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In late April, Mehr, Fairbanks & Peterson Trial Lawyers defeated Allstate Insurance Company’s motion for protective order of insurance claim files relating to a bad faith claim. In their opinion entered on April 28th, the Circuit Court held that the probative value of the documents to the Plaintiff’s case outweighed any prejudice to the Defendant, thus denying Allstate’s claim that information within the documents should be protected from discovery during the ongoing litigation.

The case at issue arose after an automobile accident occurred in Tennessee. The parties reached a settlement for bodily injury claims, though the injured party subsequently filed suit for Underinsured Motorist (UIM) coverage in Kentucky court. The Plaintiff later moved to amend their complaint to include claims against Allstate for bad faith and Unfair Claims Settlement Practices. After this motion, the Plaintiff moved to compel discovery of Allstate’s complete copy of their insurance claim file. This motion was granted, and Allstate ordered to comply within 30-days. Allstate then moved for a protective order of the documents, stating that they should be shielded from discovery under both the work product doctrine and attorney-client privilege. The work product doctrine requires that documents that have been prepared by legal counsel in preparation for litigation should not be discoverable by the other party, as it would provide an unfair edge to opposing counsel. Attorney-client privilege protects the private information shared between an attorney and their client from discovery.

Since the discovery request relates to the bad faith claim against Allstate, the Court must make several considerations when determining whether to grant a protective order. First, the Court must classify the bad faith claim by determining whether it is first- or third-party. First-party bad faith claims occur when “the insured sues the insurer for failing to use good faith to resolve the insured’s claim.” The Court concludes that the current claim falls into this category, as it “concerns a claim between an insurer and its insured.” Next, the Court must consider whether any privilege exists which could exclude part of the requested document from discovery, though not its entirety. Here, the Court looks to established case law stating that, “attorney-client privilege and work product doctrine are generally inapplicable in first-party bad faith cases.” The Court states that even if the claim file includes information that is work product or is protected by attorney-client privilege, in this category of cases, “discovery of the entire claim file is appropriate.”

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Recently, an 11th Circuit Court in Florida held that when a private settlement constitutes an “excess judgment” under an insurance policy, the insured(s) can use the amount in the settlement to bring a bad-faith claim against their insurer. This decision overturns a previous 2019 decision (which was unpublished) stating that the only method through which insureds could establish a bad-faith excess judgment claim was after the case had reached a jury verdict at trial. The insureds in this case are now able to bring suit against their insurer, Geico Insurance, for allegedly agreeing to a settlement in excess of policy limits.

The policy at issue in this case was an auto insurance policy that gave coverage for up to $100,000 (per person) for bodily injury. The insureds under the policy were at fault in an accident, causing serious bodily injury to the other party, the costs of which exceeded the policy limits. When the parties could not reach an agreement during settlement negotiations, the injured driver sued the insureds in Florida state court. The insureds were then provided with counsel by Geico for the duration of the suit, as was dictated by their policy. The parties eventually reached an agreement in the form of a settlement, but the amount agreed upon drastically exceeded the policy limits. The terms of the settlement delineated that one of the insureds (the owner of the vehicle involved in the accident, but not the driver at the time) would pay to the injured party $474,000. This amount is small compared to the amount the settlement required of the at-fault driver, which came out to $4.47 million. The settlement also included that  Geico would agree to not hold the insureds in breach of the policy through acceptance of the offer.

Florida state law provides that insureds may bring bad-faith insurance claims when the insurer grants an “excess judgment,” meaning that the insurer (in bad-faith) chose to accept a settlement agreement that exceeded policy limits. Under this principle, the insureds filed a claim against Geico, requesting damages amounting to the total agreed upon in the settlement that was over the $100,000 policy limit. Prior to this decision, the case against Geico would have been dismissed since the excess judgment was not award through a jury verdict after trial. Judge Kevin C. Newsom disagreed with this precedent, as his opinion on the matter stated, “a jury verdict is not a prerequisite to an excess judgment in a bad-faith action.” Judge Newsom’s reasoning relies on Florida state law, reiterating that when insureds are, “subject to excess judgments, they [can] prove causation in their bad-faith case.” Further, Judge Newsom states that previous opinions in lower courts which had relied on the older decision may not have properly interpreted the state law. He states that the reliance on the precedent was caused through a misinterpretation of another previous case in which a jury verdict happened to be present, which should not have resulted in a requirement that a jury verdict must exist in all cases.

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