In the case of Hines v. GEICO Indemnity Company, Dist. Court, MD Florida 2016, the plaintiff’s expert witness alleged that GEICO uses Average Loss Payment (“ALP”) metrics to incentivize adjusters to lower claims payouts.
This was a bad faith insurance case arising out of a car accident. On April 23, 2007, Eva Cordova-Rodriguez (“Cordova”) was driving a car. GEICO Indemnity Company (“GEICO”) insured it.
Cordova drove her car into a car being driven by Eunice Acosta (“Acosta”). Cordova was arrested for driving under the influence at the scene.
Acosta initially offered to settle her claim for the $25,000 bodily injury limit, but GEICO rejected her initial offer.
On April 22, 2009, Acosta had cervical (neck) spine surgery. I don’t know what type of cervical spine surgery Acosta had.
On July 17, 2009, GEICO attempted to tender the remaining $21,500 bodily injury policy limit to Acosta to settle her claim against Cordova, but Acosta rejected the settlement attempt.
The insurance policy had a $25,000 bodily injury limit, and Acosta had already received $3,500 under the policy to settle her claim against Rodriguez. Thus, the remaining available bodily injury limit was $21,500.
Thereafter, the state court entered an order awarding attorneys’ fees and costs, for a total judgment of $864,930.11.
In May of 2010, Cordova died. Plaintiff James Hines, Jr. was appointed as Cordova’s personal representative. On December 12, 2013, Hines filed this bad faith lawsuit against GEICO.
A. Acosta’s Injuries
The court said that GEICO knew that Acosta’s injuries impaired her ability to take care of her special needs daughter, and she likely would argue that GEICO should have taken that into consideration when valuing Acosta’s claim once Acosta’s doctor stated that her injuries were permanent.
The Court agreed that such evidence was relevant to the issue of GEICO’s valuation of Acosta’s claim.
Per Florida Statute § 627.737(2), Acosta could recover damages against Cordova “for pain, suffering, mental anguish, and inconvenience because of bodily injury” resulting from the car accident to the extent that Acosta suffered a “[p]ermanent injury within a reasonable degree of medical probability.”
The court agreed to let the jury hear evidence about Acosta’s injuries and their effect on her life that GEICO knew about at the time it was attempting to settle her claim.
B. GEICO’s Denied That It Uses ALP Figures to Incentivize Its Adjusters
GEICO denied that it uses ALP figures to incentivize its adjusters.
Plaintiff pointed to Plaintiff’s expert Susan Kaufman’s expert testimony that GEICO uses Average Loss Payment (“ALP”) metrics to incentivize adjusters to lower claims payouts by counseling adjusters with payouts higher than ALP and favorably recognizing adjusters and/or teams with the lowest ALP.
Kaufman opined that GEICO uses ALP metrics to make its claim department a profit center and improperly issues blanket ALP goals and directives.
Kaufman admitted that there was no direct evidence that GEICO specifically is applying ALP metrics to Acosta’s claim.
Expert Says Average Payouts Were Always In the Back of Adjusters Minds
Kaufman opined that GEICO created an environment where ALP metrics were always a consideration in the back of adjusters’ minds when adjusting claims.
Acosta argued that this is relevant to her theory that GEICO is undervalued Acosta’s claim when evaluating it, because it may be motivated by ALP.
According to Plaintiff, GEICO and its adjusters were improperly motivated by ALP and didn’t exercise good faith when valuing Acosta’s claim.
Plaintiff said that if GEICO would’ve acted in good faith, it would’ve offered to settle her claim for the policy limit when Acosta was willing to accept that amount.
Court Agrees that Average Loss Payout Evidence is Relevant
The Court agreed that this evidence was relevant. See Hogan v. Provident Life & Accident Ins. Co., 665 F. Supp.2d 1273, 1281-82 (M.D. Fla. 2009)((finding that the plaintiff’s allegation—that the insurance company set goals for claims termination in order to obtain financial gain—supported the plaintiff’s theory that the insurance company was improperly motivated by financial gain when denying the plaintiff’s claim, and as a result, the court denied the defendant’s motion for judgment on the pleadings); Leavey v. UNUM/Provident Corp., 2006 WL 1515999, at *5 (D. Ariz. May 26, 2006); Jeffers v. Farm Bureau Property & Cas. Ins. Co., 2014 WL 4259485, at *4 (D. Ariz. Aug. 28, 2014)(considering evidence that the adjuster’s job performance was influenced by the amount that he paid out on claims); Demetrulias v. Wal-Mart Stores, Inc., 917 F. Supp.2d 993, 1009 (D. Ariz. 2013)(stating that a jury could find that the goals set were arbitrary and placed unreasonable pressure on employees to deny claims).
Evidence Regarding GEICO’S use of ALP Could be Damaging to GEICO’S Defense
While the court said that evidence regarding GEICO’s use of ALP could be damaging to GEICO’s defense, such evidence would be damaging because it is highly relevant to GEICO’s motive in how it values claims.
However, whether GEICO was actually motivated by ALP when valuing Acosta’s claim is an issue of fact that the jury had to determine.
C. Personnel Files
Plaintiff said that the personnel files of GEICO’s employees show the criteria upon which employees are evaluated and rewarded.
GEICO Adjuster Told to Reduce Settlement Authority for Adjusters With Above Average Loss Payouts
For example, one employee’s personnel file instructed him to review the authority levels for adjusters in the 3rd and 4th quartiles of ALP and to reduce or suspend their authority until improvement is noted. (GEICO 1791).
Additionally, that employee stated that he would provide ALP reports to adjusters to show them where they stand within the division. (GEICO 1794).
GEICO Employee’s Note Said He had Lowest Average Loss Payout & Was Recognized at Quarterly Celebration
Another employee’s personnel file contains a self-appraisal note that he had the lowest ALP for the first quarter of 2009 and was recognized at the Quarterly Celebration. (GEICO 1571).
Another employee’s self-appraisal note stated that her year-to-date ALP coverage was the lowest in the division and that her section received the 1st and 2nd quarter award for the lowest ALP. (GEICO 2705).
The Court agreed with Plaintiff that this type of evidence contained in the personnel files is relevant to show the criteria upon which GEICO’s employees are evaluated and rewarded.
D. Punitive Damages
Acosta also made a punitive damage claim against Cordova.
The Court said that it read the Ging v. American Liberty Ins, Co., 423 F.2d 115, 119 (5th Cir. 1970) case to hold that the insurance company must communicate with the insured to warn and advise him regarding a punitive damages claim once the insurance company undertakes the defense of such a claim.
The Court agreed with GEICO that GEICO did not have a duty to take punitive damages into consideration when evaluating Acosta’s bodily injury claim.
Defendant Driver Driving Under the Influence Could Result in Higher Compensatory Damages
The court said that to the extent that the aggravating circumstances of this accident—the fact that Cordova was driving under the influence when she caused this accident—could cause a jury to increase a compensatory damages award, such argument and evidence will be allowed.
The jury found that the Hines didn’t prove by a preponderance of the evidence that GEICO acted in bad faith in failing to settle the bodily injury claim brought by Eunice Acosta against Eva Cordova-Rodriguez.
This verdict was on March 17, 2016. After GEICO won the case, Hines appealed.
However, GEICO settled the bad faith case a few days after the notice of appeal was filed. They settled before the appeals court made a ruling. Here is part of the notice of settlement.
I have no idea if GEICO paid any money to settle. Sometimes an insurance company will settle, after trial, in exchange for the injured person’s agreement to not appeal.
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