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Eleventh Circuit Court of Appeals affirms summary judgment for insurer in motor vehicle insurance bad faith case

On September 20, 2021, in Pelaez v. Government Employees Insurance Company, No. 20-12053, the Eleventh Circuit Court of Appeals affirmed a MDFL district court summary judgment for the defendant insurer in a bad faith case, finding that the district court had not erred in concluding that no reasonable jury could have found the defendant liable. The insurer in this case had offered the $50,000 liability insurance limits in a motor vehicle negligence case to the plaintiff less than two weeks after the crash, along with a proposed form release of all claims. The accompanying letter from the claims adjuster to Pelaez’s attorney explained that “[n]ot all release forms precisely fit the facts and circumstances of every claim” and asked Pelaez’s attorney to call “immediately” if he had “any questions about any aspect of the release.” That letter also invited Pelaez’s attorney to edit the release by sending GEICO “any suggested changes, additions or deletions with a short explanation of the basis for” them or, if he preferred, to send GEICO an entirely new release of his choosing. The plaintiff’s attorney subsequently rejected the settlement offer, noting that GEICO had not restricted the release to bodily injury insurance benefits, leaving the release implicitly applicable as well to property damages, which had not yet been resolved and for which there was an additional $50,000 in coverage. The plaintiff sued the insured driver and owner and subsequently executed a stipulated judgment with them pursuant to which the plaintiff was awarded $14.9 million with the stipulation that it could only be collected from insurance proceeds, including from claims of ‘bad faith’ or extra-contractual damages.” The plaintiff then brought a bad faith lawsuit against GEICO in state court, which GEICO removed to federal court. The Eleventh Circuit affirmed the district court’s summary judgment in favor of GEICO. The Eleventh Circuit noted that in Florida the question of whether an insurer has acted in bad faith in handling claims against the insured is determined under the ‘totality of the circumstances’ standard,” citing Berges v. Infinity Ins. Co., 896 So. 2d 665, 672 (Fla. 2004), and that while an overbroad release can create a jury question about bad faith, “doesn’t necessarily do so,” quoting from Eres v. Progressive Am. Ins. Co., 998 F.3d 1273, 1278 n.3 (11th Cir. 2021). The Eleventh Circuit focused on that fact that GEICO had invited the plaintiff’s attorney to amend the language of the release and that the plaintiff’s attorney declined to do so, according to his own deposition testimony, because of the Pelaez family’s desire “to effectuate change, do the right thing” in addressing what they considered to be GEICO’s practice of preying on unsuspecting claimants by providing overbroad releases.