limits, for which the insured has not paid a premium .
The case further highlights the heightened obligations that some states, including Florida, impose on insurers to adequately inform policyholders of the consequences of litigation, particularly in cases with potentially high risk and low policy limits, and to confirm these tips in writing.