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This is the case of Geico Indemnity Co. v. Whiteside, case number S21Q0227 in the Supreme Court of Georgia.

In April 2021, the Georgia Supreme Court ruled that Geico Indemnity Co. must pay $2.7 million dollars to the plaintiff after the court found that Geico failed to settle a claim arising from an accident involving a car and a bicycle, even though the insured driver failed to inform the insurer of a default judgment and claims that arose from the collision.

The high court said that Geico owed the driver, Bonnie Winslett, a duty to settle the lawsuit that was filed by the bicyclist, Terry Guthrie, even if her coverage was terminated for not notifying Geico about the claim, which ultimately resulted in a default judgment.

This court was answering questions that were certified to it by the Eleventh Circuit because Geico contested its liability after a jury found that it was 70% responsible for a $2.9 million dollar judgment that Guthrie won against Winslett, by default in the underlying case.

The high court found that Georgia has adopted the principle that if insurance companies fail or refuse to make a reasonable and good-faith settlement offer and cause a judgment against its policyholder, the insured party may seek to recover the difference between the policy limit and the underlying judgment.

The court said that “Given that Winslett was covered under the policy at that time, Geico’s duty to settle arose as soon as Geico received Guthrie’s time-limited, policy-limits settlement demand.” In the court’s opinion, it cites a series of failures to notify in Guthrie’s complaint but she won a default judgment against Winslett anyways, for injuries and damages suffered in the collision. At the time of the collision, Winslett was driving her friend’s car, which was insured by Geico.

After the judgment was entered, Winslett’s bankruptcy trustee filed a lawsuit against Geico, alleging that it acted in bad faith by not settling Guthrie’s claim. The case went to trial, and a jury found that Geico was liable for 70% of the default judgment because it failed to accept Guthrie’s settlement demand in the underlying case. According to the opinion, the judgment against Geico totaled approximately $2.7 million.

However, the high court had difficulty answering the Eleventh Circuit’s three questions and could not give unqualified yes or no answers instead they chose to answer them only in the context of Winslett’s case.

The court said that, although under Georgia law, a policyholder that is being sued is required to send their insurance provider a copy of the summons and complaint and any other related documents, and if they fail to do so this generally negates coverage. However, Winslett’s bankruptcy trustee sued Geico for tort-based damages under Geico’s duty to settle the lawsuit, not because it failed to indemnify the underlying insurance claim.

The court ruled that under Georgia Code Title 33-7-15, these circumstances left open a claim against Geico for failure-to-settle, even if the company was not notified of the judgment against Winslett.

Geico is represented by Joseph Robb Cruser and Kathleen Marie Hurley of Cruser Mitchell Novits Sanchez Gaston & ZImet LLP, Wallace Miller of Wallace Miller III LLC, and Leah Ward Sears, Edward H. Wasmuth and Colin Dang Delaney of Smith Gambrell & Russell LLP. 

Geico's attorneys argued that the plain language of the policy required Winslett to inform Geico of the claim within 30 days and that when she did not do so; her actions released Geico from any obligation to provide coverage or settle the claim.

According to the pleadings, it was three months after the February 2012 collision, that Guthrie’s attorney sent Geico a Demand Letter asking it to pay the $30,000 policy limit to settle the claim, within 30 days. However, Geico counter-offered $12,409, and Guthrie’s attorneys did not respond.

At trial, the judge entered a $2.9 million dollar default judgment against Winslett, who did not contest the lawsuit brought by Guthrie. Geico attempted to set aside the judgment after it was informed of it by Guthrie’s lawyers.

When Guthrie came to collect on her judgment, Winslett was forced to file for bankruptcy. However, upon further review of the case, Winslett’s bankruptcy trustee, Fife Whiteside, decided to sue Geico in the Middle District of Georgia, resulting in the $2.7 million verdict.

The complaint alleged that Geico either negligently or in bad faith, did not settle Guthrie’s lawsuit against Winslett.