What started as a car/motorcycle accident resulted in a $17.5 million verdict in court, all because GEICO tried to protect itself instead of its policyholder.
Insurance companies in Oregon have a huge loophole to skirt around responsibility for their practices. Oregon’s Unlawful Trade Practices Act aims to protect consumers from shady business practices and gives people the legal right to pursue monetary damages when companies engage in certain unfair practices. However, the insurance companies have the ultimate loophole: their lobbyists got the insurance industry to be completely exempt from this consumer protection law.
But the insurance company loophole doesn’t always work for the insurance companies.
GEICO Encouraged Policyholder Bankruptcy to Save Itself
A driver accidentally hit a motorcyclist in southern Oregon. The biker wound up with over $68,000 in medical bills, lost income, and serious, permanent injuries. The driver had a $100,000 auto insurance policy from GEICO, so the motorcyclist offered to settle for the $100,000.
In a strange twist, GEICO refused to pay the injured motorcyclist the $100,000, even though it recognized from the start that the driver was fully at fault and that the motorcyclist’s losses greatly exceeded that amount. Instead, the insurance company’s lawyers encouraged the driver to take bankruptcy, and forced him to go through an entire lawsuit and an unnecessary trial. GEICO’s actions exposed the driver to the high likelihood of personal liability because the judgment was expected to be well above his $100,000 policy limit.
As a result, the motorcyclist won a $330,000 judgment, leaving the driver personally on the hook for $230,000 balance due, plus interest. The motorcyclist was positioned to take the driver’s personal assets at a time in life when he had been looking forward to retirement.
Fighting Back Against The Loophole
When it looked as if all hope was lost, the driver was referred to our law firm. While the Unlawful Trade Practices Act does not apply to the insurance industry, an insurance policy is a contract, and every contract has an implied covenant of good faith and fair dealing. Because GEICO did not honor that covenant, we brought a lawsuit on behalf of our client.
GECIO fought all of the way, forcing our client to go through a second trial. When the jury heard the full facts over two weeks in the courtroom, it hit GEICO with a $17.5 million verdict. Most of that amount was for punitive damages to deter insurers from similar misconduct in the future. Under current federal law trial courts are not allowed to punish companies that much in this kind of a case, so the trial court later reduced the punitive damages to $2,679,443.80. What would have been enough to catch the attention of GEICO’s management instead became more of a slap on the wrist to a $22 billion corporation.
Even so, with help from an Oregon jury, we showed that insurance companies are not exempt from the responsibility to provide the services that policyholders pay for, and must treat their policyholders fairly.