GEICO Indemnity Company v. Whiteside
| Decision Date | 19 April 2021 |
| Docket Number | S21Q0227 |
| Citation | 311 Ga. 346,857 S.E.2d 654 |
| Court | Georgia Supreme Court |
| Parties | GEICO INDEMNITY COMPANY v. WHITESIDE. |
Cruser, Mitchell, Novitz, Sanchez, Gaston & Zimet, Joseph R. Cruser, Kathleen M. Hurley ; Wallace Miller III ; Smith, Gambrell & Russell, Leah Ward Sears, Edward H. Wasmuth, Jr., Colin D. Delaney, for appellant.
Bondurant, Mixson & Elmore, Timothy S. Rigsbee, Frank M. Lowrey IV, Michael B. Terry ; Charles A. Gower, P.C., Charles A. Gower, Jr., Miranda J. Brash, Shaun P. O'Hara, for appellee.
Swift, Currie, McGhee & Hiers, David M. Atkinson, Bradley S. Wolff, Douglas L. Clayton ; Drew, Eckl & Farnham, Jeffrey S. Ward, Elissa B. Haynes ; Balch & Bingham, Malissa A. Kaufold-Wiggins ; Ellis, Painter, Ratterree & Adams, Philip M. Thompson ; Slappey & Sadd, James N. Sadd, Richard E. Dolder, Jr. ; David A. Bersinger, amici curiae.
The United States Court of Appeals for the Eleventh Circuit certified to this Court three questions of Georgia law relating to a lawsuit brought in federal district court by Fife Whiteside, the trustee of the bankruptcy estate of Bonnie Winslett. See Whiteside v. GEICO Indem. Co. , 977 F.3d 1014, 1022 (III) (11th Cir. 2020). Whiteside sued GEICO to recover the value of Winslett's failure-to-settle tort claim against GEICO so that the bankruptcy estate could pay creditor Terry Guthrie, who was injured in an accident caused by Winslett. See Whiteside v. GEICO Indem. Co., 352 F.Supp.3d 1257 (M.D. Ga. 2018). The questions certified to us by the Eleventh Circuit, recounted at the end of Division 1 below, ask us to analyze how Georgia law applies to an unusual set of circumstances at the intersection of contract and tort law, circumstances implicating both Winslett's duty to give GEICO notice of suit and GEICO's duty to settle the claim brought against Winslett. As explained more fully below, we are unable to give unqualified "yes" or "no" answers to two of the certified questions as they have been posed; rather, we can answer the questions only in the context of the circumstances of this particular case.1
On February 26, 2012, while driving Karen Griffis's Ford Explorer, Winslett struck Guthrie, who was riding a bicycle. It is undisputed that Winslett was at fault. Guthrie received emergency medical treatment for his injuries. When his pain persisted, Guthrie returned to the hospital for further treatment.
When the accident occurred, Griffis's Ford Explorer was insured by GEICO, and Winslett was a permissive driver and thus an "insured" covered by the policy.2 The policy provided $30,000 of coverage per person of bodily injury liability coverage. GEICO notified Winslett in a letter that, his attorney. Winslett was not the policyholder, and she did not have a copy of Griffis's policy. GEICO did not ask Winslett to forward to it any accident-related legal documents, even though its claims manual advised its claims examiners to do so. Nor did GEICO inform Winslett that she had an obligation pursuant to the policy to notify GEICO if she was sued.
On May 15, 2012, Guthrie's lawyer sent GEICO a letter demanding that GEICO tender within 30 days the $30,000 policy limit to settle the liability claim against Winslett. The letter informed GEICO that, as of May 15, Guthrie's medical expenses exceeded $10,000 and that he would require additional treatment. On May 23, GEICO rejected the demand and made a counteroffer of $12,409. When GEICO made the counteroffer, it had been informed that Guthrie's medical expenses were closer to $15,000. Guthrie's attorney did not respond to the counteroffer.
GEICO's claims adjuster continued her efforts, through letters and phone calls, to contact Guthrie's attorney about a settlement. She first followed up on GEICO's counteroffer about a week after it was made, calling Guthrie's attorney and leaving a voicemail when she got no answer. About a month later, the adjuster called again and left another voicemail. A few weeks later, the adjuster once more called the attorney's office and was told that both the attorney and his paralegal were unavailable. Guthrie's attorney did not respond to those calls and letters.
On May 29, six days after GEICO had rejected the settlement demand, Guthrie filed suit against Winslett. Guthrie's attorney did not inform GEICO of the suit. Although Winslett received the summons and complaint, she did not inform GEICO or forward the suit papers to it. Instead, she called Guthrie's law firm, and a paralegal instructed her to contact GEICO. Rather than doing as instructed, Winslett discarded the summons and complaint. She later explained that she did not notify GEICO of the suit because she thought that GEICO was already handling it based on its communication with her. Winslett did not answer the complaint or appear in court.
On August 1, following a hearing, the Superior Court of Muscogee County entered a default judgment of $2,916,204 against Winslett. On August 8, Guthrie's attorney informed GEICO of the judgment. GEICO, on Winslett's behalf, filed a motion to set aside the judgment.3 On November 30, after an evidentiary hearing, the superior court denied the motion. The Court of Appeals affirmed the superior court's judgment. Winslett v. Guthrie , 326 Ga. App. 747, 755 S.E.2d 287 (2014).
After Winslett had exhausted her appellate remedies, Guthrie sought to collect on his judgment. Guthrie forced Winslett into involuntary bankruptcy by filing a petition pursuant to Chapter 7 of the federal Bankruptcy Code. On May 22, 2015, following a hearing, the bankruptcy court granted Guthrie's motion for summary judgment and adjudicated Winslett a Chapter 7 debtor. On September 10, the bankruptcy trustee, Whiteside, moved the bankruptcy court for an order appointing a personal injury attorney to represent the bankruptcy estate in investigating potential failure-to-settle litigation against GEICO.4 On September 14, the bankruptcy court granted the motion and appointed Guthrie's personal injury attorney to represent the bankruptcy estate.
On September 12, 2016, Whiteside filed suit against GEICO in the federal district court for the Middle District of Georgia, alleging that GEICO negligently or in bad faith failed to settle Guthrie's claim against Winslett, which resulted in a judgment against Winslett in excess of the policy limits.5 GEICO filed a motion for judgment as a matter of law during trial and renewed the motion after the jury returned a verdict in Winslett's favor. In those motions, GEICO argued that, pursuant to its policy's notice provision and OCGA § 33-7-15 (b), it was relieved "of any liability to pay any judgment" because it had never received notice of the underlying personal injury suit. GEICO also argued that it could not be the proximate cause of the default judgment against Winslett, given Winslett's failure to notify it of the lawsuit. GEICO further argued that it was unfair and unconstitutional to use the default judgment as the measure of damages when GEICO did not have an opportunity to contest Guthrie's damages in the underlying suit. The district court was not persuaded by any of those arguments.
Although the district court agreed that both GEICO's policy and OCGA § 33-7-15 (b) required Winslett to notify GEICO of Guthrie's suit, it ruled that Winslett's failure to give notice did not prevent her or the bankruptcy trustee from recovering in tort for GEICO's negligent or bad faith failure to settle under circumstances where GEICO was a proximate cause of Winslett's failure to give notice of the lawsuit. See Whiteside , 352 F.Supp.3d at 1264-1265 (II). The district court ruled that proximate cause was a question of fact and that some evidence supported a finding that GEICO's conduct contributed to the circumstances that led to the default judgment against Winslett. See id. at 1259-1264 (I). In addition to instructing the jury on the insurer's settlement duties, the court instructed the jury that, if GEICO was responsible for the ensuing default judgment against Winslett, GEICO would be responsible for paying her compensatory damages. See id. at 1260-1262 (I). The court also used the $2.9 million default judgment as the appropriate measure of damages, rejecting GEICO's argument that holding it liable for damages obtained in the underlying suit would violate due process when it had no opportunity to defend Winslett against Guthrie's claims. See id. at 1266-1267 (III). The jury ultimately found that Winslett was 30 percent liable for the default judgment against her and that GEICO was 70 percent liable. The final judgment against GEICO, including interest, exceeded $2.7 million. See id. at 1258-1259.
GEICO appealed to the Eleventh Circuit, which certified to this Court the following questions:
Under Georgia law, an insurer and an insured owe each other many post-loss duties that arise from their contractual relationship. Some of these duties are implied; others are found in the terms and conditions of the insurance policy. For example, "every contract implies a covenant of good faith and fair dealing which modifies and...
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